What It Is, How It Works, Benefits and How to Get Started

eClosing: What It Is, How It Works, Benefits and How to Get Started

In a time when almost every business transaction is moving digital, it is no surprise that the real estate market is following the same trend. Like many other people, you might be particularly interested in online options due to their convenience and flexibility. As such, many lenders are embracing online closing options as more people become comfortable with the concept. Today, eClosings are no longer an emerging trend since they have started to reach the mainstream. They are a competitive differentiator for lenders, especially younger people flooding the real estate market. This guide offers insight into eClosings, but first, here is a simple definition.

What is eClosing?

An eClosing, sometimes called eMortgages, is a mortgage closing where some or all of the key elements of the transaction occur online. eClosings use technology across activities such as eSigning; all documents are signed electronically. A digital mortgage closing also involves online notarization; remote online notarization approves signatures and documents. Unlike traditional mortgage closings, which use a paper promissory note, eClosings use eNotes. An eNote for Mortgage closings is an equivalent digital version of a traditional promissory note; it is electronically generated, presented and signed.

How does an eClosing work?

Not all digital mortgage closings work the same since some lenders adopt a few online elements rather than fully digitize the process. For example, some eClosings require the involved parties to meet in person, but a fully-digitized closing allows participants to close from the remote location of their choice. There are a few types of eClosings, but the most common ones include hybrid eClosing and fully-digital closing.

Regarding hybrid eClosing, the mortgage closing occurs in person, but the parties sign the documents electronically. This is unlike the usual pen-and-paper signing, which can be time-consuming at the closing. On the other hand, a fully-digital closing occurs remotely; all parties sign documents electronically. The process also involves the use of audio and video technology. Notarization of the documents also occurs online, and a digital promissory note (eNote) is filed electronically.

In both cases of eClosings, the processes are supported by a technology platform that helps the lender work with the borrower, real estate agent, and title agent to ensure all steps are taken to make the closing successful. Although similar to traditional closings, eClosings require lenders to implement new measures and technologies to offer these services to their customers.

The benefits of an eClosing

Before implementing a fully-digital closing, there is some upfront work to ensure that everyone understands how the process works—however, a fully-digital process benefits lenders, title agents and borrowers. For example, an eClosing process is more time efficient than the average mortgage closing process requiring participants to meet, sign and notarize the documents. An eClosing occurs remotely, where signatures need a mouse click and notarization happens online. As such, this decreases a significant amount of time for the lender and customer.

Fewer errors are also likely if the closing process is fully digitized. The average closing process involves a lot of paperwork and writing; this increases the risk of misspellings, unfilled spaces, and misplacement of signatures. But an eClosing results in a 33% reduction in errors, saving time for the lender and borrower.

Because of the convenience of a fully-digitized closing, customers enjoy an improved experience. Not only do eClosings give your customers a more flexible and convenient way to close, but it also helps you, as a lender, appeal to more people. Additionally, giving customers the choice and convenience of online options is a competitive advantage.

How to get started

The best way to start is to ask questions to understand how the process works. You can also start conversations with companies that offer technology to support eClosings; this helps you better understand the implementation process and benefits of using an eClosing platform. You also want to talk to your customers through conversations or a survey to know if they will be interested in closing options.

Today, many home buyers prioritize convenience and flexibility when closing a mortgage. It is an even more compelling opportunity since lenders and title agents also benefit from the move. If you consider ways to stand out from other lenders, introduce the eClosing process to your customers.

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