Is technology changing the way homeowners purchase and borrow money for a house? Here's how current tech trends impact the home buying process.
Home buying and financing looks a lot different than it did even a few years ago, and for most borrowers, and the real estate agents who work with them, it’s a welcome change. Even among credit-worthy borrowers, one of the biggest hurdles—and sources of stress—for buyers has been securing a mortgage.
It's no wonder that borrowers or home buyers are increasingly seeking to work with lenders like Fifth Third Bank that offer digital tools and processes to improve the experience on the front end while streamlining verifications and valuations behind the scenes.
Here are five ways technology is transforming lending, and improving the overall buying experience.
Digital Applications Open Doors
Even before COVID-19 accelerated digital adoption, borrowers were already gravitating toward lenders that offered the convenience and transparency of digital tools. In its 2019 Borrower Insights Survey, Ellie Mae found that 50% of borrowers had opted for lenders that offer digital tools, with 66% indicating that they prefer online applications.
Of course, the application is only the beginning, and the need for technology does not end there. Customers not only want the option to apply online, they want a seamless and transparent experience that takes them all the way through closing.
Automation Makes Everything Easier
Few buyers would say they relish the “good ole days” of tracking down documents, scanning them, faxing them, and then fretting about the security of their sensitive data. Thanks to automation, cloud computing and other technology, these steps are increasingly part of a bygone era.
Today borrowers can securely upload and share key documents electronically, in many cases capturing images from their mobile phones or authorizing banks to share information directly with their lenders.
Meanwhile, behind the scenes, lenders are using automation and machine learning to remove manual tasks, and improve the speed and accuracy of the process. In a study by the Federal Reserve Bank of New York, digitally-based mortgage lenders reduced mortgage processing times by about 20%. Traditional lenders have since embraced these digital processes, whether by investing in their own platforms or via partnerships. For example, Fifth Third works with a leading fintech in the mortgage space, to offer borrowers the best of both worlds—an exceptional digital experience coupled with the expertise and resources of an established lender.
Transparency Goes a Long Way
Transparency may not be the first thing that comes to mind when borrowers choose a home lender—but it can make all of the difference between a seamless process—and overall buying experience—and one fraught with angst.
Thanks to technology, borrowers can manage and track their mortgage applications in real time via online portals. At the same time, lenders can use technology to update borrowers on their progress and flag items that need to be reviewed, signed or addressed.
Better Verification and Valuation
Technology has made it far more efficient for lenders to verify borrower information and arrive at accurate property valuations—and the Covid-19 has accelerated the use of cloud-based computing and data analysis. This is a far cry from the no-income-verification loans and drive-by appraisals that contributed to the Great Financial Crisis. On the contrary, underwriters and appraisers are now able to look at the quality of borrowers and property valuations from many different angles. The upshot: Borrowers learn about potential roadblocks earlier in the process, giving them more flexibility to address any issues or move on and explore other options.
Bringing the Close Closer to Home
The closing process varies by lender, state and situation, but increasingly borrowers can close virtually or via a “hybrid” model. With an all-online closing, borrowers sign documents electronically with notarization happening via webcam. In the case of a hybrid close, borrowers sign most documents electronically, reserving only a portion of the paper for in-person notarization—in many cases from the steps of their new homes.
Technology is taking what has traditionally been a dreaded part of home buying and giving borrowers the tools and confidence they need to complete the entire process on their terms. As more lenders and buyers embrace digital tools and processes, it reduces the risk of deals falling through and improves the overall experience for buyers.
For Realtors, it leads to happier buyers, faster closings, fewer roadblocks, more transparency, and frees them up to focus on what they do best—building a strong, personal relationship with their clients.
The views expressed by the authors are not necessarily those of Fifth Third Bank, National Association and are solely the opinions of the authors. This article is for informational purposes only. It does not constitute the rendering of legal, accounting, or other professional services by Fifth Third Bank, National Association or any of their subsidiaries or affiliates, and are provided without any warranty whatsoever. Deposit and credit products provided by Fifth Third Bank, National Association. Member FDIC.