Buying houses and owning land is a part of the American dream. However, the excitement of buying a new home can be dampened by the mortgage application process. The notoriously byzantine mortgage process has not followed trends in streamlining, as it is still over-encumbered with paperwork, requiring time and patience. The infrastructure is being challenged with new innovative technology, where the hurdles are fewer and wider in-between. Better.com is a company that aims to uproot the traditional dreary mortgage system, offer lower rates, eliminate fees, and streamline the entire process online 24/7. The company uses fintech to revolutionize the mortgage process.
Pre-Approved Mortgage In Minutes Rather Than Weeks
Better Mortgage, or ‘better.com‘, is a New York City-based company, founded by Vishal Garg in 2016. It strives to be commission-free, allowing borrowers to apply for loans, sign documentation, online at the convenience of their own home. Utilizing automated technology, it allows mortgages to be pre-approved in minutes, as opposed to weeks.
Company Inspired By The Mortgage Process
Garg was inspired when he lost out of his dream home to an all-cash buyer, due to being caught up in the tedious mortgage process. A somewhat poetic origin, he used his final down payment to fund the initial startup of Better Mortgage. Garg said “There were all these hidden fees, I could not tell which document was what. So, I actually used the down payment that we had saved up for the house and used it to start better.com with the idea of enabling a consumer to find out how much they can afford, what their rate is, and even connect with someone who can help them get approved in as little as three minutes”
No Commission Fees As Better.com’s Competitive Advantage
Traditional lenders get money by the commission on loan price, charging lender fees, and interest payments on loans. better.com does not charge any commission or fees, as the company website writes “no one should have to pay thousands of dollars in commission to a loan officer who mostly slows the process down”. This creates an enticing incentive to use their services, alongside its flexibility, and convenience.
Ideal Startup For Millennials?
Garg said “The Millennial generation is buying at a slower rate than prior generation relative to their age. It is because they have more student loan debt to pay off than in any prior generation. We are able to help them by making the cost lower. So if our rate means that instead of paying $1800 a month to buy a $300,000 house you have to pay $1500 that automatically reduces your debt to income ratio because you are saving $300 a month on average with Better.com versus the competition”.
Drastically Improved Speed Of The Process
The speed of the process is drastically improved, compared to a traditional mortgage, as Garg said “people spend almost as much time financing the houses they found as much as they do in looking for a house”. Mortgage loan applications usually take around 6 weeks to one fully approved and locked down, which is lengthy in our fast-paced modern society. Garg commented on the processing, as he said it takes “to as little as 10-20 minutes to be able to know how much housing we can afford, and to get a pre-approval letter, so you can close your loan in as little as 10 days”.
Pandemic Creating A Great Situation For Better.com
The pandemic has created an ideal situation for better.com, as it has grown exponentially under the circumstances, and recently secured a $4 Billion valuation. The pandemic has lowered interest rates, which makes borrowing more attractive. Furthermore, better.com is a fully online process, which requires no human interaction, therefore many people are utilizing the technology to refinance their homes. More than 2,000 better.com employees were hired since the start of the pandemic to account for the increased demand. Furthermore, there was a 200% increase in applications since the beginning of the pandemic.
There are inherent minority biases that occur with traditional mortgage processes. A study by the National Bureau of Economic Research indicated that there is a 6% higher rejection rate for minorities, alongside higher charges. Since the process is entirely online and automated, there is no room for minority or racial biases, which creates an even playing field. Furthermore, algorithmic discrimination can be found in many areas of algorithm-based decisions, as historical prejudices are involuntarily integrated into the AI. However, mortgage lending used by better.com does not have these biases.
As society dials up the odometer, people use services that cater for streamline and convenience. Mortgages have always been viewed as a stagnant process, which may become a thing of the past, as more people turn their gaze towards better.com.