Eight out of ten Americans carry some sort of debt, and over 4 out of 10 carry a mortgage. The reason why mortgage loans are so attractive is because the American dream is incomplete unless you haven’t bought a house.
But the fact is, over 40% of modern mortgage loans are something other than your run-of-the-mill “traditional” mortgage. Many lenders these days are not even banks, and most (if not all) of the mortgage lending process can sometimes be done online.
Here are some of the major trends in the new and fast-growing non-traditional mortgage lending industry:
1. Online Lenders
Today, there are a number of internet-based mortgage lender sites out there (most conspicuous among them being Quicken Loans) that are making it possible to get a mortgage or a refinancing application approved in less than 10 minutes.
Additionally, with automated loan-approval algorithms and rapid-pace e-document gathering technology both on the horizon, it looks like the online process may get even quicker and more streamlined in the near future.
Many of these players are direct lenders who are already involved in other lending sectors, like student loans or consumer loans, but some are solely dedicated to mortgage loans.
2. Online Marketplaces & Brokers
A second major trend is the explosion of online “middle men,” such as mortgage marketplaces and mortgage broker sites. These websites can help you immensely in comparing your options and finding out what kind of rates are obtainable.
With marketplaces, you fill out a “generic application” form that is then used to bring up a number of relevant lenders. You then, after noting the rates, terms and other details listed, choose your best fit. That sends you to the lender’s site in order to complete the actual application.
With broker sites, you can get the benefit of an actual broker working with you to guide you to the best decision. He/she will sometimes even go beyond helping you make a selection and assisting you in picking out an exact package to finishing your application.
3. An Upsurge in Local Mortgage Lenders
Ironically, as the biggest national banks are backing away from lending to all but the most highly qualified buyers, mortgage lending is meandering back to where it all began decades earlier: local lenders.
Some of these lenders are local credit unions and some may be smaller, local banks. But many are not banks at all. They are locally owned and operated, often family-owned, small businesses focused on facilitating mortgage loans in their own local area.
Many people with less than perfect credit scores, who are first-time home buyers, or who like the extra flexibility in loan terms these lenders offer, are turning to the non-bank option.
4. Online But Finish Up Offline
Many online mortgages cannot be 100% completed online. There are a few exceptions, and as e-docs become more widespread, this may change. But don’t be surprised if, after finding, applying for, and being tentatively approved, you still have to finalize the loan at an offline attorney’s or notary public’s office.
In sum, we can say that private lenders and various non-bank lenders who are small enough and different enough to escape out from under many federal regulations, are swallowing up some 45% of today’s mortgage market.
The internet is playing a huge role in this transformation, but it runs deeper than that. Both the reluctance of the big banks to approve mortgages they would have approved in an earlier day, and the consumer’s desires to break away from the slow, inflexible loan terms of the past, are major factors.