The SCOOP! Blog by ChangeMyRate.com®

An e-closing affords you the chance to bypass some parts of the mortgage process that are traditionally done in person. That doesn’t necessarily mean you’ll get to avoid in-person meetings entirely, but if you’re working with a lender that offers e-closings, you can expect a faster and more convenient closing process for everyone involved.

What is an e-closing?

In a broad sense, an e-closing occurs when one or more closing documents for a mortgage are signed electronically. There are three different types of e-closings:

• Remote online notarization: Called RON for short, with a remote online notarization, you’ll meet a notary over video chat and sign all of your documents digitally. “Remote online notarization is a fully digital experience that mirrors the traditional in-person notarial act,” explains Pat Kinsel, founder and CEO of Notarize, a company that provides online notarization. Not all states allow RONs.
• In-person e-notarization: Also called IPEN, this option involves meeting with a notary in person, but all documents are signed and notarized electronically.
• Hybrid e-closing: With this approach, you’ll meet with a notary in person and sign some documents electronically and others with a pen.

In general, hybrid e-closings are most common, but due to the pandemic, many states have temporarily allowed RONs to facilitate socially-distanced closings. From mid-March to the end of August, 89 percent of homebuyers and 84 percent of refinancers e-signed their closing disclosures or documents, according to closing data firm ClosingCorp. Of those, 82 percent said they preferred signing documents electronically prior to closing, and more than two-thirds would want an e-closing instead of an in-person closing in the future.

E-closings vs. e-mortgages

Although an e-closing and e-mortgage sound synonymous, they’re slightly different. An e-closing refers only to the closing aspect of the mortgage process, while an e-mortgage is any mortgage that uses an e-closing process in addition to an original electronic promissory note, also called an e-note.

What is the e-closing process?

In a traditional mortgage closing process, each party signs all disclosures and closing documents in person with pen and paper. In many ways, the e-closing process is similar, especially if you’re not doing remote online notarization. You’ll sign all the same documents, but some or all of your signatures will be done electronically.

That said, RON is becoming more popular.

“At Notarize, we’ve seen 700-percent growth in the last seven months of the pandemic, as COVID has forced traditionally-offline tasks online out of necessity,” Kinsel says.

Depending on the format your lender uses, you may be required to e-sign your documents by typing in your full name via online software or tracing your signature on a tablet or pad.

Keep in mind that whether you’re meeting with your notary in person or online, you’ll need to provide proof of your identity. If you’re using RON, this may include showing photo identification via the webcam or answering certain questions tied to your credit report.

Remember, too, that whether you sign your documents manually or electronically, the contract is binding.

E-closing pros and cons

There are several reasons to take advantage of an e-closing, but it’s also important to consider the shortfalls of the process, which is still relatively new.

Pros 

• Saves time and money during the closing process
• Offers more flexibility for borrowers with busy schedules
• Reduces the risks associated with operational errors and data quality and validation
• Allows borrowers to review all documents prior to closing, giving them more time to review the fine print

Cons

• Laws and standards vary based on where you live, especially with RON
• Can be difficult for borrowers who have limited or no internet access
• Could potentially make it easier for borrowers to speed through the closing process without reading all of the documents and disclosures

E-close lenders

Every mortgage lender in the U.S. can utilize e-closing in some form or another; however, some have yet to make the transition, and the forms of e-closing you’ll have access to can vary depending on where you live.

That said, here are some major mortgage lenders that offer e-closing in at least some capacity:

• Bank of America
• Better Mortgage
• Caliber Home Loans
• Fairway Independent Mortgage
• Freedom Mortgage
• LoanDepot
• Rocket Mortgage
• United Wholesale Mortgage
• Wells Fargo

Bottom line

“E-closings bring convenience and security together to make the mortgage or refinancing process easier and completely online,” Kinsel says.

If the option for an e-closing is important to you, check with mortgage lenders during the preapproval or application process to see which ones offer it and the type of e-closing they have available. By the same token, if an e-closing won’t work for you, your lender is likely to have an in-person or alternative process to help make your closing as smooth as possible.

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