What Are eMortgages And How Do They Work?

With many types of transactions, going digital removes the hassle of juggling physical paperwork. Home mortgages are no exception. Electronic mortgages – aka eMortgages – existed before 2020 but grew in popularity at the height of the COVID-19 pandemic. While the mortgage industry used them to do business safely during the social-distancing days, eMortgages are now more about convenience than wellness.

If you’re looking for a new home or another type of real estate, here’s what you should know about eMortgages.

What Is An eMortgage?

An eMortgage is an electronically created and stored version of standard mortgage documents. The term “eMortgage” can also refer to a fully electronic mortgage process that involves an eClosing and utilizing electronic signatures for documents.

Using electronic documents, eMortgages can speed up the mortgage loan process by eliminating the need for home buyers to drive somewhere to meet their mortgage broker or real estate agent in person.

Do eMortgages Have Different Requirements?

To qualify for an eMortgage, borrowers will need to have mortgage loan qualifications exactly the same as needed for approval on a standard mortgage. If you have a strong credit score and a solid debt-to-income ratio (DTI), you will get the same interest rate you’d lock in if you went through the traditional mortgage loan process.

How Does An eMortgage Differ From A Traditional Mortgage?

An eMortgage is digitally originated, transferred and stored. It differs in a few ways from a standard conventional mortgage but ultimately follows the same home loan application process and serves the same purpose: financing a borrower’s home purchase.

Mortgage eClosings 

While standard mortgages typically still feature in-person closings, eMortgages are often accompanied by eClosings. During an eClosing, the parties involved review and sign the documents remotely and/or electronically.

Mortgage eNotes

Included in an eMortgage is an eNote, or an electronic version of a promissory note. The borrower signs the promissory note, which outlines the loan conditions. The lender then maintains the note.

In a standard mortgage, the promissory note is a physical piece of paper that the mortgage company holds onto (or sells) until the borrower pays off the loan. eNotes are registered with the MERS mortgage eRegistry and stored in a digital vault.

As is the case with the promissory note for standard conventional conforming loans, lenders can sell an eNote to government-sponsored enterprises Fannie Mae and Freddie Mac, provided all qualifying and closing requirements are met.

What Are The Advantages Of An eMortgage?

An eMortgage can be beneficial to the buyer, seller and mortgage lender. Here are some of the major advantages:

• Efficiency: eMortgages tend to move more quickly and be more efficient. For the lender, this efficiency can result in faster processing of the loan. For buyers and sellers, an eMortgage can make the process less stressful.
• Convenience: In many states, an eMortgage allows everyone who needs to attend the mortgage closing to do so from the comfort of their own home. Fully digital documents also offer the opportunity to review the documents and ask questions in advance.
• Security: eMortgages come with a reduced risk of error since the computer will catch any missing documents, missing signatures or mistakes in the paperwork. With a fully digital experience, you don’t have to worry about anyone misplacing critical documents.
• Eco-friendliness: An eMortgage creates significantly less physical paperwork, making the entire process more environmentally friendly.

How Do Digital Mortgage Closings (eClosings) Work?

A standard mortgage closing typically means those involved all sitting around a table, signing stacks of paperwork. In an eClosing – or remote closing – both the documents and the signatures are usually electronic and will look different from state to state since laws on remote notarization vary. Here are a few ways that real estate and mortgage brokers might handle an eClosing:

• In-person electronic signing: Using this method, the mortgage documents are electronically signed and notarized, but the involved parties attend the closing in-person.
• Remote ink signing: With this type of closing, the closing attendees sign paper documents while a notary witnesses the signing via webcam. Once the signing is complete, the attendees mail the documents to the notary.
• Remote electronic signing: This is a fully remote and digital closing process – often called remote online notarization (RON) – where both buyer and seller sign electronically (and a notary witnesses it via webcam). Once the signing is complete, the notarization is done electronically. This is available for those refinancing in some states. At this time, Rocket Mortgage^® isn’t doing RON purchase closings.
• Hybrid in-person and remote signing: Some closings may involve a combination of in-person and remote meetings – with either electronic or ink signature – to adhere to state and local laws.

Fully remote closings are legal in all but five states – Mississippi, Alabama, Georgia, South Carolina and Connecticut. Lawmakers in these states have introduced legislation to legalize this practice. If you live in a state that allows remote notarization, you may be able to use an eClosing for your mortgage closing.

Rocket Mortgage completed its first eClosing in 2017. In 2019, we became the first company to offer hybrid eClosings in all 50 states.

What Does A Digital Signing Involve?

If you live in a state that allows the remote signing of mortgage documents, this might happen in one of several ways. Common digital signing methods include:

• Typing your name in the signature box using either a script or plain font
• Uploading a picture of your actual signature
• Drawing your signature on the screen using your finger, a stylus or the computer mouse

It helps to have your contact information ready when you’re scheduled for a digital signing.

Will Your Loan Documents Stay Safe?

Those using an eMortgage may worry about the safety of their loan documents and personal information. However, the documents in an eMortgage might be even more secure than the documents printed out and signed the traditional way.

Significant precautions are taken with an eMortgage to ensure that access is only provided to those who should have access to the documents. The digital nature of the paperwork allows for the opportunity to create additional layers of security. Plus, digital documents remove the possibility of someone misplacing sensitive information.

The Bottom Line

You might be able to take advantage of an eMortgage and eClosing with your next home purchase or refinance. If you’re interested in this option, just ask your real estate agent or mortgage broker if you can complete your mortgage and closing process electronically. If so, you can expect the same competitive rate that you would find with a traditional mortgage, and you’ll save some time and be less inconvenienced along the way.

Ready to see if an eMortgage will work for you? Start your mortgage application today to determine what you qualify for and whether you’re able to use an eMortgage to finance your home purchase.