Why speed matters: Mortgages and processing time
In today’s business environment, it would be difficult to overstate the importance of creating efficiencies—both for the customer and the business itself. Harnessing efficiencies enables improved workflows and a smoother experience for customers. When you’re efficient, you get more done, you solve more problems and you have more time left over to pursue your dreams—or the next item on your to-do list.
This is never more true than in the mortgage industry, especially when it comes to customer-first lenders like Proper Rate. In an effort to provide a more rapid and seamless mortgage experience, they have been busy examining existing problems and logjams from all angles, taking inventory of friction points, blind spots and technological hurdles, and then conceiving solutions that will transform key processes, unleashing simplicity, transparency and speed.
Yes, speed matters. Especially when it comes to mortgages.
Speed, efficiency and customer service
When you’re applying for a loan, a certain set of expectations are communicated to you regarding how long the process will take and how many touchpoints it will require. Many of those expectations are measured in terms of transaction speed. Depending on how things play out, there’s either delight and triumph or frustration and regret.
For today’s borrower, customer experience is equally important to the rate or product being offered. And speed has a lot to say about that.
Your mortgage experience transformed
For example, preapprovals can now be issued not only on the same day, but within hours or even minutes. This means you can attend an open house at 10:00 a.m. and make an offer on that same property by the afternoon—a credible offer that demonstrates verified purchasing power. That’s not just accelerating the first step in approval, that’s turbocharging your lending experience so you can connect with sellers early on in the process—before the bidding wars begin. In today’s hypercompetitive housing market, early, proactive preapproval can be a difference maker.
What speed conveys
To put a finer point on it, speed is the way a mortgage lender conveys trust, credibility and innovation in an effort to perfect the business-customer relationship and deliver a stress-free experience. The greater the speed, the shorter the process. The shorter the process, the more rapidly an approval turns into a closing, which quickly leads to keys in your hand and a smile on your face as you begin life in your new home.
Processing: The delay factor
However, without the aid of expert teams and powerful, error-reducing digital technology to speed things along, that life in your new home could be delayed. Mistakes can occur—costly processing mistakes that could jeopardize your closing date or even your purchase deal with the seller.
When it comes to closings, processing delays don’t always scuttle deals but they can add unnecessary confusion and be a logistical nightmare for both sellers and buyers, especially if move-in and move-out days are impacted. You shouldn’t have to rearrange your life because the 21st century mortgage you thought you were getting is being slow-walked by a 20th century mortgage provider.
As a new homebuyer, your reputation is only as solid as the lender you’re working with. Smart lenders actively strive to anticipate problem points and provide succinct communication to ensure a smooth ride and a speedy approval.
As a borrower in today’s marketplace, you should expect to be the recipient of a mortgage experience that’s less taxing, less convoluted, more personalized, easier to understand and faster for you and all the other parties involved. Closing the “speed gap” to enhance customer experience clearly matters, and we’re going to illustrate why.
Speed and mortgages
While we’d love to say that the opposite is true, historically speaking, there's no denying that obtaining a mortgage hasn't always been the quickest or easiest of processes. For decades, there seemed to be built-in frictions and inevitable energy-zapping delays everywhere you looked. At least that was the experience of many borrowers.
In all fairness, getting a mortgage is a big deal, and it can generate complexities that take time for professional teams to examine and verify. Given the momentous nature of a home loan, most people understand a little due diligence is necessary.
That said, carefully conducting risk assessment or transacting a mortgage to ensure full compliance with industry regulations while leveraging premium digital tools is one thing; doing it at a glacial pace with underperforming technology, poor communication, redundant document requests and expanding timelines is something else entirely. These differences are noticeable.
As a borrower in an industry increasingly defined by choice, you no longer have to settle for a “business as usual” approach. You have clear-cut options. Lenders who embrace change in the form of cutting-edge technology, streamlined processing and improved communication—lenders like Proper Rate—have begun to separate themselves from those who refuse to earnestly innovate. As the facts have borne out, turn times matter, speed matters and superior customer service always has the last word.
A digital world = digital expectations
Think about how e-commerce has evolved over the past decade or so: You already pay your bills online, have your groceries delivered with a few simple clicks and can order big-tickets items like cars and motorcycles by virtue of online showrooms. If the rest of your purchases are defined by a seamless, digital, omnichannel experience, why would you settle for anything less when it comes to your mortgage?
In fact, it could be convincingly argued that the hallmark of modern mortgages is speed of process. The faster (and more seamless) the loan experience, the greater the customer satisfaction, and the less potential for unwelcome surprises. And it’s not simply speed in and of itself, it’s the fact that speed carries with it trust, professionalism and reliable follow through. Setting expectations with the borrower is only half the equation; delivering on them is the other 50 percent. Good mortgage providers understand your needs and will doggedly emphasize an adherence to timelines as an extension of customer experience.
