You’ve probably heard about digital mortgages, and you might even know people who have gotten their mortgages using a digital platform. But because the mortgage industry is a tightly regulated one, that has operated pretty much unchanged for decades, it can be difficult for established financial institutions to embrace new ways of doing business. And that’s understandable.
The more you know about something, however, the less daunting that something is. If you aren’t too familiar with digital mortgages and how they work, or if you just don’t see the benefit of implementing a change to the way you do business , and therefore, have been avoiding adding digital mortgages to the services you offer customers, you might want to learn more and ultimately pivot. With millennials, especially, digital mortgages are the wave of the future.
What is a Digital Mortgage?
Digital mortgages offer a simpler and quicker way for homebuyers to get a mortgage than the traditional (and often arduous) face-to-face way. Digital is synonymous with online, and any type of shopping you can do online is typically faster and more convenient, even mortgage shopping. In fact, because algorithms are used to determine statistics with a digital mortgage, many people are more confident of the accuracy of a digital mortgage as opposed to a traditional one, where there is a greater chance of human error.
Digital Mortgages: The New Norm
Digital mortgages allow homebuyers applying for a mortgage and homeowners refinancing their loan to do so online, at home, whenever it’s convenient for them. Consumers can typically do everything electronically with a digital mortgage, oftentimes having a completely paperless experience.
One of the industry leaders, Rocket Mortgage from Quicken Loans, offers a mobile application or website for consumers to enter their personal information and their necessary documents. Many other lenders offer a service like this one. If a customer comes to your financial institution asking about your digital mortgage program, what will you tell them? You don’t want to have to say you don’t have one. You’ll likely lose that customer if you do.
Millennials Prefer to Shop Digitally
Be prepared for an increasing number of customers to want a digital mortgage option. Millennials are buying their first homes now, and some are even at the point of refinancing. They live in a digital world already, shopping for everyday goods, cars and even homes, online. It makes sense that they would be interested in shopping for a mortgage loan online as well.
In fact, millennials, as of 2019, make 60% of their purchases online. And that’s up significantly from 2017, demonstrating the upward trend. Mobile shopping is catching up quickly; 36% of the total shopping millennials do is through their phone. As mobile shopping rises, laptop or desktop shopping drops. Mobile shopping is up 20% from 2017, and laptop or desktop purchasing is down 31% from 2017. Millennials value convenience, and nothing is more convenient than shopping using your phone.
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All this online and mobile shopping certainly signals a change among younger people who make up about 36% of the home buying market. Of that 36%, 57% said they would prefer to use a digital channel when shopping for a mortgage, a large potential customer base.
What are Digital Mortgage Platforms?
Digital mortgage startups help lenders do it all. They let homebuyers know how much home they can afford and then find a mortgage for them, one that is fully compliant, often paperless, quick and easy to use.
Some leaders in the field are Better.com, LoanDepot, SoFi and Rocket Mortgage. These lenders saw that technology was the future, and they gained a large market share by seeing this early on.
It can be expensive for banks, credit unions and non-bank lenders to transform themselves to a true digital mortgage lender; however, they can partner with digital mortgage platforms, like BeSmartee, to process mortgage applications and find the best digital mortgages for customers.
Some customers, including millennials, will still want the option of talking with someone about what could be the biggest purchase of their lives: a mortgage. Banks, credit unions and non-bank lenders would be wise to continue with their bread-and-butter business, while adding the option of a digital mortgage to their suite of options. A digital mortgage can offer a great benefit for your customers, while being profitable for you.