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The Mortgage Application of the Future Is Here – And There’s No Going Back

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The days of endless paperwork and long delays are over.

There are some things that almost everyone agrees on. A delicious cup of morning coffee, a longer-lasting phone battery, the joy of binge watching great television. On the negative side, everyone agrees that filling in a traditional mortgage application is a truly awful experience. From the gathering of payslips, through the bank statements, to the reams of paperwork, all followed by the waiting to hear whether you’re approved – it’s no wonder that consumers speak of a mortgage application with the same fondness they reserve for root canal treatment.

But times are changing, and so are mortgage applications – thanks to the digital revolution which has transformed so much of what we do.

Banks and financial service providers were resistant to change as the digital economy matured and cloud computing took off. They were nervous about changing their business model, worried about security, and unwilling to think about a new way of doing things.

But the momentum has shifted, and nowadays, innovation and consumer-friendly products are top-of-mind. Thankfully, the mortgage application is benefitting from this new attitude, and it has become a lot more consumer-friendly over the last few years.

What Has Changed With Mortgage Applications?

Firstly, banks realized they didn’t need to reinvent the wheel to offer a digital mortgage. Rather, they can make use of tools, protocols, and systems that most of their consumers are already familiar with and using on a regular basis. Nima Ghamsari, CEO and founder of Blend, explains that “many of the underlying components – mobile capabilities, data connections, and collaboration tools-  are readily available and provide a great baseline to integrate into your workflow.”

In the same vein, the technology that is driving a new wave of digital mortgages can now integrate with existing tech systems, which has made adoption of e-mortgages easier. Banks and lenders have made significant investments in tech over the past years, whether it’s in on-premise hardware or cloud-based tools. It’s unrealistic to ask them to discard it all and try something new. Tech needs to integrate in order to be useful.

6 Must-Haves in a 21st Century Mortgage Application

Accounting firm PwC did an extensive study into Consumer Lending and drew several broad conclusions that are pertinent to this article:

  • Digital all the way: The majority of consumers, by a wide margin, prefer to apply for loans online.
  • Consumers are ruthless: Younger borrowers, in particular, are fairly critical of the ways that their applications work. They grew up digital, and they expect the experience to be seamless. Lenders need to work harder to make products that speak to a growing portion of the market.
  • Speed is vital: There are some features of a digital mortgage that are nice to have, e.g., an automated status feature of the application, but mostly, it needs to be quick. Borrowers believe the most important factor in choosing a lender is the speed of the process.
  • Great opportunity in mobile apps: Many consumers still feel that their mobile apps are not truly delivering the experience they want. The mobile apps currently available on the market are simply not providing important features that consumers say they want on their mobile devices when they are interested in a consumer loan, such as the ability to lock in a rate, compare products, or calculate the affordability of payments.
  • Interest rate is the most important metric, but it’s not the only one: If you offer great services and a sophisticated interface, many consumers will be willing to pay more.
  • Established relationships are priceless: For nearly one in five consumers, having an existing relationship with a lender was seen as a key referral source for the loan.
  • You must add value: Many of the features that consumers said would be the most valuable to them are also relatively simple to implement, such as online credit score services, payment reminder tools, and budget trackers. In some cases, it seems that lenders could provide instant additional value to their customers with relatively little expense. 

Traditional lenders have a strong advantage when it comes to large investments like mortgages. An established trust in the brand, a pre-existing relationship, and confidence in the stability of the lender go a long way. Branch location has become less and less important, which is a direct product of the shift to digital products.

When asked what the most important aspects of the relationship with a mortgage provider were to them, most consumers listed the following four categories: 

  • Flexible product and terms;
  • Low closing fees;
  • Fast end-to-end process;
  • Product bundles
Image credit: Pexels

The Value of Data

The differentiating factor in all of this is good quality data. Efficiency and accuracy in data gathering and analysis is where the digital mortgage stands to provide some of the greatest process improvements. AI Foundry understands that by working with data that is machine-readable (as opposed to handwritten information or scanned PDFs), one can make that data can come alive, offer insights, and guide the lending decisions. As a result, the risks associated with the mortgage can be measured and mitigated far easier than before. “This takes any guesswork and/or unconscious bias out of the process altogether,” says Ghamsari.

In the Service of the Consumer

A recent article in the Harvard Business Review neatly summed up how new technology and innovation are pushing both banks and fintech startups to create better and better products, designed very much with the consumer in mind. “The familiar David vs. Goliath script of the scrappy, internet-fueled startup vanquishing the clunky, brick-and-mortar-laden incumbent is repeated so often in startup circles that it is sometimes treated as inevitable. But in the real world, sometimes David wins, other times Goliath wins, and sometimes the right solution involves a combination of both.”

Consumers were burdened for so long by unwieldy and hostile mortgages that they are naturally still suspicious of mortgages that work quickly and effectively in their best interest. It will take some time for them to accept the fact that this is the new normal, and that from here, things can only get better. 

AI Foundry works with data every day to help the financial services industry create better products and understand the needs of their clients more fully. Get in touch today to find out how we can work together.