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Less than three months after launch, Better says 40 percent of its applicants are qualifying for the company’s “One Day Mortgage” product, which is experiencing exponential growth as the spring homebuying season kicks into gear.
Together with an alternative collateral program and a “Buy Now, Refi Later” offer — which provides up to $3,500 in lender paid credits if interest rates fall and homebuyers decide to refinance with Better within three years — the One Day Mortgage could help Better make the transition from a company known primarily for refinancing existing loans to one that’s geared to serving homebuyers.
To further that goal, Better is using HouseCanary’s ComeHome search tool to generate leads and has also launched an agent referral program that provides $2,000 in closing credits.
Better grows ‘One Day Mortgage’ volume
Better One Day Mortgage production as of April 5, 2023 | Source: Better
While the numbers won’t have mortgage industry giants shaking in their boots, Better says it’s closed $250.5 million in One Day Mortgage loans as of April 5, up 339 percent from March 1. The average loan balance of $368,400 for the 680 loans funded to date backs up Better’s contention that the certainty provided by the One Day Mortgage will appeal to first-time homebuyers.
“In terms of the customer who is going to be most delighted by this product, I think it’s going to be the customer who’s entering the housing market for the first time, learning about how to be responsible homeowners and figuring out how much home they can afford and whether or not they are going to be approved,” said Nneka Ukpai, Better’s head of financial innovation.
The One Day Mortgage automates the application, verification and underwriting process to provide binding commitment letters to eligible borrowers in 24 hours. Ukpai said that 99 percent of applicants who meet the program’s requirements to submit documents like bank statements, pay stubs and W-2s within 4 hours receive binding commitment letters within that time frame.
Getting to the closing table takes a little longer, but Better closed one purchase loan in six days and 17 hours, Ukpai said.
Better’s One Day Mortgages is available in all 50 states to homebuyers who are salaried employees making down payments of at least 3 percent on home purchases and who can qualify for a conforming mortgage with Fannie Mae or Freddie Mac. “Near-agency” jumbo mortgages that exceed federal conforming limits but are underwritten in accordance with conforming guidelines are also eligible.
Better said the top 10 states for One Day Mortgage closings are Florida, Texas, California, Georgia, North Carolina, Illinois, New Jersey, Pennsylvania, Washington and Tennessee.
Same day mortgage race is on
Fannie Mae and Freddie Mac have embraced technology that can automate property valuations, allowing many homebuyers to get approved for loans without appraisals — a development that could allow more lenders to offer same-day mortgages.
Guaranteed Rate announced a “Same Day Mortgage” in March for properties that are eligible for an appraisal waiver. Borrowers must opt-in to AccountChek for automated income and asset verification, which rules out self-employed borrowers.
Ukpai said Better can do the One Day Mortgage with an appraisal waiver, but that it’s not required.
Rocket Mortgage introduced a program called “overnight underwrite” in 2021, guaranteeing that eligible borrowers who submit the paperwork for a purchase application by 7 p.m. will receive a fully verified approval by morning.
While the technology that Better employs to provide binding commitment letters in 24 hours is increasingly available to other lenders, Ukpai doesn’t think all of the company’s competitors will be able — or willing — to use it.
“I think it should be an industry standard,” Ukpai said. “If it’s possible to do this quickly, I think that everyone should lean into innovation and automation and figure out ways that they can make their customers’ lives easier. So I’ll just say that kind of just as table stakes.”
But in the near term “a lot of people aren’t going to do it because they don’t have to, in order to be profitable,” Ukpai said. “They’re perfectly happy with their margins and the way that their business is running. And you know, simply put, they probably don’t see this as their biggest opportunity.”
In announcing the One Day Mortgage at Inman Connect New York in January, Better founder and CEO Vishal Garg said he thinks Better also has an edge on the back-end of the mortgage process: The Tinman Marketplace, a collaboration with analytics giant Palantir Technologies which Better launched last year that provides insights on the requirements of investors who fund most mortgage loans.
“Tinman Marketplace empowers One Day Mortgage by taking in all of the investor requirements and the investor bids and enabling the underwriting process to seamlessly adapt based on the investor the mortgage is getting delivered to,” Garg said in January. “And no system of its kind exists in the mortgage industry today. We had to build it completely from scratch.”
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