Shopping for a Home Loan? There’s an App for That

January 4, 2016 | By

Millennials place homeownership as one of their top priorities, something that SoFi, a new online lender based in San Francisco, can attest to.

The startup, which works with young professionals in the beginning stages of their careers to help them with student loan financing and mortgages, places a greater emphasis on connecting with customers through its mobile platforms instead of the traditional ways of in-person meetings and paper applications.

“Most consumers appreciate the ability to move their applications towards approval at any time of day or night. Instant feedback is a fundamental element in providing a positive experience,” says David Wind, vice president of mortgage at SoFi, which expects to issue $3 billion of mortgages in 2016.

The company does offer customers the opportunity to speak with a mortgage professional, says Wind. But SoFi’s customers are more attuned to the latest in technology—and the speed and convenience that it can afford them—which may provide all the information and interface its clients need to apply for a mortgage. SoFi boasts it can offer customers a mortgage rate quote in just two minutes.

SoFi and Lenda are among a handful of new startups that rely on the speed and convenience of the web and smartphone technology to connect younger customers with the right home loans.

This comes at a time when consumers are increasingly using their smartphones and other mobile devices for a number of transactions, like mobile payments and banking. Last year 39 percent of all mobile phone owners with a bank account have used mobile banking, a 10 percent increase from 2012, according to the Federal Reserve System’s “Consumers and Mobile Financial Services 2015” report.

However, mobile activity is not as widespread in the mortgage space, and may not be as highly preferred or prioritized by lenders as it is by consumers. Online mortgage applications are increasing, and recent research shows consumers’ appetite for mobile mortgage shopping will continue to grow.

Are Lenders Dragging Their e-Feet?

While many lenders use a combination of traditional and digital marketing channels to advertise their mortgage apps, mobile apps were not a big part of their overall strategy, according to the Mortgage Lender Sentiment Survey from Fannie Mae’s Economic & Strategic Research (ESR) Group.

Three out of four lenders do not offer a mobile app for consumers to shop for or secure mortgages, according to the report, and only 40 percent of lenders that did not offer a mobile app planned to develop one in the course of a year.

“The lower priority that lenders are placing on mobile channels, and the differences in lender and consumer views on mobile tool functionality, could place lenders at risk of not meeting consumer demand or encouraging new entrants to address this growing demand at the expense of existing firms,” says Steve Deggendorf, director, business strategy and strategic research at Fannie Mae.

Lenders cited the high cost of IT investment, potential information security risks, and slow consumer adoption as reasons why they are slow to bolster their mobile strategies.

“Lenders are a little more focused on back-end things like collecting the documents once the borrower has applied for a mortgage, collecting all the documents they need to get their loans in closing, which makes their processes more efficient but they may be missing an opportunity to address consumers’ technology preferences more on the front end,” says Sarah Shahdad, strategic planning analyst for ESR.

Consumers Are Hungry for Mobile Accessibility

In ESR’s National Housing Survey™ report “Consumer Attitudes about Getting a Mortgage Online and via Mobile Technology,” 57 percent of recent homebuyers obtained a mortgage quote online, while 77 percent of college grads said they would like to fill out a mortgage application online.

“People are going on Google, they’re searching for homes themselves and getting a better idea of what they want, so the lenders have to be where the communications and the searches are happening,” says Cleve Bellar, chief marketing officer for ValueInsured.

In the meantime, as lenders begin to transition into new mobile strategies, the features they would like to include are those that help consumers get prequalification, connect with loan officers, and fill out mortgage applications, according to ESR research.

The advent of this technology should not diminish the importance of offering the consumer face-to-face contact with a mortgage expert, says Deggendorf. “Many consumers still prefer speaking to an expert at certain points during the mortgage shopping process.”

While consumers are driving the demand for mobile apps related to home loans, the new technology itself provides a “holistic” solution to the overall mortgage shopping process, says Jeff McGuinness, chief sales officer for Embrace Home Loans.

“The first-time homebuying process is terrifying, and lenders should ask themselves if they’ve identified how each consumer wants to interact with the lender throughout the process,” says McGuinness.

“At the end of the day this is a very human transaction and there are real people on the line, so we want to humanize the process as much as possible,” he adds.

comments
  • As time moves on, and digital mortgage platforms with paperless transactions become the norm, consumers will gravitate towards less face to face contact. While direct contact will likely always be necessary for some, the convenience of conducting a successful mortgage transaction from home, at the moment the consumer is ready to engage, will become the standard in the marketplace.

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