Offering a full online mortgage application process has long been the crux of many mortgage lenders’ businesses, but not always at more traditional community banks and credit unions.

But with more customers searching for mortgage and financial products on the Internet, more institutions are realizing they’d do well to offer as much online help as possible.

The majority of banks and credit unions don’t offer the service, said Jeff Berg, senior marketing consultant with Wisconsin-based MortgageBot, which provides this software to most of the local banks that offer it.

But banks that do use it – and promote it – get a lot of traffic from those applications, he said.

Of the banks and credit unions that offer mortgages, only about 20 percent to 25 percent of them have a “smart, interactive” online application, Berg said.

With a less-aggressive sales culture and a bigger emphasis on traditional, face-to-face interactions, most banks’ Web sites just offer a phone number for customers to call and make an appointment, or sometimes a .pdf application to print out and bring in.

MortgageBot has offered online application products since its founding in 1997, Berg said. It currently has 1,000 financial institutions as clients, 200 of which only became customers in the past year. Berg estimates that only 1,300 institutions nationwide offer the service.

During last year’s frenetic refinance boom, the six loan officers at Ware’s Country Bank were stretched thin, with borrowers sometimes having to wait a week or more for an appointment. With interest rates threatening to inch upward at any time, that time delay could be crucial.

The borrowers’ answer? Forget making an appointment, and just file the application online.

The bank had offered online applications for about six years, said Denise Hawk, director of retail lending, “but honestly, it wasn’t until 2009 that we saw any kind of volume there.”

In 2008, Country Bank generated about $2.5 million of loans online. Last year, the bank did $29 million, Hawk said. When the crunch hit, those online applications came in handy.

When customers enter their own information online, the data flows directly into the bank’s origination systems, so it eliminates the time-consuming, and often error-riddled, process of having a bank employee enter the data manually from a printed application, Berg explained.

Typically the biggest cost is in installing the system, according to Hawk, but after a high upfront cost, the institution just pays a monthly support fee. Even with Country Bank’s usually low numbers of online applicants, she said, it was worth the expense.

Rockland Trust has offered online applications for about four years now, said Dustin DeMeritt, regional manager of the bank’s mortgage division.

It hasn’t exploded in popularity recently, but it’s seen slow-and-steady growth since it was implemented, he said, largely because more people are more comfortable with entering personal data online.

Younger generations that grew up shopping on the Internet are more naturally trending online. And it’s more convenient for many customers – the borrower can pause the application if interrupted or to go find additional information.

But the ease of online mortgages has to be balanced with plenty of personal contact with the bank’s employees, DeMeritt said, including follow-up calls and sometimes in-person conversations. The online application is a great way to extend conveniences to customers, but it’s seen as an extension of more traditional, personal contact that makes community banks stand out from larger, faceless lenders.

Hawk said despite her bank’s spike in online applications in 2009, she doesn’t foresee a long-term shift in how customers apply with her bank. Community bank customers stick with their banks because they like the specialized, in-person approach over the automated, arms-length transactions of other institutions.

“A lot of customers would just go and prefer to sit down with their community bankers,” she said.