We quit searching high and low for a much-obsessed-over house buying guide. Because, unfortunately, one…
What are the best AI mortgage advisors?
The decision on how to finance your home is a personal one that depends on many circumstances. You might be applying for a mortgage for the first time or just looking to refinance. But whether you can or cannot afford any home equity just yet, the factors that will affect your choices will be dictated by the numbers.
All over the world, artificial intelligence (AI) is invading all kinds of industries. The banking industry is just one of them. Although we have yet to see a more robust market in AI technology, especially when it comes to mortgages and other bank products, there is already an advanced few gaining traction in today’s economic landscape.
In this article, we will discuss mortgage brokers and advisors and the current AI options that are now available if you prefer to find a mortgage even in the confines of your safe zone.
First, we need to discuss what it means to get a home loan.
Is it something that you can do by yourself, or should you use a mortgage broker? What are the pros and cons of getting a mortgage advisor? And finally, what will be availing of the services of a mortgage broker mean to your bottom line?
Applying for a Mortgage
A home purchase is a significant and weighty financial transaction. Often, people will not have the cash up front to pay for their dream house, which urges them to turn to loan programs for assistance. Depending on your unique money situation, you might be eligible for a government-backed loan that might ask for little to no down payment. You can also be qualified for mortgage products from different lenders in private institutions, but to find out will involve a lot of patience, legwork, and traditional research.
Whichever lender you get, their loan officer will be taking a deep look into your personal financial background. They will ask for your Social Security Number to get your credit report and learn your FICO score. It is also part of the home loan application process to give details about your income and cash flow situation. They might also get access to your saved information to find out just how much capital you have put away in the bank. These are all important factors for determining just how much money you should be allowed to borrow.
The documentation for these is all possible for you to access on your own. In fact, even if you are not yet on the verge of a real estate decision, you should be aware of this information yourself. Did you know that you are entitled to one free copy of your credit report every 12 months? You can order this via annualcreditreport.com, which is the only website authorized by the federal government to release free credit reports. You can determine your score from any of the three major credit reporting companies: Equifax, Experian, and TransUnion. Besides this, you can already freely document your income through payslips and transaction receipts, and you can also monitor your monthly expenses through statement bills.
A 2013 mortgage survey found that 47% of homebuyers fail to compare lenders, ending up with the first lender they talk to about half of the time. This finding is not at all surprising when you take into consideration that it still takes a lot of time and resources to research and shop around to get the best mortgage rates. Even if you are always on top of your money situation, if you don’t have the privilege to find the right mortgage lender and all available options for you, you will still end up paying more than you probably should. You can’t approach a bank for mortgage advice and expect them to point you in the competition’s direction.
One solution for this is seeking the help of mortgage brokers or advisors.
You are probably already familiar with what financial advisors do. These are professionals who can give you expert advice on where to put your money. You might ask for the help of a financial advisor when you don’t have the time to look up particular investments to grow your savings or when you are looking for security by availing of insurance.
A mortgage advisor is another type of financial expert, but this time, a professional has a mortgage specialization. They will be more familiar with all kinds of loan options, especially in the zip code of your target purchase. With an existing contact list of lenders, mortgage brokers might even be able to quote you on the best loan available with just one look at your credit information.
2008 Subprime Mortgage Crisis
However, people have not been keen to avail the services of mortgage brokers since the aftermath of the 2008 Real Estate Crash. It has been concluded that brokers had a big hand in the subprime crisis when you consider that in the years leading to 2008, mortgage brokers controlled about 65% of the subprime mortgage market. Left unchecked, greed got the best of a lot of these brokers who chose to sell more home loans to riskier borrowers just because it earned them tidier profits.
For this reason, even though a mortgage broker can save a borrower a lot in terms of money and time spent to find the cheapest down payment and mortgage rates, it’s been pretty clear to borrowers that they may not have their clients’ best interests at heart. That and mortgage broker’s fees will be added to closing costs as an additional expense.
But what about a mortgage advisor who can give you neutral counsel to help you get approved for the mortgage you want?
AI Mortgage Brokers
In the age of big data and a fast-paced world, AI-powered technologies have allowed us to make outstanding leaps in several industries. Tasks that used to take more time and high costs can now be executed without any delay. AI has the capability to serve a mass market, and at the same time, cater to unique client personalities.
Imagine a mortgage broker who will give all of the same information and find the best options for you without gaining any profit in the process. That sounds terrific. But services like this are already up and running, so it’s high time more people learned about them!
An online mortgage broker can sometimes be referred to as a robo-advisor. Using algorithms to analyze your savings portfolio and risk appetite, robo-advisors can automate results to give you sound financial advice. Think of them as your online financial advisors who also act as your fiduciary. By sidestepping the human factor in the advising process, and AI mortgage broker can help you arrive at the best decision using software that can keep your information private. Since AI can cater to several borrowers simultaneously, there are also usually lesser fees to be expected compared to the cost of approaching the traditional mortgage broker.
Here are just some of the online AI mortgage brokers in operation that can give you access to the interest rate and real estate that’s right for you.
Betterment has one of the best-reviewed apps currently in the market. While they can function as a robo-advisor, they can also give you access to a human broker via a premium service. Betterment can give you advice on mortgages and credit cards, investments, and all other aspects of your finances. At just a low fee of 25 basis points, which translates to about $20 a month on a $100,000 balance, it’s a fiduciary broker that can help you get closer to your goals.
Pefin often touts itself as the “world’s first AI financial advisor.” Founded in 2011 by CEO Ramya Joseph, Pefin was started to help people forgo the stress of making difficult financial decisions. Pefin asks for pertinent financial information through a chat interface to use machine learning to deliver a solid financial plan for a potential borrower. For only $10 a month, they hope to give less affluent households better access to money advice they can count on.
SoFi is another company founded in 2011 that prides itself in always putting the best interest of its members first. Through SoFi, you can get access to investments, credit cards, and all types of loans aside from mortgages. You can even get paid for referring a friend or family member who will avail of their services.
Like other robo-advisors that have gained popularity in the financial market, Wealthfront is a company that gives you all-around financial planning at a very minimal cost. Mortgage advising is just one service among many that you can access once you sign up for an account. It’s really designed for younger professionals looking to make money through investing, even with minimal funds and experience.
While a traditional mortgage broker can have some stake in the outcome of your mortgage options, AI brokers may have no reaction or any interest in your decision at all.
When searching for the right bank or lender to help you reach your goals, you need to trust the data and follow the numbers where they may lead you. Don’t be afraid to listen to as much advice as you can! Shop around and let the lenders offer you their best!