Home buyers are becoming more digitally-savvy. At the same time financial institutions and traditional mortgage lenders are struggling to keep up. Instead digital mortgage startups like QuickenLoans and Better Mortgage have made strides towards making the process faster and more convenient.
There remains some issues with digital mortgage lenders, however, according to Karl Jacob, CEO of LoanSnap. Digital mortgage lenders do not have the data they need to make sound financial recommendations – and they are hurting consumers in the process.
Jacob states that mortgage lenders are doing home buyers a disservice by pushing low-interest rate loans without first understanding their full financial picture. He believes multiple factors need to be considered – think income, credit card debt, future financial goals, and external factors from the U.S. financial environment – that digital providers are severely overlooking today.
Digital Journal spoke with Jacob about these important financial sector trends.
Digital Journal: What is the current state of the mortgage market?
Karl Jacob: Until recently, the mortgage industry has been viewed as stagnant and full of human error. Home buyers have associated the mortgage process with stress and frustration – the least enjoyable part about buying a home. Today, however, multiple companies are working to digitize the mortgage process to make it easier for consumers.
DJ: How do digital mortgages differ to other types of mortgages?
Jacob: With a digital mortgage, individuals are submitting the same financial information as with a traditional mortgage application, but they are doing it online – with less manual input and, in LoanSnap’s case, with AI-powered financial analysis. Digital mortgages are fast and easy. Traditional mortgages take an average of 45 days to close, but many digital lenders are working to bring it down to 7 days.
LoanSnap’s smart loan technology brings the power of financial analysis and future forecasting to the digital mortgage landscape – a capability that other providers cannot offer. It is critical that all lenders look at a home buyer’s full financial picture – credit card debt, income, future financial goals and external data from the U.S. financial environment – before making a loan recommendation.
DJ: What are the advantages of digital mortgages?
Jacob: A digital mortgage is a faster and easier way for consumers to finance a home. This self-service technology allows homebuyers and refinancers to upload documents electronically on their own schedule, avoiding running around finding all necessary paperwork in a hurry. All items are instantly transferred to the lender’s loan system, enabling both parties to jump-start the mortgage process and ultimately lowering close time.
DJ: What are the disadvantages of digital mortgages?
Jacob: Digital mortgages have many benefits, but some providers are pushing mortgages based SOLELY on interest rates. If they dont take into account all financial data, these recommendations can be off the mark or short-term only solutions. For example, a 30-year fixed mortgage might be the one with the lowest interest rate, but it is not necessarily the right solution for everyone both at the time of applying and into the future. For some providers, fast and easy aren’t always right.
DJ: Why do these weaknesses occur?
Jacob: It all comes down to data. A home buyer’s financial needs change on a daily basis while the U.S. economy and housing market are in a constant state of flux. It’s important for mortgage lenders to adapt to these changing circumstances and make recommendations that help the home buyer navigate their debt across time. The only way this can be achieved is by utilizing advanced artificial intelligence technology to aggregate, analyze and forecast financial data in real-time.
DJ: How can digital providers improve?
Jacob: Digital providers need to focus on recommending the right mortgages to consumers, instead of solely focusing on how quickly they can close the deal. In order to achieve this, they need to understand a home buyer’s full financial picture, and they need massive amounts of data to do that. Currently, LoanSnap is the only digital mortgage provider that uses artificial intelligence to forecast your future financial needs and recommend the best loan option for you across time.
DJ: How should consumers approach seeking a mortgage?
Jacob: Make sure you are using a lender that looks at your entire financial picture and takes into consideration what types of debt you have and what you should pay off first. A lender should weigh different factors, not just your credit score, to provide the best mortgage option that won’t leave you swimming in debt. Additionally, future homeowners shouldn’t just shop for a low mortgage rate. Most buyers choose a lender primarily based on the lowest rate. Instead, look for lenders that have the data to match mortgages to your current and future financial needs.
