How Improving the Borrower Experience Can Reduce Closing Times


In today’s digital-first world, most mortgage lenders recognize the value of improving digital experiences for consumers. In fact, 84 percent of financial institutions list this goal among their top three strategic priorities. Yet many lenders fail to grasp the full business implications.

Building a great digital experience is not just a marketing or branding play. In fact, many of the problems that affect homebuyers during their purchase process are the same ones preventing loan originators from processing loans more efficiently. By building a modern and seamless digital homebuying experience, mortgage lenders can delight clients while significantly reducing closing time and cost.

Digitizing the Application Process

When asked how the borrowing experience could be improved, millennials said speeding up the mortgage process was most important – and so far, fintech lenders have stepped up to meet this need. Between 2010 and 2016, fintech lenders have reduced loan processing time by about 10 days, or one-fifth of the previous average. They’ve accomplished this in a few different ways:

  • Digital access to financial records: Online platforms that leverage open banking standards can directly access a borrower’s account statements and tax returns to collect information about assets and income. Other documents can be uploaded electronically in one location, rather than being sent piecemeal by mail, fax or email.
  • Optical character recognition (OCR): Text recognition software can be used to process borrower documents and flag missing or inconsistent data. These systems make the mortgage underwriting process more standardized and repeatable and reduce transcription errors introduced by human underwriters.
  • Instant loan customization: Moving the mortgage application process online enables borrowers to instantly customize their loans based on lender underwriting standards and real-time pricing. This helps borrowers determine their needs and limitations earlier in the process, reducing in-person interactions.

All of these improvements help address another persistent challenge for lenders: weathering changes in demand. By digitizing and automating information collection, rather than relying on traditional underwriting methods, fintech lenders are better able to accommodate demand shocks. In fact, a 2018 study found that doubling application volumes increases loan processing time by as many as 13.5 days (or 26%) for traditional lenders, compared to just 7.5 days for fintech lenders.

Creating an End-to-End Homebuying Experience

Of course, moving the mortgage application process online can only go so far in reducing closing times. To have a more significant effect, financial institutions must consider the entire homebuying cycle.

Despite improvements in the online home search, consumers still must deal with disconnected technology platforms, professionals and organizations throughout the homebuying process. Those entities must also communicate with one another on their clients’ behalf. As a result, today’s buyers face a drawn-out and fragmented home purchase process that increases confusion and reduces transparency.

Financial institutions can address this problem by expanding their offerings to encompass every stage in the homebuying process, including the following: 

  • Neighborhood discovery to help consumers research areas that fit their needs and budget;
  • Educational content to help borrowers understand the various scenarios they face today;
  • Property search that integrates with local MLS data to help buyers find their ideal home;
  • Realtor networks to build relationships with trusted local real estate agents and connect them with qualified homebuyers;
  • Personalized lead nurturing to grow relationships with prospective borrowers over the long term; and
  • Homeowner platforms to give clients insight on their homes’ value over time and identify refinancing opportunities.

North American banks are starting to get the message about investing in these solutions, with overall spending on tech having grown an estimated 4.9% to $104 billion in 2018. Yet many of these organizations have spent years sinking billions into proprietary technology, with little to show for their efforts. 

Rather than trying to build their own innovations from scratch, banks should instead focus on modernizing infrastructure and making compliance easier. Once those improvements are in place, they can partner with technology providers, leveraging their expertise in serving real estate consumers online to quickly implement mature, custom-branded solutions. 

By working with technology companies to digitize the borrowing process and offer an end-to-end homebuying experience in a single platform, mortgage lenders can reduce closing times, increase client loyalty and build a strong foundation for the online future of lending.

Marcos Carvalho is chief revenue officer of Boston-based NestReady, a one-stop digital real estate technology company building innovative tools that empower the next generation to enter the real estate market.