Shelter-in-place orders haven’t been enough to put a damper on the dream of homeownership, but it has complicated the process for many. As a result, an increasing number of homebuyers are turning to the internet to close on their mortgages remotely.
According to Ellie Mae’s 2019 Borrower Insights survey, 50% of borrowers opted for lenders that offered digital tools. And 66% of borrowers preferred online applications because they lead to quicker closing.
The Federal Reserve Bank of New York found that digitally-based mortgage lenders reduce mortgage processing times by about 20% compared to traditional lenders. And from 2010 to 2016, online lenders shortened processing time by an average of 10 days. If you’re refinancing your mortgage, applying online can cut down your transaction time by an average of 14.6 days.
Online mortgage lending tools not only speed up and simplify the application process for consumers, but also reduce bottlenecks that plague traditional lending. According to the Federal Reserve Bank of New York, digitally-based mortgage lenders have helped ease capacity constraints and broadened lenders’ ability to reach more borrowers and avoid human error.
The Best Online Lenders of 2020
In light of current events and increasing public demand for a fully online mortgage application, we’ve reviewed the best online mortgage lenders that prioritize customer experience and offer ongoing support from application to closing.
Rocket Mortgage by Quicken Loans
The introduction of the digital mortgage platform Rocket Mortgage in 2015 has made Quicken Loans one of the largest mortgage lenders by volume in the U.S. The company has also received the highest customer satisfaction scores in J.D. Power’s Primary Mortgage Servicers Study for ten consecutive years.
Rocket Mortgage is a good bet for tech-savvy borrowers who want an online, mobile-friendly application experience with live support. The company claims you can apply and be approved for a mortgage in less than 10 minutes, but borrowers can complete their mortgage or refinance applications at their own pace.
Rocket Mortgage’s online application is simple. You’ll be asked whether you want to purchase a home or refinance. Should you opt for a refinance, you’ll be asked to enter the property address, and the platform will pull public data to fill out the required information automatically.
During the application process, you should be ready to enter personal information about your assets and employment. But Rocket Mortgage also speeds up this step by collecting data directly from your bank, so you don’t have to waste time manually inputting information from your account statements. The company can also pull information such as pay stubs if your bank has access to them.
If you’re self-employed, you’ll need to verify and document your income to prove your financial stability. And Rocket Mortgage may require you to have a lower DTI and higher credit score than other applicants.
Once it gathers your information, Rocket Mortgage offers customized quotes that fit your needs and financial goals.
Should you prefer a flexible loan length and a fixed interest rate, Quicken’s YOURgage program allows qualified borrowers to customize their loan terms from 8 to 29 years. To be eligible, borrowers must have a minimum FICO score of 620, a minimum 3% down payment, and a debt-to-income ratio no greater than 50%, as well as enough money saved to cover closing costs. Most lenders won’t go higher than 45% DTI for borrowers seeking a 30-year term.
If you have questions, mortgage experts are available via online chat or phone seven days a week to assist you.
Better Mortgage is a digital mortgage lender that offers a variety of purchase and refinance loans. While Better is 100% digital, it personalizes your experience by assigning a loan officer that you can contact at any time throughout the process. Additional support is available via phone, email, and chat during most hours of the week.
Since it doesn’t have any brick-and-mortar offices, this lender is ideal for borrowers who prefer an online-only experience. According to the company, its automated process can offer rate quotes within seconds and a pre-approval letter within three minutes. Additionally, Better.com services its own loans and doesn’t charge any lender fees, including application, commission (underwriting), and origination fees, which can save borrowers thousands of dollars.
Better also sets itself apart from its competitors by offering its Better Real Estate discount program, available only in select states. If you choose a real estate agent from Better Real Estate and get a mortgage through the company, you could be eligible for up to $2,000 in lender credits.
Closing with Better can take 21 days, and rate locks are available on demand.
It must be noted, however, that Better does not offer VA loans, USDA loans, home equity loans, or home equity lines of credit (HELOCs).
Paramount Bank is a regional bank that serves residents of 11 states in the Midwest, South, and West, but its online services have expanded its reach to all 50 states. The company is a HUD-approved lender that provides a wide array of mortgage and refinancing products, including federally-backed loans, jumbo loans, 203K loans (for home rehabilitations), and conventional mortgages.
There is little information about Paramount’s loan process on its website besides the standard steps to an online loan application.
Once you complete a basic form that requires some introductory information about your credit, employment, and current assets, you’ll receive a phone call from a Paramount loan officer to go over your options.
Based on the information you provide online, the loan officer will go over the steps needed to meet your goals — whether that requires temporarily delaying your home purchase plans and enrolling in a credit repair program, or continuing the home purchase or refinance process.
You will only be required to provide further information and go through a hard credit pull if you decide to move forward with the loan application. After your application is approved, the closing can be completed online via e-signing, so there’s no human contact necessary.
It’s also worth noting that while several competitors have tightened their loan eligibility requirements due to the novel coronavirus pandemic, Paramount hasn’t changed their standard qualification requirements. You can qualify for a conforming loan with a 680 credit score or an FHA or VA loan with a credit score of at least 620. Paramount also offers a 3% down payment program for first-time homebuyers.
As a veteran-owned company, Paramount is especially committed to helping veteran families and doesn’t charge lender fees for its VA Home loan program.
To learn more about their loan products, you would have to contact the company directly, and the only way to do that is by creating an account.
How We Chose The Best Online Mortgage Lenders
To find the best online lenders, we reviewed the products and services that make these providers stand out. We spoke to industry experts from mortgage brokers and economists to realtors and financial advisors with decades of experience to get a better understanding of the elements that consumers are looking for in a mortgage lender. We selected our top companies based on the following factors.
Types of Loans
To accommodate each borrower’s needs, we valued lenders that offered a large selection of loans from conventional to government-sponsored loans. We also took into consideration any special loan programs, minimum FICO scores, discounts, waivers, as well as debt-to-income ratios.