The thing about mortgages is they continue to be difficult to obtain relative to just about everything else out there.
Today, it’s easy to buy anything with the literal click of a button, whether it’s a new pair of shoes, groceries, a plane ticket, or a new car. You can pretty much do it instantaneously without leaving your couch.
When it comes to home loans, it’s still a process that tends to take weeks or more than a month, despite being a fairly straightforward transaction.
Even home buying and selling is becoming simple, with iBuyers like Zillow beginning to dominate the landscape and cut out real estate agents in the process.
It’s just the pesky mortgage that slows it all down.
Why Mortgages Take Forever
- Mortgages tend to take 4-6 weeks from start to finish
- There are many entities involved that slow down the process
- Such as processors, underwriters, appraisers, title/escrow companies, etc.
- The manual review of documents is also very time consuming, and can be exacerbated based on lender capacity
One of the main roadblocks to instant mortgage approvals is the many entities involved, on several different levels.
We’re talking borrowers, lenders, appraisers, employers, loan officers, loan processors, underwriters, funders, title and escrow companies, insurance companies, notaries, and so on.
A borrower seeking a mortgage has to provide a ton of paperwork, from a credit report to paystubs and tax returns to bank statements, disclosures, and more.
Unfortunately, these documents come from a variety of sources, and once collected, often need to be analyzed to determine eligibility.
From there, it can get even more complicated as loan underwriters seek to connect the dots and make sense of any anomalies.
This can call for even more documentation requests, updated documents, letters of explanation, and so on.
There is also lender capacity to worry about, since a human being is often required to review the documents.
This means waiting for someone to look at your loan file, which can be agonizing when trying to close on a home purchase.
Fintech companies have been working to solve this “problem” for years, and it does look like the solutions are getting closer to reality.
A pioneer in the field has been Quicken’s Rocket Mortgage, which shook things up when it released a commercial during the Super Bowl promising a full mortgage approval in just eight minutes.
Most critics paid attention to the speed part, confusing it with a return to subprime.
But that wasn’t really the case; it was more about streamlining a very old process, as opposed to skipping steps along the way and providing access to easy credit again.
Quicken made this bold claim based on technology it had created via QL Labs and other partners that allowed borrowers to import and verify asset, property and income information online, as opposed to sending in paper documents, which would then need to be analyzed.
This led the company to release the slogan, “Push Button, Get Mortgage.”
But ultimately, it’s still not that simple. Of course, Quicken didn’t want to use the line “Push Multiple Buttons to Get Mortgage.”
They later took part in a Single Source Validation pilot program with Fannie Mae that allowed them to digitally verify income, assets, and employment in a single step.
Now We’ve Got ‘One Tap Pre-Approvals’
Another company, Blend, has also been hard at work looking to revolutionize the mortgage industry, along with all facets of consumer lending.
Blend refers to their one-tap technology as their “answer to the modern checkout experience for consumer banking products.”
Once again, the same basic technology is being employed. Instead of downloading PDFs and sending them to your loan processor, who will then tell you that you’re missing pages, you can simply input your bank account credentials.
If you’ve ever used TurboTax, the process is similar. When filling out the mortgage application, you can select a financial institution from a list, provide the login details, and it does the rest for you.
From there, Blend’s “one-tap technology” connects consumers’ accounts to instantly and automatically verify information, eliminating the need for the lender to review the numbers manually.
The result is a verified mortgage pre-approval, not just an estimate of buying power, in a matter of minutes.
Again, the borrower is probably going to have to make a series of taps to generate the pre-approval letter (from their phone), but the speed and convenience should be night and day versus the current process.
For example, a prospective home buyer attending an open house might be able to generate a pre-approval letter on the fly, while in the house they just can’t pass up.
This can provide a competitive advantage, and save everyone time, by verifying they actually qualify for the home in question.
For the record, Blend’s technology is white-labeled, meaning it will be rebranded and used by individual mortgage lenders.
So if you want to take advantage of their technology, you’ll need to find a lender partner.
Speaking of, U.S. Bank will be one of the first banks to offer Blend’s “One-tap Pre-approval” to consumers, with more lenders launching as soon as December 2019.
Blend also counts Wells Fargo as a customer, meaning we might be hearing of their instant mortgage offering soon as well, which could level the playing field for ultra-fast mortgages.
The hope is that once the pre-approval piece becomes instant, the rest of the process can be sped up as well.
In most cases, it’s still going to take you several weeks to get a mortgage, but if the other steps, such as appraisal and escrow/title can be shortened as well, a mortgage in a matter of days might become a reality.
We’re already seeing progress on these fronts as well, with appraisal waivers and eSignings, so the future might be closer than it appears.