January 19th, 2019 11:07 AM by Jackie A. Graves, President
If you’re a move-up buyer looking to purchase your second home,
you might be pleasantly surprised by changes in one aspect of your experience:
You can now apply for your mortgage completely online, rather than having to
deal with all the onerous paperwork of yesteryear.
recent years, numerous lenders have streamlined mortgage applications to allow
borrowers to have more control of the process, with a lot less hassle.
speed and ease of online and app-based shopping have raised expectations for
all consumer transactions, including mortgage approval.
is heating up in the digital mortgage arena, as big and small companies refine
and expand their offerings.
a mix of lenders right now,” said Tendayi Kapfidze, chief economist at
LendingTree, the nation’s leading online loan marketplace. “There are some
lenders that have an almost completely digital process, and some lenders who
have a partial digital process. But, ultimately, the industry as a whole, from
application to underwriting and processing the application, is moving toward a
lot of that, he said, has to do with consumer demand. “Customers are used to
doing a lot of other purchases online and doing it digitally,” Kapfidze said.
“It also creates for a faster process, so typically with digital mortgages, you
get a quicker closing date, which is something that is appealing to a lot of
other side of the equation is creating a user-friendly experience and providing
guidance for potential borrowers to make sure they are comfortable with such a
Jones of Hampton, Ga., has bought three homes through the long and complicated
traditional process. Obtaining a mortgage this year through an online lender
has made a believer in digital lending out of him.
After Jones visited his lender’s website in April, he received a
call from a representative, who discussed what to expect in the mortgage
process. Once Jones was prequalified to see how much he could borrow, he
shopped around for a home based on his budget.
“Initially, I was supposed to get my mortgage around April, but
I didn’t find any homes I was interested in,” Jones said. “If I had already had
the house picked out, I probably could have gone from filling out the
documentation with them to closing on the loan in less than two weeks. It was
just that fast. It was actually a little frenzied fast.”
decided on a ranch-style home with a basement for his family, and the loan
process resumed in May.
buying his first home 24 years ago to his fourth home this year, Jones said: “I
would do digital every time. It was that profound a difference. It made the
mortgage process kind of enjoyable.”
said the key is helping borrowers get to a point where they feel that they are
well informed and making the best decision.
try to create a lot of educational content that helps borrowers understand the
various types of mortgages that exist, the way that they can prepare to
position themselves as well as possible to make sure that they are getting the
appropriate mortgages for themselves, that they are getting the best deal that
they can get, and that they are financially prepared for this very significant
obligation that they take on when they get a mortgage,” he said.
Not everyone feels comfortable yet applying for a mortgage
recent poll conducted by Branded Research of 7,200 potential new home buyers
found that men are more likely than women to contact lenders online. New home
buyers younger than 45 are more likely than their older counterparts to start
the loan process online.
the process has not met expectations that using algorithms to analyze a
consumer’s financial picture would make a digital mortgage colorblind. A new study conducted
by researchers at the University of California at Berkeley raises questions
about statistical discrimination and pricing disparities.
results tell us that lenders have pricing schemes that enable them to charge
higher interest, and thus take higher profits from minorities, even if the
pricing schemes are not intentionally aimed toward minorities,” said study co-author
Adair Morse, a finance professor at the Haas School of Business at the
University of California at Berkeley, which published the study. “These pricing
schemes instead may target borrowers who are not able to shop around more or
who choose not to shop around more. If a seller knows he or she can charge a
higher price without the customer shopping around, it is good business practice
to do so. But this inadvertently may cause discrimination.”
Indeed, Kapfidze points
to a study by the Consumer Financial
Protection Bureau that found more than 30 percent of borrowers
do not comparison-shop, and more than 75 percent apply for a mortgage with
only one lender.
a similar way to ride-hailing services giving riders the option to shop for
transportation reduced discrimination by taxi operators, we believe consumer
comparison-shopping can reduce discriminatory outcomes in financial services,”
Kapfidze said. “While the industry continues to make progress in combating
discrimination, the best way for individual consumers to improve their chances
of being approved and getting the best rates is to make the lenders compete for
their business by shopping around.”
Gilbert, chairman of Quicken Loans, the nation’s largest retail mortgage lender
and an early adopter of digital mortgages, said he is skeptical of the study’s
conclusions about algorithmic lending, including research that found financial
technology companies offering mortgages online charge creditworthy minorities
higher interest rates than white applicants.
“FinTech lenders like us are never in front of our clients,”
Gilbert said. “We have no clue of applicants’ race or ethnicity unless they
tell us. Over a third of our clients do not tell us this information, which is
their right. But then we can’t and don’t make the visual observation because
we’re not face to face.”
silver lining in the report is that online lenders do not discriminate in
application rejections, instead catering to those discriminated by face-to-face
digital mortgages’ potential to save time and money, Thomas Hahn, 24, an
apartment dweller in West Bloomfield, Mich., is not keen on starting a mortgage
process online. He said he would rather talk to a loan officer face to face.
definitely think that for the first time buying a home, I would prefer to sit
down with somebody, because I handle things visually,” he said. “If you’re not
familiar with something, it really helps having a professional walk you through
Hahn said he thinks home buyers might overlook important details
in an online mortgage origination.
person guiding you through the loan process can point you to the things that
really matter and sort out the fluff,” he said.
2015, Quicken Loans launched Rocket Mortgage as an online-only mortgage
process. Quicken Loans chief executive Jay Farner said that although technology
has automated the loan process, human interaction remains a robust feature of
try to take the best of both worlds, not only the technology that has been
developed, but also the human touch that we’ve been doing for 34 years,” he
said. “A lot of people try to do one or the other, and what we’ve done is both:
leveraged technology when it makes sense, and applied that human touch when
that’s needed, as well.”
Now another paperwork-heavy aspect of home buying is moving to
the Internet — the closing or settlement. Technology is automating the day when
all involved parties gather around a table to make the transaction official by
signing stacks of paper.
brokerage Redfin and online notary platform Notarize have teamed up to let
customers close a property purchase entirely online.
November, Redfin real estate agent Art Cisneros and a California couple who
were moving to Austin, were involved in the brokerage’s first digital closing.
we close at title companies here in Texas and sign the documentation at the
title company,” Cisneros said.
our clients who were in California at the time, the closing seemed pretty
seamless. This was a situation where they could handle the closing from home
before heading off to work,” Cisneros said. “It took about 30 minutes. They
were just happy with the convenience of it all.”
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