Over the last few years, many people have embraced transacting businesses digitally or online. This innovation has also found its way into the real estate sector, particularly changing the working of mortgage closings. Also referred to as eClosings, digital mortgage closings aim to make the process efficient and eliminate additional expenses such as shipping costs.
Moreover, since the mortgage loan settlement does not involve paper or physical documents, document signing happens electronically; it helps save a few trees from being felled.
What is electronic closing?
Mortgage closing or settlement is the last process necessary to purchase and finance a home. In the closing stage, you and other parties involved in a mortgage loan transaction wet-ink sign the required paper documents, making you responsible for the home refinancing or loan.
However, unlike traditional mortgage closing, which involves signing papers, electronic mortgage settlement involves placing e-signatures on digital paperless documents. Digital mortgage closings employ the use of online platforms to enable the signing of documents electronically by money lenders and borrowers.
For signing the closing of a real estate agreement, commonly accepted approaches include typing a name into the space reserved for your signature, uploading your signature’s snapshot to the closing documents, or tracing a stylus pen or your finger along the line of the signature.
If the signing happens remotely, you may have to use a cloud platform such as DocuSign. Additionally, video conferencing software like Skype and Zoom may come in handy for enabling communication between parties to sign a document and the confirmation of the background and identity of the borrower.
Forms of electronic closings
The electronic ways of completing the mortgage transaction process include:
- Hybrid electronic closing
Hybrid electronic closing is the most popular type of eClosing and involves using electronic and pen-to-paper signatures.
You have the option of signing documents that are non-critical and non-notarized. You undertake electronic signing before you meet with a notary public (settlement agent) to conclude the closing.
2. In-person electronic notarization
This type of electronic mortgage closing involves the people signing the necessary documents and meeting physically and face-to-face with a settlement agent or notary to review the digital copies.
Then, the documents accessed through a computer or a smartphone are signed electronically instead of using ink signatures.
3. Remote online notarization
It is the most straightforward process for signing documents for a mortgage loan. Remote online notarization allows parties to meet remotely and in the presence of a state-licensed notary to notarize transaction documents. All documents are signed and notarized electronically.
This type of electronic closing relies on various technologies for enabling electronic signing, identity verification of parties, and the creation of a notary journal and records. A notary journal offers a written description of the official acts of the notary.
Pros of electronic mortgage closings
- It is a convenient process compared to the traditional method of mortgage loan closing. It enables the review of transaction documents in advance and the early raising of pertinent questions. You can benefit from a mobile notary when there is a need for wet signing.
- The process is eco-friendly. Reduces paper use and the carbon footprint of making, storing, and shipping paper documents.
- Highly efficient. The electronic mortgage closings enable early electronic delivery of documents, avoid paperwork redundancy, and shorten appointments for signing and waiting time for funding.
- Enables panning the right time for all parties to conduct the mortgage closing process.
- The process is often highly safe and secure, mainly because it implements multi-factor authentication and enables the detection and identification of altered documents immediately.
Cons of electronic mortgage closings
- So that you can read and sign electronic documents, you require an excellent internet connection, and you must have internet-enabled devices like a tablet.
- Electronic mortgage closing types, like remote online notarization, are unavailable in all states. The existing legal frameworks also differ in different regions of the country.
- It may be challenging to coordinate between parties digitally.
Best practices for RON for mortgage closings
- Confirm with your lender about the electronic closing options available in your area.
- Ensure you are in a position to participate in video conferencing.
- Ensure your internet speed is stable and excellent.
- During electronic mortgage closing, listen carefully to the lender and the notary and put your signature in the right place.
- Organize how you will obtain the key for your new property or home.