Turn times: Challenges and developments
When it comes to the homebuying process, the faster you can move through the “buying” part, the more quickly you can get to the “home” part, and the deep satisfaction of ownership.
Key steps in the mortgage process include:
- Home inspection
- Attorney review
Home inspections and appraisals are absolutely essential to the homebuying process, and it may take some time to find the relevant expert—so plan accordingly. Meeting with a real estate attorney to hammer out outstanding issues (such as those discovered via home inspections) with the seller may also eat up some time. The attorney will help you negotiate and determine the cost of repairs, if applicable.
As far as appraisals go, your lender will want to ensure that the loan amount they are considering is equal to the value of the property. Only then will your lender proceed to underwriting and then finally closing. Depending on the type of loan, the processing capacities of your lender and the complexity of your financial situation, things can proceed rather swiftly or endure a few complications along the way.
On average, the entire loan acquisition process usually takes around 30-45 days to complete. This is your turn time. As you know, getting a loan is not a trivial transaction that can wrap over the course of a week or two. There’s a lot that needs to happen—including your participation in providing the correct financial information. At the same time, the journey to obtain a loan should not consume months and months of your time and energy, requiring duplicate or unnecessary interactions and a growing sense of uncertainty.
Volume and processing
While the past year and a half have seen the mortgage industry set records for revenue and loan volume as interest rates have dipped to historically low levels, this good news has often been accompanied with a puzzling disclaimer that goes something like this: Due to heavy volume, there may be delays in approving your loan.
If you’re like many borrowers, news like this sits somewhere between the suboptimal and the deeply frustrating. Think about it: You’re entrusting the lender to verify your income and assets expeditiously, check your credit score and credit history, issue an approval and then move to the closing table in a timely manner—is that really too much to ask?
Complexities matter. In addition to buying, you might be selling your place and need to move into your new home by a certain date. The lender’s high volume is not on your radar—you’re looking at timelines and how you need to seamlessly coordinate with multiple parties to wrap up a much larger process. While certain technology-challenged lenders have struggled during this period, lenders like Proper Rate have made it a priority to improve the modern homebuying process, beginning with turn times.
Fintech emergence and real-world impact on loans
As we’ve been saying, the mortgage component to homebuying will likely span a few weeks—or longer. However, thanks to the emergence of fintech (short for “financial technology”) innovations over the last 10 years, the process has accelerated, providing customers with a new reality: a simple, streamlined process in which to procure a loan.
To meet consumer demands for greater speed and efficiency, many lenders are adopting innovative technology platforms that help process your loan more quickly and seamlessly. According to a 2018 report from the Federal Reserve Bank of New York, Mortgage providers with “fintech” capabilities close loans 10 days faster than those who lack these capabilities. That’s 10 days faster for the lender and 10 days faster for you.
While there will always be laggards who are slow to adopt new platforms and processes, mortgage guarantor and government sponsored enterprise (GSE) Freddie Mac recently reported that the industry overall is becoming more efficient, with cycle times declining on average by 6 days over the last 5 years. That’s a measurable step forward and one that has real value to homebuyers.
Much of this success can be attributed to lenders like Proper Rate who offer a fully realized end-to-end Digital MortgageTM since 2015. With a few simple clicks, users can enter into a mortgage experience that’s not only centralized and streamlined, but guided and smart—a transformative upgrade for borrowers used to reams of paperwork and tedious, overlapping requests for documents.
“The nice thing about Digital Mortgage is that it’s convenient, giving customers immediate access to real-time rates and the personalized products they need to begin the process any time of day,” says Guaranteed Rate COO Nik Athanasiou. “It’s so quick and easy to use that 90% of our business is now being conducted online through the Digital MortgageTM.”
Fast, flexible, secure and available as an app, Digital Mortgage has proven to be a game-changing platform for loan applications and preapproval, integrating seamlessly with Freddie Mac and Fannie Mae’s industry automated underwriting system (AUS) software. Faster preapproval means greater insight into purchasing power and more negotiating strength when dealing with sellers. It also accelerates final approval, getting you to the finish line on time with less anxiety so that you, the seller, the real estate agent and the closing agent are all aligned.
Introducing speed into the process
As illustrated above, pre-pandemic a number of savvy lenders were beginning to orchestrate their application process around cloud-based digital technology, but as we approach 2022 it’s become increasingly commonplace—first and foremost because borrowers are demanding it. According to a survey by a leading mortgage technology company, 61% of borrowers used an online application in 2020 and 61% of borrowers also took advantage of an electronic portal to sign and finalize closing documents.
Proper Rate is at the forefront of this sea change, and not just in terms of digital applications and zero-touch electronic closings* The company is leveraging partnerships with digital allies like Gateless to optimize and accelerate behind-the-scenes mortgage processing.
