There’s no lack of trying when it comes to simplifying the home-buying process. It seems a new startup aiming to “disrupt the mortgage loan industry” comes on the scene almost weekly.
Better Mortgage (found at better.com) has been working to simplify mortgage loans for more than two years. Here’s how it stacks up.
AT A GLANCE
- Offers purchase and refinance loans up to $2 million.
- Available in California, New Jersey, North Carolina, Pennsylvania, Washington, Oregon, Connecticut, Illinois and Washington D.C.
- Minimum credit score: 680.
A ‘digital mortgage experience’
Vishal Garg is the founder of Better Mortgage, and like so many of us was frustrated by the difficulty of getting a home loan.
“I went through the mortgage process to buy an apartment, and it was a disaster; it took forever,” Garg tells NerdWallet. “It took Citibank three weeks to get me a basic preapproval.” He launched Better.com in an effort to create a “fast, transparent digital mortgage experience.”
“[With Better] you can get approved in under three minutes,” Garg says. “We’ve done this year on Better.com something like $300 million in loans — every one of those loans has closed with an interest rate within 25 basis points [0.25%] of the interest rate they were quoted at minute 3 of the process.”
Better Mortgage handles purchase and refinance loans. Borrowers tend to be affluent; Garg says the typical Better Mortgage borrower has a 780 credit score, an annual income of $190,000 and is between age 32 and 55, with an average loan of $465,000. That borrower has a debt-to-income ratio of 30%, and the loan typically equals 60% of the home’s market value.
How Better Mortgage works
The process begins online with an interest rate quote. Click on the “Get a Rate Quote” link, and, like most mortgage rate tools, Better.com asks for your ZIP code, state, a credit score range, home value and loan amount.
Within seconds, a screen of different rates and terms appears. These are the rate quotes that Garg says have been within 0.25% of the actual rates Better customers have received with loans issued this year.
Garg credits the tool’s ability to match accurate interest rates with potential borrowers to machine learning technology similar to what Spotify uses to match music to users. Better’s Chief Technology Officer Erik Bernhardsson worked at Spotify for over six years and led the engineering team that developed the algorithms that power the music service’s recommendation features.
Armed with a mortgage rate you like, you can proceed to the preliminary approval process. Here, you enter fresh info or confirm pre-populated data, including:
- Property information.
- Borrower information (and co-borrower, if applicable).
- Current mortgages, if the user is applying for a refinance.
- Cash-out details, if that’s what you’re looking for.
With that, the system verifies the information and delivers a decision.
After what Better says is a three-minute process, you are shown a menu of the loan products you’ve qualified for, with an estimated monthly payment and annual percentage rate, as well as the fees or credits available with each option. Garg says there is no set origination fee.
“And then you can lock that loan in as little as 15 to 30 minutes. And you can do this without ever speaking to a human being, 24/7, online, all the time,” he says.
And Garg says Better Mortgage’s online self-service model isn’t just an option; it’s the rule.
“If you pick up the phone and call us and say, ‘Can you tell me my rate?’ my loan officers will tell you, ‘Please go to the website.’” He says licensed loan officers aren’t paid commissions on loans and are available to “provide support, not sales.”
Completing the loan application is a “dynamic Q&A” process that adjusts with the information you provide, asking for additional info relevant to your particular situation. It feels a lot like using TurboTax to file your taxes.
What Better Mortgage does best
- Users access a single platform through the entire mortgage loan process, from making an application to uploading documents and monitoring their loan’s status.
- Users can choose from various options in their loan pricing, adjusting fees and discount points for different interest rates.
- Better is well-suited for the do-it-yourselfer doing it whenever they want: after the kids are asleep, before the morning rush or on their lunch hour.
Where Better Mortgage falls short
- It’s available only in California, New Jersey, North Carolina, Pennsylvania, Washington, Oregon, Connecticut, Illinois and Washington, D.C.
- Better doesn’t offer home equity loans or lines of credit.
- Better doesn’t handle FHA, VA or USDA loans.
Overall, Better is a worthy competitor in the mortgage lending space. The site is clean, easy to navigate and built for the borrower who doesn’t want or need a bunch of hand-holding.
Let the disruption continue.