Real Estate Finance: The Rise Of FinTech Loans


Technology is getting smarter. As a result, so much of the work we do regularly can be performed faster and more effectively than the old way of performing tasks manually.

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The real estate lending space is no different. From advanced, technology-driven mortgage products to apps that allow customers to get prequalified right away, there are so many ways that FinTech, or financial technology, can revolutionize the real estate industry.

One of the biggest ways we see this happening is with FinTech loans. Not only does this type of real estate finance create a better customer experience, but it speeds up the process of closing mortgages. This is a big win for both lenders and clients.

Wondering what finance technology is and how it’s changing the process of buying a home? Keeping reading to find out now.

What Is FinTech?

FinTech is short for financial technology. It’s any technology that makes the financial industry or specific financial processes and tasks better, faster, and more efficient.

A big aspect of FinTech is automation. For decades in the past, what has been done by hand is now being automated by new software, allowing for faster transactions and easier record keeping.

It has tons of applications, from serving consumers with banking and lending to serving businesses of all sizes. When it comes down to it, FinTech is the process of advancing the banking industry for all.

Many specific applications can be seen daily. When you go to a coffee shop or restaurant, you might be inserting your credit card into a Square payment processor. Square’s FinTech has revolutionized the retail point-of-sale process.

You likely have banking apps on your phone that allow you to deposit checks by taking a photo of them or pay off your credit card balances. Or you might have an app allowing you to invest in the stock market or cryptocurrencies.

The fact is, FinTech is all around us. And now, it’s changing the process of becoming a new homeowner.

FinTech Applications In Real Estate

When it comes to real estate for consumers, the main variable is acquiring a place to live. This is done by either buying a home or renting an apartment.

While both of these options are different, they benefit from the rise of FinTech in the real estate industry.

Paying rent for an apartment is now typically done online, through a payment portal, or an app on your phone. Filling out an application for a lease and getting a background check is typically automated by technology as well.

Those looking to buy a home are served many different types of home loans to choose from. The process of searching for the perfect loan, the perfect lender, and applying is all made possible by new financial technology.

What is a FinTech Loan?

In the past, getting approved for a loan of any kind was quite a lengthy process. Long applications needed to be submitted, copies of countless documents made, and dozens of signatures required.

Then, your application disappears into a network of underwriters, a mysterious group of people that we aren’t even sure are humans. They often take weeks to process an application and provide approval or denial.

Basically, the old way of processing a mortgage is outdated, slow, and hidden. FinTech allows for the automation of much of this process, thanks to brilliant algorithms, and makes the process more transparent.

That means you’ll always know where your mortgage application is in the approval process.

One of the benefits of these algorithms is the opportunity for a personalized experience. The old underwriting process required borrowers to fit a particular box. If their situation doesn’t fit that standard, then sorry, no loan.

But technology is smarter and is willing to work harder to work with you to provide a customized mortgage experience, making it more likely for people to qualify for a mortgage.

Types of FinTech Loans

FinTech is changing the mortgage landscape. For the most part, the mortgage is still a mortgage. A lender will provide you with a loan for a home, requiring you to make monthly payments until it’s paid off or until you sell.

But to see the financial technology at work, you need to glance at the details. For example, one new lender in California offers mortgages without requiring monthly payments. Instead, the lender invests in a portion of the equity.

Borrowers can choose to make payments when they want or use their cash flow on anything else, such as home improvements. If the home isn’t paid off by the time you sell it, then the lender’s stake is paid back through a portion of the equity in your home.

Another newer mortgage made possible by FinTech is the All In One mortgage, offered by lenders such as Ascend Mortgage. This is one of the most unique types of home loans.

The All In One Loan combines your mortgage loan with your bank account. This means that your bank account balance offsets your mortgage. But you can use your balance at any time, just like a normal checking account or debit card, giving you access to cash when you need it.

And since interest is calculated daily, this means that overall, you’ll end up paying far less in interest over the life of your loan. Many people find that this type of mortgage allows them to pay off their mortgage much faster than the average 30 years.

A Brand New Mortgage Lending Process

As technology continues to develop and as more lenders begin to adopt FinTech, we can expect to see a brand new mortgage lending process in the years to come.

This is good news for aspiring homeowners, particularly with unique circumstances that may disqualify them from traditional mortgages. FinTech loans are capable of working with complex circumstances far more easily than the standard underwriter or broker.

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