Online mortgage app: pros & cons?

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Online mortgage applications benefit both lenders and borrowers, allowing for increased convenience and access to a wider market. However, lenders are susceptible to fraud as they cannot physically verify the applicant’s ID. The underwriting process takes the same amount of time as applying in person.

Many mortgage lenders allow prospective borrowers to apply for mortgages online. The ability to submit a mortgage application online means borrowers do not have to make in-person visits to banks or mortgage offices. Despite the convenience that this brings, online mortgage applications have advantages and disadvantages that affect both borrowers and lenders.

Lenders benefit from online applications because borrowers whose work schedules prevent them from meeting lenders during regular business hours can submit their details online. Borrowers can also submit an online mortgage application with a lender that does not have a presence in their local area. Consequently, lenders that in the past operated locally can now compete in the national market. Increased loan applications generally lead to higher mortgage production, and proceeds from loan sales lead to higher profits for the lender.

Consumers benefit from online applications because they can submit applications at any time and from anywhere. Online search tools also allow potential borrowers to find the best interest rates available before submitting an application. During the actual online mortgage application process, those at home can easily locate the documents and information needed to complete the process. Most online applications allow borrowers to save their progress and resume filing at any time, while anyone who has to leave an in-person meeting with a lender should try to schedule a follow-up meeting at the lender’s convenience.

Lenders make a preliminary decision to approve or reject an online mortgage application based on information submitted by the potential borrower. Approval is not confirmed until the borrower provides the lender with supporting documentation, such as recent bank statements and copies of tax returns. Consumers typically have to mail these documents, which can slow down the process, or deliver documents in person at a local bank. Despite the speed with which preliminary decisions are made, the entire underwriting process generally takes the same amount of time as applying in person.

Lenders who accept mortgage applications online are susceptible to fraud because no one physically verifies the applicant’s ID when the mortgage application is first submitted. A standard mortgage application includes a request for permission to check the borrower’s credit report. Lenders submit applications to check the borrower’s credit without knowing whether the person submitting the application is the person whose name is on the application. This can lead to legal problems if the person presenting the loan is found to be committing fraud because in most places lenders can only check credit scores with the consent of the borrower.

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