Digital mortgages to enter a new, faster (and cheaper) era in year ahead

The digital mortgage continues to evolve, and could enter a new era in the year ahead as lenders invest in technology. (iStock)

Over the past few years, lenders have focused on improving the digital mortgage experience for consumers, but now lenders could increasingly look to back-end technology for mortgage, improving the speed at which consumers can go through the mortgage process.

This coming year, mortgage lenders will be focused on investing in solutions that will drive efficiency, Seth Appleton, Mortgage Industry Standards Maintenance Organization (MISMO) president, said.

Last year, after interest rates hit record lows, a surge of borrowers rushed to refinance their homes or buy new ones, and while this gave lenders robust profit margins, it also left them with no time to improve the mortgage experience. Lenders hit a record average production volume of $1.4 billion per firm in the third quarter of 2020, according to the data from the Mortgage Bankers Association (MBA) shared at their annual conference in Nashville. 

Now, although the housing market has slowed, lenders can begin to use some of their profits over the last year to invest in technology. According to the MBA, some the top technology concerns for technology companies include: 

  • Cutting IT costs
  • Information security
  • Picking the right technology

"While [lenders] are now in a different situation financially, those that have done well and prepared for the other side of the cycle, they are optimizing," Appleton said. 

This optimization could lead to faster cycles for mortgages, which currently take about one month or more to complete from beginning to end.

If you are considering buying a home, comparing offerings from multiple lenders can help ensure you get the best product for you. Visit Credible to find your personalized interest rate without affecting your credit score.

Tech investments could bring down the fees for a mortgage

As lenders invest more in technology, it will reduce the time and the cost for them to originate a mortgage. These savings can then be passed on to consumers, making it less expensive to get a mortgage.

While investment in technology for the front end of the mortgage — that is, the side that consumers see such as online applications — is convenient, investment in back-end technology (or the technology that fuels the process, but may not necessarily be seen) can actually provide consumers more benefits by reducing the time it takes to close on a mortgage or decreasing costs, according to Appleton.

He pointed out that technology adoption has been slow in the mortgage industry, but the industry is making progress. In fact, the onset of COVID-19 and stay-at-home orders forced many lenders to look for alternative solutions, accelerating tech adoption for the industry. 

If you are looking to purchase a home or refinancing your current loan, you can consider an online marketplace like Credible to compare your options. Visit Credible to compare multiple mortgage lenders at once and find the one that is the best fit for you.

Home price growth slowing, but equity levels remain high

As the housing market slows, the rate of home price growth has begun to decrease. However, home values are still significantly higher than they were last year, giving homeowners access to record amounts of home equity.

Tappable homeowner equity, or the amount available for homeowners to access from their home while retaining at least 20% equity in their homes, hit an all-time high for the 10th consecutive month, according to a recent report from Black Knight. It increased to $11.5 trillion, up 5% or $500 billion from the first quarter and $2.3 trillion or 25% from the same time last year. 

If you are interested in tapping into the equity in your home, consider a cash-out refinance. Contact Credible to speak to a home loan expert and get all of your questions answered.

Have a finance-related question, but don't know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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