The U.S. housing market is fairly quiet right now, as it enters the mid-winter doldrums, and should remain dormant until the crocuses bloom or and baseball season returns again.
That doesn't mean big shifts aren't underway in the housing market, because there are big changes imminent, and they'll impact the way you buy a home once they're fully up and rolling.
Take the venerable home mortgage loan, the financial welcome mat to the American Dream.
With turmoil in the U.S. stock market, below-zero interest rate benchmarks from the Bank of Japan, and a slowing U.S. economy in the last quarter of 2015 (with a paltry 0.7% GDP growth rate), home mortgage options could become more limited in a weaker economy.
Thus, choosing the best home mortgage loan becomes paramount for homebuyers, especially first-time homebuyers who'll need all the help they can get.
So what's different about the new age of home loans, especially in a tougher lending environment?
First and foremost, the emergence of financial technology products and services (also known as fintech in corporate jargon), will give future home loans a unique look and feel, and homebuyers need to know how and why. "The future of home loans will be directly integrated with technology," says Jason Van Brand, chief executive officer of Lenda, an online mortgage platform that allows homeowners to refinance their home completely online. "For example, continued, secure access to customer data will help eliminate telemarketing, provide instant underwriting approval decisions, and ultimately speed up the entire process to minutes instead of months."
Winners in the market will provide this technology in a transparent, easy and simple online consumer experience, Brand explains. "Tomorrow's digital consumers will quickly snuff out marketing lies and instead favor genuine innovation, ease of use, and the bottom line," he adds. "The best analogy of this to date is Walmart vs. Amazon, and it's clear the victor is online."
Technology will also give consumers more transparency into the home loan process, which will enable consumers to make smarter decisions, including around timing interest rate lockups. "According to data from our platform, at present, consumers are timing interest poorly," Brand notes. "Out of 6,000 consumers that requested mortgage rate quotes on our platform over the last 60 month, 70% were typically a week behind."
"For a 30-year home loan, this can be the difference between of $40,000," he adds. "As technology evolves and gets adopted, consumers will be able to more easily time interest rates, which will help the economy."
Another, larger fintech trend - data analytics - is already reshaping the home loan marketplace as well here in early 2016. "In the late 1990s, as the Internet blossomed, there was a huge push to automate as much of the home loan process as possible," explains Casey Fleming, a mortgage loan advisor and author of the book, The Loan Guide: How To Get the Best Mortgage Possible. "Frankly, there wasn't enough data collection to support it, and then the financial meltdown killed the initiative."
However, if the various data analysis pieces could be automated (and technology providers are almost there) mortgage lenders and borrowers could possibly close a loan in five days, even accounting for three-day waiting periods, Fleming says.
How so? "For openers, data on appraisals has been collected for at least 15 years now," he says. "Automated Valuations Models (AVM) have now become scarily accurate in most cases. Also, The Internal Revenue Service is refining their process to automate confirmation of income, and banks are experimenting with allowing verification services to verify borrower balances and activity - many already allow it via Mint.com and Quicken, for example."
Other mortgage industry professionals concur with that assessment, and some see an "all digital" mortgage loan closing in the near future. "There is a segment of home buyers who would like a digital closing option, especially Millennials," notes Heather McRae, senior loan officer at Chicago Financial Services, Inc. in Chicago. "We already electronically sign most documents for the initial loan package. However, there is currently nothing electronic about signing the closing documents. That is still done face-to-face."
McRae says there has been too much fraud in the past, with regard to mortgages, and some would argue it hasn't entirely gone away. "There would need to be some sort of system to verify the identity of the person signing the closing papers, perhaps, fingerprint identification or facial recognition software," she says. "I think information technology professionals in the mortgage industry could piggyback on some of the ideas the credit card industry has come up with in their efforts to combat fraud."
Simplifying a historically complex and cumbersome home loan process is on the docket, too, experts say.
"Lenders are continuing the trend toward automation of the origination process," explains Joe Parsons, senior loan officer with PFS Funding, a mortgage banker located in Dublin, Calif. "This removes a great deal of the burden from the consumer. In my opinion, buying a home is no more difficult-possibly less-than buying a car."
Parsons says consumers should continue to expect a financial boost in buying a new home down the road. "Mortgage rates will likely remain low," he says. "The low price of oil, China's soft economy and global unrest will continue to drive money into safe-haven U.S. Treasuries and mortgage backed securities, both of which support low rates."
Overall, the future, both short- and long-term, looks fairly bright for home loan borrowers.
"Consumers are beginning to disregard the false narrative that getting a mortgage is too difficult for most people," Parsons says. "Underwriting standards continue to be reasonable, and the word is spreading that investing in a home for a down payment of 3% or less is a good personal and financial move."
The mortgage market can't speed up the calendar to springtime and warmer weather. But it can improve your home loan experience, and by leveraging technology, that's exactly what's happening in 2016.