There’s no shortage of tech solutions when it comes to finding a mortgage. If you live on the Peninsula, you’ve likely seen the Caltrain wrapped in SoFi advertising and Rocket Mortgages (owned by Quicken Loans,) seems to be advertising on TV every other commercial. These, along with their main competitors Lenda and Guaranteed Rate, are great resources for home buyers. But are they the best way to go about procuring an actual mortgage?
I was curious to better understand that, and to look into what these tech solutions might offer and lack, so I called up my favorite mortgage banker, John Brunson, to get his thoughts. (Full disclosure, part of the reason that John’s my favorite mortgage banker is he’s also my brother-in-law and after knowing him for 30 years, I trust his insights!) Here’s our Q&A:
Q: What’s the best use for digital mortgage solutions?
Digital solutions are good for simple requests. They can provide good price discovery and ultimate execution for those most straightforward of applications.
On the downside, once you’ve provided your information to the online mortgage companies, you’ll be part of their lead generation machine and your contact info can be systematically solicited in an invasive way.
Q: Is there anything these digital solutions are missing or incapable of that makes the “real person “ approach still best?
The digital solutions provide a large product solution set, but one that does not solve for millions of loan requests. It’s these individual needs that really benefit from the “real person” approach. The digital solutions are designed to primarily serve people who are salaried borrowers with spotless credit and seeking a loan of less than $679,150.
When your situation is more unique, that’s when it’s best to speak with a real person. Certainly if you’re self-employed, or seeking a larger loan (which is most common in the Bay Area,) you’ll want to have an advocate who can help you figure out the best options.
Additionally, sometimes credit can be wrongly reported or have complications, and you definitely need someone to help you correct that. Finally, with complex attributes such as the effects of death or divorce or something such as property or market nonconformity, you absolutely have to talk with a banker or broker.
Q: Is the “real person” approach faster?
Not necessarily. Some of the digital solutions can process straightforward loans just as quickly as a banker or broker. The difference is in the conversion to closed loan rate. The digital solutions have much lower conversions to closed loans (meaning they don’t approve nearly as high a percentage of the loans applied for as a banker or broker). This really comes down to the fact that a banker works really closely with the applicant to create a solid relationship and have a customized solution for the individual. I close nearly all of my applications because I understand my clients needs so well and set them up for streamlined success.
Q: Are online loans more or less expensive?
Both. On the face of it, online mortgages often seem to be less expensive than going through a banker or broker. But over the long-term, when you get into the most optimum product for your situation, you’re going to save money. Because the digital solutions aren’t able to personalize your solution for your specific needs, it will end up costing you more and just not being the best fit.
Q: In 2008, we had the big mortgage disaster. I’m worried about something like that happening again. Will the all-digital approach result in less qualified people getting loans, thereby causing more defaults?
No, the online process seeks to automate the easiest to process loans, loans which have lower risk. If there’s any complications with the application, the loan won’t be approved, hence the lower conversion to closed rate.
Q: Doesn’t it take working with a person to ensure you’re making the best choices for your situation?
Absolutely. A customized mortgage solution set empowers the negotiation process to home-buying, giving an individual buyer more power when they present their offer. A mortgage banker can help buyers to identify the optimum balance between how much of a mortgage to take and how much cash to put down. There are also certain financial life cycle decisions that need to be considered and discussed, such as Adjustable vs. Fixed rates.
For someone who is self-employed or has hard to prove income, working with a mortgage banker is really the only path to getting approved for a loan. It’s just too complex a situation for the digital solutions to work with.
Finally, when you work with a person, whether a banker or a broker, you have a single point of contact. Think of it like a project owner to manage your transaction. They will keep your loan application on track to streamline the process and advocate on your behalf. Keep in mind, these bankers and brokers don’t get paid until your transaction closes (escrow signing,) so they have a real vested interest in applicants succeeding in their loan approval and getting the home they want.
If you’ve got questions on this topic, feel free to add them to the comments section below and we’ll get them answered for you.
John Brunson is a Mortgage Banker with Skyline Home Loans Nmls #1086320
IMPORTANT NOTE: I have not and will not verify or investigate the information supplied by third parties.
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