Monday, 22 March 2021

The COVID-19 pandemic has affected all aspects of our lives, and banking is no exception. Measures put in place to help customers in the face of shelter in place orders have hastened a process that was already starting to happen. That means applying for everything from a car or personal loan to a mortgage seamlessly through a digital lending platform is now a reality for many.

The rise in digital lending has been happening for some time. Fannie Mae revealed that the use of electronic promissory notes (used for online loans of all kinds) increased by 500 percent between 2018 and 2019, and continued to boom in 2020.

Meanwhile, customers are using their phones for almost everything, a trend that increased during 2020 because of pandemic restrictions. It's therefore no surprise that we are now looking for the same level of convenience enjoyed for shopping and consuming media when conducting our banking transactions.

In the past many customers have used a combination of branch visits and online platforms to do their banking. But a recent study by JD Power shows that 30 percent of people are digital customers only, and those digital customers have the highest levels of satisfaction with the banking experience, suggesting that this type of banking will become more and more popular.

Banks are catching on. Though less than half of all banks offer a complete end-to-end loan application on a mobile device, many offer digital solutions that help when applying for a loan online. Here's what you can expect for one of the biggest lending milestones—applying for a mortgage digitally.

Online pre-qualification

One of the first steps in getting an online mortgage is working out how much you can borrow. Most digital lending platforms provide an online calculator to assess your likely mortgage and down payment amount. You'll need this to complete the pre-qualification stage online. For pre-qualification via a digital lending solution, you'll have to provide information about your identity, income, bank accounts and desired mortgage amount and down payment. The bank will do a credit check, which is completed online.

Online mortgage pre-approval

For the online mortgage pre-approval stage, which puts a mortgage offer in place so you can move quickly when you find a home, you'll also need to submit pay stubs for the past month, W2 statements and two years of tax returns. Again, the bank will do an online credit check.

Online inspection and appraisal confirmation

While you may get your mortgage through digital lending, digital inspections are not yet a thing. You can book the appointment online, of course, but someone will have to inspect the property physically to ensure there are no red flags prior to mortgage approval. That also goes for the appraisal process, though in both cases, you can submit the results to the digital lending platform online.

Online mortgage approval

Once everything stacks up, you can get approval for your mortgage online, too. However, there's one aspect of the process that will likely require an in-person visit — the closing. Many banks offer a hybrid approach with digital solutions for part of the closing, but a bank visit to finalize.

The future of digital lending

Many experts predict that customers will soon be able to complete digital lending transactions without ever visiting a branch at all. You'll be able to use video calls for the in-person portion, and do everything else through the digital lending platform. Then the digital age of lending will really be here.

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