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The financial industry is leaning toward democratization more and more every year. From decentralized finance to online-only banks that provide all of the financial services of a traditional bank branch, consumers have more options than ever before. One of the barriers many consumers had in the past was the digital mortgage. For people to get a mortgage, they needed to go into a bank, often after building a relationship with the lender and go through a time-consuming process filled with paperwork.
Now, institutions are opening up the process of applying for and getting a mortgage by breaking down the previous barriers. Digital mortgages are mortgages that homeowners can apply for and receive to buy a home completely online without paperwork.
Digital mortgages also allow lenders to avoid any inequities when determining credit risk factors, as an automated system prevents personal bias from getting in the way of any homeowner’s dream of owning their own home.
More Access, More Options
Since a digital mortgage isn’t tethered to any one geographical location, there are many more options when shopping around for lenders and rates. Particularly for underbanked and underserved communities, a digital mortgage is a great way to get faster access to more options. Online lenders also often have more features and tailored services available. Potential homeowners might be missing out on some of the services that a bank branch might provide, but the range of additional features helps a lot.
Additionally, because online tools have no fixed location, consumers can review mortgages and rates from around the country, widening options even further. The lack of in-person communication and pressure in the moment of shopping for a mortgage also gives consumers less stress when making a decision. Some of the pressure they might feel in the moment dissipates when they can sit with the decision on their own time at home.
Lower Rejection Rates
Face-to-face lending has its benefits, and there are many consumers who like the treatment they receive at their local bank. However, there is also a large group of consumers who aren’t totally satisfied with their local bank and don’t want the stress of dealing with them. Additionally, bias can often play a factor in rejection rates that may prevent people from getting a mortgage in the future. Algorithmic online lenders do not show bias or discrimination in loan rejection decisions, making it an even playing field for everyone who applies.
The increase in ease of access plus the growing competition in the digital mortgage space means consumers have the power and can negotiate and shop for the terms that suit them best. Now people from every walk of life are able to get a digital mortgage.
The digital mortgage process is similar to a normal mortgage but facilitated through online systems. You will need a credit check, income statements, and possibly a debt-to-income (DTI) assessment. Once that is done, the algorithm will tell you what kind of mortgage at what rate you are eligible for or not eligible for. All in all, it is a pretty straightforward and low-stress process that takes less time and less paperwork.
In a digital-first era, online shopping has become the norm for every type of product and service under the sun. Now, mortgage lenders are realizing that they can serve more consumers and in a better manner using digital mortgages. The next time you are looking for a mortgage, you might want to check all of the digital options available from credit unions, banks, and even online-only lenders who may be offering even better rates than traditional financial institutions.
It is important to still keep in mind that making the right decision is still of the utmost importance and your mortgage should fit your personal financial situation.