Underwriting, automation and moving things along
Arguably the most important step on the road to closing your loan is the underwriting portion of your mortgage experience. This is really where the rubber meets the road, and where information regarding loan approval is examined, weighed and vetted—and it can be time consuming. An underwriter looks into your creditworthiness, scrutinizing your financial history and profile including income, assets, liabilities, employment history, collateral and more.
New technology for back-end processing signals a key evolutionary step for the mortgage industry, one that should delight borrowers as much as lenders. By beginning to incorporate the bold advancements of artificial intelligence (AI) and machine learning into mortgage processing, Gateless and other companies are creating integrations and efficiencies that can be automated, saving mortgage providers countless hours on the backend that, in turn, can be passed along to you, the borrower.
While underwriters and their staff still play a vital role, this new, smart technology allows them to synthesize data from a range of parties—not just borrowers—more quickly and seamlessly, effectively eliminating errors, biases and bottlenecks attributed to an overreliance on manual labor, and delivering you a next-generation mortgage experience.
It’s worth noting that even professional teams can sometimes make processing errors—not often, but it can happen. For example, underwriting mistakes have been known to occur when calculating income, especially if there are bonuses, overtime and/or declining income to consider. This can affect your DTI (debt-to-income ratio), which can result in processing delays or even a denial. When you have smart technology assisting underwriting, things move more quickly and seamlessly, ensuring your loan request is accurately vetted the first time around.
Mortgages and the human touch
As much as we celebrate the time-saving breakthroughs of modern technology, make no mistake about it: The human-to-human dimension is still imperative in delivering speed and precision. A loan officer is there for a reason—to help set useful expectations, guide you through the process and answer essential questions you’ll encounter as you prepare to obtain the necessary financing to purchase your home.
Teams still matter
While the verdict is certainly out as to what degree of involvement AI will play in the future of mortgages, for today’s generation of homebuyers, it is an important yet complementary role. Experts still matter and finely orchestrated teams can make all the difference in the world between a delightful experience, and one you’d rather forget.
The POD Model
For example, Proper Rate employs the POD Model as a way to effectively process loans and provide a superior customer experience. The brainchild of Founder and CEO Victor Ciardelli, the POD is basically an intelligently imagined division of labor that leverages expertise from application opening to document collection to processing to closing. Each employee has a specific function, and once that function is completed, the loan is pushed forward to the next expert in line. The POD Model is the connective tissue of modern processing, accelerating loan approval and ensuring the borrower is always kept in the loop—but never overwhelmed with notifications.
Frankly, the prevailing industry way of processing mortgages was outdated and inefficient. It relied too much on the loan officer (LO) to be “in the file” and not enough emphasis on leveraging dedicated teams and establishing clearly defined roles. The LO would often have to jump back into the process, put out fires and help shepherd things along. Even then, the designated processor might be overwhelmed, managing too many touch points on too many loans. The POD Model fixes all that, assigning the right people to the right tasks and proactively alleviating potential issues before borrower experience can be affected.
A faster way to close
In the last few years (to the delight of many borrowers), lenders who offer end-to-end digital mortgages are introducing added speed and convenience into the closing process. For many borrowers, this has been a game changer, allowing them to experience streamlined speed and simplicity.
A faster closing means no last-minute complications that could jeopardize finalizing the loan. It also means transformative convenience. Think about logistics for a moment. In the age of COVID and social distancing, smart digital tools are essential in conducting business that would otherwise be face-to-face. In addition, many loans are dependent on co-signers, some of whom may not be in the same town let alone the same room. Digital closings solve this dilemma, right down to the online notary.
Once a source of great anxiety, closings can now be conducted from your laptop or smartphone thanks to a seamless and secure process that allows you to finalize the loan agreement from almost anywhere in the country (or wherever else you happen to be). Proper Rate's e-Close and FlashCloseSM technology is a leading industry example of how visionary technology can provide you with a simple, secure and succinct closing experience.
Speed and mortgages: Where do we go from here?
Like any other industry operating today, the mortgage industry will continue to evolve to serve you better and to be more efficient. As a homebuyer, you’ve doubtlessly become accustomed to searching for homes and exploring neighborhoods online, applying for your preapproval online and leveraging both the internet and the cloud to access and achieve a superior customer experience.
Along the way, you’ve probably noticed that things are moving more quickly than you may have anticipated, especially if you’re working with a highly regarded lender who embraces innovation. Yes, speed of process will continue to evolve to meet your needs, perhaps in ways that none of us have quite yet imagined. Sometimes technology outpaces vision, and sometimes vision outpaces technology. Find a lender that prioritizes exceptional customer experience and you just may have an opportunity to preview the future: smooth, streamlined and defined by speed and accuracy.
*Closing eligibility requirements still apply (e.g., property, state, loan criteria, etc.)
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