How Technology is Making Homeownership Faster, Cheaper and More Accessible for All Americans
Mechanization has taken over 85% of factory work, we have driverless cars on our highways, our dreams can literally be digitized, and tourists can now buy a ticket to travel to space, yet when it comes to buying a home our systems are dolefully antiquated and analog.
Even in 2021, nearly 60% of loan files have between 500-2,000 pages of paperwork, in addition to hidden costs and a process that requires manual intervention at every step from application and processing. In a world where you can get legal advice from a robot, it seems that home buying could be far more efficient.
From start to finish, the entire real estate transaction is disjointed. First, you need to find a broker and identify a property. From there the real work starts, from making an offer, securing financing, title insurance, special taxes, commissions, fees, all the while trying to make sure everyone involved is competent. If it all goes well, you might close in about an average of 47 days, if you are lucky.
Imagine if the entire process of buying a home was streamlined, the way you would imagine the largest asset class in the country to operate, live, and instantaneously. Meet Better, a digital homeownership platform that digitally streamlines the entire process, making it efficiently faster, and cheaper.
A one-stop-shop platform where you can get a qualifying mortgage rate in seconds, be matched with a realtor and instantly purchase insurance and other services through a menu process.
Mortgage lending — the old-fashioned way
Unfortunately, many homebuyers get bogged down in the lengthy process of pre-qualification, pre-approval, working with an agent to find a home, and then waiting on the mortgage approval and finally, the home appraisal. It is a long journey indeed, with an average duration of 47 days from offer to close.
Vice President of Capital Markets, Emanuel Santa-Donato
A homebuyer who found himself stuck on that slow path is Better’s Vice President of Capital Markets, Emanuel Santa-Donato; Throughout his homeownership journey in 2016, he worked with a lender who wasn’t transparent about the loan process. He experienced a delay of over a month – no fault of his – due to missing paperwork that slowed down processing and approval. Fortunately, after a lot of last-minute scrambling, his deal finally came together, and he closed on his home despite the obstacles.
Although Emanuel eventually succeeded in buying his home, it’s worth noting that the denial rate for home-purchase applications for all applicants was 9.3% in 2020, according to the Consumer Finance Mortgage Trends Report. How can potential property owners ensure they are not denied a mortgage?
Recognizing that such a high rate of denial presented an opportunity ignored by conventional lenders, Better launched Better Mortgage, with the goal of utilizing technology to re-engineer the painfully long process into something that is both efficient and user-friendly. The company created its own “investor matching engine” to pair borrowers to mortgage products, all in a matter of minutes. This technology is the backbone of Better.
At Better, the mission is to make the homeownership process simpler, faster, and more accessible. With a robust and speedy financing process, borrowers are pre-approved in as little as 3 minutes, 100% online.
This pre-approval process helps buyers identify the upfront costs of homeownership and, with that additional information, determine a budget to begin their home search. Other lenders present a price range for the buyer’s home search without factoring in upfront costs for the inspection, taxes, insurance, closing, and appraisal. Better Mortgage’s pre-approval provides an official CFPB Loan Estimate in as few as 3 minutes, which shows a buyer all of the fees upfront so they can plan ahead for their dream home.
Upping the real estate game
Better’s commitment to great customer service also stems from their highly trained agents through Better Real Estate. From the start of the home buying process to closing, Better Real Estate prepares agents to anticipate and resolve a homebuyer’s needs through their extensive training and education programs.
Better Real Estate agents know that their clients count on proactive communication every step of the way and that “good service” means helping the homebuyer feel comfortable and secure in the process.
A homebuyer working with a Better Real Estate agent does not always need to make the highest offer to have it accepted. Their agents bring two distinct advantages to their buyers who use Better Mortgage, helping their offers stand out in a bidding war with unique offerings including an appraisal guarantee and a closing guarantee.
Better Real Estate is now live in 28 markets across 12 states with over 300 agents currently signed on. The company plans to grow to 500 agents by the end of 2021 and is actively recruiting.
The Better home buying process
When homebuyers step into the Better ecosystem, they are presented with a full-service team that shares a single goal— to make the home-buying process fast and simple.
Here’s how the process works:
Step 1: Get pre-approved with Better Mortgage in as little as 3 minutes. A pre-approval provides insight into how much you can afford and the costs related to buying a home. We also match you with a dedicated Home Advisor who will assist you throughout the entire process.
Step 2: Pair up with a Better Real Estate agent to help with the home search. Better Real Estate agents are local experts. They’ll help you find the right home and craft the perfect offer.
Step 3: Prepare an offer. Work with your real estate agent to figure out how much to offer. The offer you make won’t just include the dollar amount you’ll pay for the home. You may also need to figure out how to strengthen your offer. With the Better Appraisal Guarantee, you can feel comfortable waiving your appraisal contingency which may make your offer more attractive to sellers.
This means you can visit open houses on the weekend, get pre-approved in minutes and make an offer through your Better agent in the same day.
Step 4: After the offer has been accepted, Better Mortgage finalizes the loan application process by adding the property address to the loan estimate. Better Mortgage then updates the loan estimate within seconds – instead of the typical 3-day turnaround offered by other mortgage lenders.
Step 5: Unlike other lenders, Better Mortgage allows buyers to lock in their rate immediately, 24 hours a day, seven days a week. Buyers don’t have to wait for banking hours or for when their lender is available— they can lock in the rate they want when they want it.
Step 6: Close on your home in 32 days on average, which is ten days faster than the industry average. Better Mortgage’s Closing Guarantee also guarantees that borrowers close on time and if you don’t, you’ll receive $2,000.
Better Mortgage’s Appraisal Guarantee has been a game-changer for many homebuyers. The guarantee allows for stronger offers, therefore increasing the likelihood your offer is accepted, especially in a competitive market where cash offers are dominant. It also helps aspiring homebuyers avoid any unnecessary changes in the loan terms, notably the down payment amount.
With the understanding that speed is crucial in this hot housing market — close to 1 in 5 successful offers in recent months have waived the appraisal contingency, according to Motley Fool — Better Mortgage launched the Better Appraisal Guarantee in a matter of weeks to help increase customer confidence during the offer stage.
Home sellers who receive multiple offers tend to look favorably at those without appraisal contingencies. An appraisal contingency protects home buyers by allowing cancellation of their purchase contract if the home appraisal comes in lower than their offer price–Better Real Estate agents will recommend when to forego this contingency and use the appraisal guarantee, helping buyers avoid paying more on their down payment.
With the alignment of technology, data, non-commissioned loan officers, and real estate agents, homebuyers can level the playing field and participate successfully in markets previously available only to cash buyers. As a result, offers made with a Better Appraisal Guarantee had a 50% higher acceptance rate than home offers made without a guarantee. Furthermore, Better Mortgage has been able to fund mortgages for over 159k home buyers this year.
Homebuyers like Dan and Louise Gallagher were renting and traveling as retirees prior to finding Better. Living on a fixed income they were unsure they would qualify for a mortgage. With Better Mortgage, they not only got the mortgage but much more; according to Dan, “There’s an emotional joy and pride that goes with owning that I didn’t feel when I rented. I had missed that connection.” These types of relationships are why Better funded 5x their year-over-year loan amount in 2020.
Working within the Better ecosystem, every homebuyer has an equal opportunity and competitive advantage to purchase a home and avoid obstacles presented by the wealth gap, all-cash offers, or racial divides. The Better process allows people to find homes they love and build generational wealth through homeownership.