Most parts of the home buying process have already gone digital. Searching homes for sale, comparing mortgage options, getting pre-approved, and finding a lender are all readily available online. The one part of the process that has resisted the move to digital has been the mortgage closing — until now.
During the pandemic, digital mortgage closings (eClosings) increased 228% and the numbers are still continuing to grow. eClosings can be faster and more convenient, have fewer errors and provide easier access to documents and information — and lenders, agents and homebuyers are seeing the benefits.
There are two main types of eClosings:
- Hybrid eClosing: A hybrid eClosing incorporates some digital elements such as digital signatures. This type of eClosing occurs in-person and still requires certain elements such as notarization to be done in-person.
- Full eClosing: A full eClosing means that every element of the closing is online. This enables the people involved to close remotely, creating significantly more flexibility.
While hybrid eClosings save time and money for homebuyers and lenders, full digital eClosings provide the biggest benefits. In addition to increased efficiency, closings can happen from virtually anywhere. This allows homebuyers to close from anywhere. With a full eClosing, people deployed in the military, out-of-town buyers and people on vacation can still close on a new home.
The parts of an eClosing
Lenders are still in the process of adopting and implementing eClosing technologies, as the push for eClosings is a relatively new initiative that gained traction during the height of the pandemic.
Here are just a few parts to an eClosing that need to be moved online in order to enable a full digital close:
- Access to technology: Everyone involved needs to have access to a computer with an internet connection and video capabilities. Lenders need to have the technology in place (eClosing software) that will enable all of the elements of the digital closing.
- Digital documents: All documents including the deed and mortgage agreement need to be made available for signature online (eSignature). The documents must be digital documents that can not only be signed, but also notarized and then filed with necessary agencies.
- Online notarization: For documents that need to be notarized, an online notarization platform will ensure that the process is done correctly, securely and most importantly — digitally.
- eNote filing: The electronic version of the promissory note must be able to be created and filed digitally.
Depending on how many digital elements a lender has in place, an eClosing may be hybrid or fully-digital.
5 steps for running a smooth eClose
With so many moving parts, it’s important that lenders do what they can to make the process as seamless as possible to create the best experience for homebuyers. Here are 5 actions lenders can take to make sure they’re prepared for a full eClosing.
- Create a checklist: Lenders should create an easy-to-follow checklist for title agents, real estate agents and homebuyers, so they can help everyone prepare for the new process and ensure that they have what they need for a digital closing.
- Do a tech check: Make sure everyone has access to a computer or tablet connected to the internet, that they’ve created an account login where needed, and that they have access to the necessary software. Homebuyers will need to have video enabled to facilitate an eClose.
- Contact software providers: Inevitably, someone will have a glitch at some point. Perhaps they forget their password, their camera doesn’t turn on, or a document won’t submit properly. Having a contact from the eClosing software company will provide peace of mind and help to quickly solve problems should they arise.
- Have a “pre-closing” meeting: Don’t assume that everyone else will prepare ahead of time. Make sure to check in or schedule a quick call with title agents, real estate agents and homebuyers to run through the checklist.
- Measure and share successes: With every eClosing, lenders learn how to make the process a little bit smoother. It’s important to share these learnings with other members of the closing team so that everyone learns how to make the process more seamless and efficient.
It may seem daunting at first to get used to a new, digital process, but the benefits of flexibility, speed, and convenience that eClosings provide far outweigh the hassle of having to adopt new tools. By utilizing the above checklist, lenders can ensure that everything runs smoothly on closing day.
As more lenders, agents and homebuyers experience the benefits of eClosings, the more everyone will become comfortable with the process. Based on the increasing number of eClosings we see today, it’s safe to predict that the future of closings is digital.