In the pre-internet days, you walked into a bank or credit union and filled out a mortgage application. A loan officer sat across the table from you and answered questions. You likely wouldn’t come prepared with paystubs or tax returns, so the application would sit until you could drop the information off later.
These days, you could still go into a brick-and-mortar building to fill out an application. But why do that when you can start the process online? While some institutions may lack the tech savviness of an online application, others will make the process very easy.
That being said, even the most seamless online mortgage applications still ask for quite a bit of information. It’s a requirement of the process, no matter which lender you choose. Before you apply for a mortgage online, here’s what you need to know.
1. Understanding online mortgage applications
By law, all mortgage applications must collect certain information, such as information about your income and details about the loan (such as the amount of the loan you’re requesting). This is to ensure transparency and fairness in lending. In fact, many lenders use identical loan application forms to collect the required information.
Even though an online application won’t look like the paper form, the same information has to be collected. However, when you apply for a mortgage loan online, you benefit from the convenience of applying from your home. You can also securely upload all of the requested documentation (usually through an online portal), making it easier for a lender to review and approve your loan.
2. Preparing to apply online
An online application makes it easier for you to comparison shop. You can check out several lenders and compare their rates and loan offerings before applying for a mortgage online.
Before you submit an application, gather some documentation you’ll need. Common documentation includes:
- Recent pay stubs covering 30 days of income
- Your two most recent W-2s
- Bank statements covering 2-3 months
- Documentation of other assets, such as retirement accounts
- Two years of tax returns, especially if you’re self-employed
- A copy of your driver’s license
Click here to learn more about different types of home loans.
3. Pre-qualification and pre-approval
When you start an online application, you may be asked whether you’re seeking a pre-qualification or pre-approval.
Pre-qualification is a typically quick process that assesses your ability to qualify for a loan. It’s not a guarantee that you would be approved, since it’s not an in-depth analysis of your financial situation. But, if you’re unsure if you would qualify for a loan, it’s helpful to go through pre-qualification — especially because a lender can help you determine the loan amount within your budget.
A pre-approval is a more rigorous process. The lender will do a more thorough review of your income, debt, and other factors that impact approval. While a pre-approval is still not a guarantee of approval, it’s a much better indication than a pre-qualification. It’s also more work for you, the borrower, than a pre-qualification.
If you’re looking to buy a home, a letter from your lender stating your pre-approval can help when submitting an offer. It provides some assurances to the seller that you’ll be able to obtain financing.
4. The online application process
Because of the amount of information lenders have to collect, online applications can take time. You’ll need to fill out information about yourself, any co-borrowers, your employment history, and financial information. You’ll also request a specific loan amount and indicate your preferred term or loan program (such as a 30-year fixed-rate mortgage).
It might take 30 minutes or longer to complete a loan application, depending on how much information the lender wants you to upload and how much you’ve organized in advance. Every person’s financial situation is unique, and every online application is different. Some may collect a lot of data upfront (especially for a pre-approval), while others may collect less and follow up with a more specific list later.
You’ll also need to provide identification. The online application may require you to upload a copy of your driver’s license. You’ll provide your social security number so the lender can run a credit report and review your outstanding debts.
Mortgage applications online should have secure portals that make it easy for you to upload the requested documentation.
5. Loan approval and loan closing
After you submit your application, it’ll be reviewed by a lender and an underwriter. Some lenders have automated parts of their loan approval process, meaning if you meet certain criteria, you might get a response fairly quickly (within a few hours). In other cases, your loan application might need to be reviewed in more detail before a lender can issue a pre-approval, usually within a few days.
In either situation, a lender will likely reach out to you after your application is submitted and ask if you have any questions.
After you’re pre-approved and you decide to move forward, your loan will move into underwriting. You’ll get requests for additional documentation from the underwriter. The lender will also work to order an appraisal and title insurance, which are necessary to close the loan. Once the lender has completed everything, you’ll either be issued a conditional approval or a full approval. With a conditional approval, the lender is saying that you are fully approved, as long as you provide some additional documentation prior to closing (such as updated bank statements or pay stubs). If the loan is fully approved, you can move forward with closing.
If you’re buying a home, you’ll have other steps in the process, such as a home inspection and satisfying any contingencies from your offer.
At that point, your lender will work with you to set a date to close your loan. If you’re buying a home, this may be a set in your purchase contract with the seller. You’ll need to work with the lender to either meet that date or work with the seller to change the date. On the closing date, you’ll either bring a cashier’s check or wire your down payment in advance. You’ll sign all your mortgage documents, either on paper or electronically. If you’re refinancing, it’s a much more straightforward process to select a closing date with the lender.
Check out this article to learn more about what to expect during underwriting.
Applying for a mortgage online
While you can apply for a loan with more than one lender, it’s such a lengthy process that it’s probably not worth your energy. Decide on a lender, submit an application, and only submit an application elsewhere if you’re not approved.
An online mortgage application can tell you quite a bit about the lender’s technology overall. If the online application is clunky, there’s a good chance that the process won’t be as streamlined. It’s unlikely that the lender has good technology in place to help process your loan, and it might be an indication of the overall service you’ll receive.
Remember: an online application is your first impression of the lender. It should be a good one.
