money Housing: Fintech companies are easing the ‘high-friction process’ of buying a home
During the pandemic housing boom, the increase in mortgage applications created a need for faster turnaround times in loan approval and processing.
Fintech companies jumped into the market to fill the void.
According to Citi's Home of the Future research series, there are numerous ways the tech industry can ease the lending and selling process for home buyers.
“There's a lot of process that happens around mortgage lending — looking at borrowers' incomes, documentation, verification, and other aspects of enabling a borrower to get a loan to go buy a house,” Roger Ashworth, head of Citi's research non-agency MBS strategy team, told Yahoo Finance Live (video above), later adding: “Historically speaking, it's been a high-friction process market… anything we can do to streamline that process is certainly appreciated.”
Although the housing market has cooled down with the 30-year fixed mortgage rate at 5.30%, down from 5.70% the week prior, there are still buyers in the market.
With rates changing weekly, home buyers that haven’t locked in rates will need to requalify — making the home buying process even more protracted.
Not only would a more efficient underwriting process be beneficial for home buyers racing against rising rates, it could also help them save $1,000 to $2,000 in costs, Ashworth said.
Fintechs are also trying to make selling your home less stressful.
“When you think about moving from one home to another, you have to sell one home — it's an emotional process [with] a lot of friction involved,” Ashworth said. “There are companies out there looking to streamline that process by providing an instant offer to your home.”
Some of these fintech companies are also coming up with innovative ways for homeowners to tap into equity, which is especially helpful for homeowners that missed out on refinancing with the low mortgage rates from earlier in the year.
“Companies are willing to, instead of taking out a second mortgage, they'll simply purchase a piece of equity for your home, for a share of that home price appreciation going forward,” Ashworth said. “There's a lot of potential market share across the board and a lot of frictions that can be removed in the underwriting process in the real estate transaction process.”
Ronda is a personal finance senior reporter for Yahoo Money and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda
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