Home Loan Approvals in Ten Minutes: Here’s How They Work

A new generation of home lenders are offering online approval in minutes, but there may be strings attached.

Online home loan applications are nothing new.

But until now, filling out what appeared to be an application on a lender’s website was in many cases more of a fact-finding mission, allowing the bank to contact potential borrowers and guide them through the process. standard request.

That’s changing, as a new breed of fintech lenders are offering the real deal – online apps that can greenlight a mortgage in minutes.

Key to these turbocharged online approvals is the arrival of Open Banking, coupled with advances in technology and data collection.

Open Banking started in Australia in mid-2020allowing accredited third parties, such as lenders, to access a borrower’s savings and credit card data in a machine-readable manner.

Simply put, the lender’s computer scrolls through your transaction account entries, and in the case of the Nano lenderapplies sophisticated algorithms to sort account activity into income, regular household expenses, and any payments for other debts.

Fintechs confirm this with a check of your credit score, and the final piece of the puzzle – valuing the home you want to buy – is completed in real time using property data maintained by companies like CoreLogic.

Instead of a loan application moving slowly through a bank’s credit reporting team, fintechs run these processes in parallel, allowing lending decisions to be made in less time than it takes. it takes to make a latte.

Leading the pack

It all sounds simple on paper, but digitizing the home loan process is complex, and 10-minute loan approvals require cutting-edge technology to achieve high speeds.

This explains why currently only a small number of fintechs such as Nano and Tic:Toc offer super-fast online approvals.

However, the big banks are not left out.

NAB has rolled out its Simple Home Loans (SHL) application platform, saying around 90% of retail applications are now eligible for this and that one in three of them is approved in less than an hour.

In May, the Commonwealth Bank launched the digital mortgage brand Unloanwhich CommBank claims can complete online applications in just 10 minutes.

The downside of automatic loan approvals is that they are not for everyone.

Target audience

Nano requires minimum household income of $100,000 and a 20% down payment for buyers, or 20% home equity for refinancers, and it does not offer loans for vacant land.

Disborrowing, on the other hand, is currently only available to refinancers.

And Tic:Toc doesn’t offer construction loans or split loans (split between fixed and variable rates), or accept guarantors, which likely puts some first-time home buyers off the hook.

The result is that algorithms, automated platforms and artificial intelligence have a lot of potential to shake up the mortgage market.

Right now though, if your situation is a little out of the ordinary, it might be a good idea to speak to a mortgage broker to find out which lender might be able to give you a hand.

Even if you check all the boxes to get approved online, taking out a mortgage worth hundreds of thousands of dollars can take some patience.

For some borrowers, the assurance of having a human connection to their loan application will compensate for a longer wait.