Traditional mortgage loans are expensive and labor intensive. Currently, the average mortgage takes 46 days to close, requires 30 separate touch points, and costs the lender between $2,000 and $2,500 to produce. That’s a lot of time and money invested into a single loan.
But digital mortgage technology is poised to disrupt that reality in a way that benefits both the borrower and the lender. By taking note of current trends, lenders can unlock greater potential––and greater profitability––in the digital mortgage marketplace.
What are digital mortgages, and why are they vital to lending?
A digital mortgage uses technology to interact with borrowers at every stage of the lending process to reduce internal costs, eliminate cumbersome manual processes, and streamline the outfacing experience. An entirely digital mortgage would have no human interaction and zero paper transfers.
The trend toward digital mortgages isn’t just a pivot for 2020 that’ll bounce back to the conventional status quo.
Digital mortgages are vital to a progressive lending business model from both internal and external perspectives. In fact, lending institutions that integrate technology could see an increase in profits of up to 40% due to revenue growth and cost reduction.
5 market trends impacting digital mortgages
In general, the global marketplace has become increasingly digitized. Taking note of current market trends can help mortgage professionals predict how the lending industry will operate in the next few years and beyond.
1. Increasing consumer confidence in digital products
With the pandemic-driven user uptick in the online marketplace, consumers aren’t just comfortable with a completely digital experience––they expect it. Worldwide, 80% of consumers shop online. These customers say convenience is the main driving factor in those purchase decisions. Even members of older generations, who may have been hesitant to participate in the online community, are now at ease with a greater range of technology.
These changes indicate that the mortgage industry should expect consumers of all ages to become increasingly comfortable with a fully digital experience. If grandma is OK with ordering groceries online, chances are she’ll soon want to refinance her condo online too.
2. Mobile-first behavior
Decisions are made on mobile devices. From food to finances, from education to entertainment, Americans reach for their phones first. Gone are the days of “let me get back to you when I’m at my desk.” Seventy percent of overall digital media time is spent on smartphones, and 66% of consumers use their phones to complete purchases.
Mobile platforms empower life as we know it.
Lending institutions must have digital mortgage systems that are optimized for mobile users. Otherwise, they risk losing business to those who do.
3. Automated communication that supplements human-led support
Status updates are now status quo. The average smartphone user gets 46 push notifications each day. If the pizza app sends a notification when food goes in the oven, it makes sense for borrowers to get notifications during the loan approval process. A notification at each of the major loan stages––consideration, application, processing, underwriting, and closing––is a useful component in digital mortgage services.
Still, person-to-person support is invaluable to most borrowers. Today, lenders communicate 20% more with their customers, according to a survey by Ellie Mae. Younger millennial borrowers in particular tend to prefer human-led support that is supplemented by convenient digital communications.
A happy medium is to use technology for automated notifications and messages alongside strong customer support. Implemented wisely, automated messaging can both help the customer experience and reduce labor costs––a win from both angles!
4. Trust in cashless transactions
Almost all businesses provide cashless payment options for customers. Recently, cashless has gone a step further by becoming “touchless.” A couple decades ago, consumers hesitated to even use debit cards over checks. Today, things like tap cards and mobile payment apps actually increase security by eliminating the possibility of cash theft.
Consumers have learned to trust today’s technology with their finances.
That type of trust that didn’t develop overnight, but it now feels very normalized. This is great news for lenders looking to upgrade their technology.
Lending institutions can capitalize on cashless security ideologies with the digital mortgage. Offering secure portals and encrypted data sharing may feel safer than in-person document exchanges to many borrowers in this cashless, paperless, touchless society.
What do swipe-right dating apps have to do with mortgages? Personalization and felt needs. After answering a few demographic questions, singles across America assume that matchmaking apps will “get them.” They trust this technology to understand who they are and what they want. They rely on the apps to weed through the options and personalize their dating experience.
A digital mortgage should have similar qualities. By using proper filters and intuitive features, fintech should help borrowers discover the mortgage products that fit their personal needs. Today’s borrowers need to feel personally understood. Digital mortgages can do this.
Adopt technology into your lending practice now.
Most mortgage lending companies currently have at least some level of digital mortgage integration, even if it’s just an online application form. The goal for many is to increase automation so they can compete against large players in the space, like Rocket Mortgage.
The move towards a more digital lending process is inevitable. Still, digital mortgage processes take time to implement, and there is always some sort of learning curve––or possible restructuring––in back-office operations.
That’s why it’s important to consider digital adoption now. The market is ready; the trends are there now. But your support personnel needs time to adapt to digital mortgage tech. C-suite leaders can give loan staff the support they need by making immediate, gradual investments in the internal digital mortgage ecosystem.
We’re here to help.
Maxwell offers great solutions for whatever stage your company is at on the digital mortgage spectrum. As far as market trends go, we’re on the cutting edge with services like intuitive pre-fill applications, verification suite drivers, automated milestone updates, electronic notarizations, and much more.
Our tech can be customized based on your current needs and expanded as your needs change, all in an effort to help your company close more loans for less. Together, we can optimize digital mortgages within your company’s brand.