How Mobile Apps Can Play a Bigger Role in Mortgages

As young, tech-savvy consumers now approach high-income years and mobile usage increases among mortgage customers in the age of COVID, lenders are looking for ways to serve them with speed and simplicity in the digital space.

“You just expect things to be easy because you’ve lived with technology your whole life,” said Brad Lawson, co-founder of PrimeLine Capital, a brokerage that connects with 11 different mortgage lenders.

For the mortgage sector, the development of financial applications offers the opportunity to work with native mobile consumers. A Realtor.com study last year revealed nearly 29 million Gen Zers may be looking for homeownership by 2026.

Recent data shows rapid growth in the popularity of mobile usage among mortgage customers during the pandemic. According to LexisNexis Risk Solutions, the share of mortgage activity, including applications and transactions, conducted by mobile has more than doubled in two years, rising from 12% in 2019 to 16% in 2020 and 29% in 2021.

The industry is moving down a path already blazed by the banks to some extent. A 2021 study by Morning Consult and the American Bankers Association found that before the pandemic, 33% of consumers were already using mobile apps more than other methods for their banking needs, and among Gen Z and Generation Y, the percentages were even higher at 48% and 45% respectively. Since the start of the pandemic, those numbers have risen to 44% overall, and 56% and 55% for Gen Z and Millennials.

Although financial apps aren’t as popular as social or gaming offerings, research by software company Simform found that their usage time in 2020 was relatively high at 57 minutes per week due to the attention that people paid when making decisions. on them.

For lenders like Fairway or Revolution Mortgage, mobile apps are used primarily to streamline and automate the application process, through the uploading or scanning of documents. Their apps also allow other parties to the purchase to keep up to date with the status of the apps.

“Realtors will also have a connection so they can see where their borrowers or clients are throughout their home buying process,” said Masana Noma, vice president of marketing at Revolution Mortgage, who said that 79% of his company’s loans have come through his app.

Even when the loan is closed, the app can still remain an additional means of engagement, leaving the door open for business back down the road.

Shane Westra, chief product officer whose team builds apps for more than 400 lenders representing approximately 45,000 loan officers at a provider of housing technology and software solutions SimpleNexus, said that while they may have the same codebase under the hood, the design of the app is highly customizable. Some companies ask for a product that they can provide to a potential borrower, who may not even be ready to lend, but can use it to search for homes or real estate agents, while others will send it to customers only for the application process, which itself can be adapted. The number of parameters reaches thousands that could be presented in different ways. “A lot of them don’t look alike at all,” he said.

While reducing paperwork for the customer, the time saved can also be a boon for a loan officer. “I always have a client who does an online app or the mobile app, just because it’s 20 to 30 minutes that I can dedicate to generating more business. It just makes me a more effective originator by having this technology,” said Jeremy Schachter, producer branch manager for Fairway Independent Mortgage in Phoenix, which in 2021 generated about $80 million from the sale of about 240 units. .

In addition to saving you time, mortgage fintech Lowerwhich creates its mobile application in-house, also sees its digital tools reducing the apprehension that a new homebuyer might have.

“If you’re going to buy a house, it’s more than likely intimidating to walk to your local bank,” said Lower CEO Dan Snyder. “You don’t know where to go and you may have no idea what you can really afford. And we solve this online and through our app.

While Lower’s end goal is to fund a home loan, the app also incorporates personal finance tools that encourage savings and goal setting by “gamifying” the process. In addition to loan calculators, the app also includes a savings account that customers can use to deposit funds, which can potentially turn into a down payment, with a Lower match.

“What you see is like the early entry into stock trading that once was only for your dad or mom. Now it’s really accessible,” Snyder said. “You can download Robinhood, you get one share for free, and you can trade a few shares for free. And it’s easy on the app. I think that’s the same kind of people coming through us.

Even though mobile apps are becoming more prevalent, limitations still exist that prevent the mobile experience from being entirely seamless. Unlike many banking transactions, mortgage lending is a more complicated procedure with many steps between application and closing, not all of which can be done exclusively on one app. Many borrowers express their frustration in online reviews at not being able to make payments through a mortgage app, unaware that their lender and their service are not always the same.

Current regulations also limit the extent to which mobile services can be provided in languages ​​other than English, leaving out a rapidly growing Spanish-speaking market. And as mobile usage grows, so does the threat of fraud, which the mortgage industry is struggling to combat. Criminals targeting mobile transactions accounted for 29% of total mortgage lender fraud costs in 2021, up from 24% in 2020, according to LexisNexis.

For mortgage lenders who have emerged in the digital age, their apps are also part of a broader strategy to appeal to younger consumers, who are increasingly influenced by online presence and social media when shopping. it’s about choosing products or brands to support. According to a 2020 study by McKinsey & Co., 39% of the Gen Z population over the age of 18 and 25% of Millennials cited social media as the top factor behind purchasing decisions. Whether through stadium naming rights, like Lower.com Field in the hometown of Columbus, Ohio, or a prolific presence on specific social media channels, branding is important to a younger audience, Noma said, although it’s not always mortgage-related.

Unlike most companies, Revolution Mortgage eschews Twitter and instead devotes more attention to Instagram, a site that appeals more to younger users. “Our brand is solidified through Instagram,” Noma said.

“I think, more than ever, as we move into 22 and beyond, this is really important. Consumers are now connecting with the brands they want to do business with,” she said.

But the best marketing campaigns are only effective if companies rely on service that satisfies customers, and the lenders that come out ahead will be those that prioritize speed and digital tools that new homebuyers appreciate, according to Schachter. .

“I always encourage creators to embrace technology simply because the older I get, the younger my clients get,” he said. “People love technology, and they just have to embrace it.”