The growth of technology in home financing is coming from all directions. New companies are springing out every day, startups are having access to end-to-end technology and thereby trying new things, online listing services are dabbling into mortgage lending. All this is not only improving the home financing niche but it’s also providing customers with more option while squeezing out the lender’s profit on the other side. Without more ado, let’s check how technology is affecting the niche.
Digitalized Mortgage Platform and Lending
Unlike traditional loan application and processing, technology has disrupted the mortgage industry. It allows both the borrower and lender to provide and access information with a lot of ease. Digitalization of the lending platforms has reduced the stress involved in applying and getting approval for a loan. For example, customers can now apply for a loan and get approval from the comfort of their room.
Also, as we know that IT security has been the most important issues among lenders, digitalization of the lending platform has made it very possible and easier to mitigate any form of attack on customers’ data. Financial firms are now working with third-party firms to protect their data and utilize cloud-based products.
Simplified Know Your Customer (KYC) process and Smooth User Experience
As already said above, digitalization has turned to the new benchmark among lenders and this has in-turn changed the way things are done in regards to home financing. Most home financing firms are turning to cloud-based products while some others are also exploring the use case of blockchain, this has made it very easy to share permitted user information with ease.
For example, in the traditional settings, users need to go through rigorous steps of submitting their data every time they apply for a loan. With the help of digitalized platform and cloud-based storage and data centers, lenders don’t have to repeat the KYC processes every time. This has simplified the lending process for both parties.
Faster Loan Processing
Digitalization of the industry has also helped to automate the lending process. The reduction of loan turnaround time has evolved because of the automated processing of loan applications. For example, the time for processing home loans has been averaged to five working days while the disbursement of the loan takes two days.
However, as more financial technology (fin-tech) companies are getting involved in mortgage lending, they can integrate technologically advanced system into their loan application processes and use highly sophisticated softwares to automate the lending process. These thereby reduce the lending time. When we compare fin-tech firms to the traditional lenders, with the help of technology, fin-tech was able to reduce the closing time for home purchases by an average of 7.5 days while an average of 9.3 days has been cut off when refinancing your home.
More Competition in the Industry reduces Lender’s Terms and Condition
Financial technology has rapidly evolved and turned to the benchmark for most financial institution especially fin-tech startups. As more fin-tech firms are springing out from all sides, the competition in the industry has increased and these cause the legacy companies [traditional lenders] to ease their terms and condition to remain relevant. In 2016, for example, Quicken Loans launched an online lending service which immediately increased the company’s total loan amount by 22%. In 2017, Quicken loan became the top originator in residential mortgage overtaking Wells Fargo, Bank of America and Chase Bank.
However, for these banks to remain relevant in the industry, they need to work with fin-tech startups and embrace the tech invention in the industry. And for those that find it difficult to do so, they need to ease their terms and conditions to keep their customers.
Technology has helped Borrowers Understand the Industry
One of the problems of mortgage lending is the process complexity. With the help of technology, the steps involved in lending has been reduced simplifying the complex terms and condition. For many years, the loan origination process has been complex and rigid with heavy paperwork and terms. But with the help of cutting edge technology, fin-tech firms has helped reduced the process and has made the process opened with each step traceable by the borrowers. This has not only made the customer understand the industry but has given them access to the services on their terms and from the convenience of their rooms.