Many of the millions of viewers who saw Rocket Mortgage’s Super Bowl commercial — with its taglines “Push button. Get mortgage” — probably thought, “Cool. I can get a home loan from my phone on my lunch break.” But for other people who were watching, it might have sounded like the next mortgage crisis in the making.
Laurie Goodman, director of the Urban Institute’s Housing Finance Policy Center, doesn’t share those misgivings. “This isn’t a revival of the 2005-07 lending standards,” she says. “It’s an automated, less cumbersome way to collect information.” With Rocket Mortgage, a tool from online lender Quicken Loans, you can be approved in as little as eight minutes, say its developers, by providing details about income, assets and the property you’re buying through an online form. Rather than uploading the key documents yourself, you permit Rocket to link directly to public and private data sources, such as your bank account, to verify your information.
But the amount of time that digitization saves has its limits. Buying a home involves scheduling an appraisal and an inspection. Mortgages from Quicken typically close in about 30 days, says Regis Hadiaris, of Rocket Mortgage. Still, that’s considerably faster than the average of 46 days, according to the February Ellie Mae Origination Insight Report, which analyzes closed mortgage-loan applications.
Mortgages aren’t the only loans on the fast track. Some personal-loan providers deliver on the promise of quick cash. Online lender Avant will place money in your bank account by the next business day at interest rates that start at 9.95% and run as high as 36%. “Speed usually means you’re going to pay a higher rate,” warns Nick Clements, cofounder of financial education site MagnifyMoney.com. One exception: LightStream, an online lending division of SunTrust Bank, can fund loans as soon as the same day, and rates recently started at a competitive 3.99% for home-improvement loans and 4.99% for debt consolidation. LightStream accepts borrowers with strong credit–a credit report with few or no delinquencies and several years of history are among the criteria LightA Stream may consider–and you may borrow up to $100,000.
Credit qualifications, interest rates and fees for quick loans vary widely by the type of loan and lender. Quicken mortgages recently had fixed rates starting at 3.625% on 30-year conventional loans, compared with a national average of 3.75%, according to HSH.com. (If the mortgage is backed by a government entity such as Fannie Mae or Freddie Mac, Fannie or Freddie’s minimum standards apply.) SoFi, an online lender that targets young people with strong financial prospects, recently charged a minimum of 3.5% for a 30-year fixed-rate mortgage with no origination fee or other lender fees.
As nonbank online lenders and other financial-technology companies proliferate, regulators are taking a closer look at how to manage them. But, says Obrea Poindexter, co-chair of the Financial Services Practice Group at legal consulting firm Morrison & Foerster, lenders of all stripes must comply with federal laws that require disclosure of loan terms and that protect borrowers from discrimination and abusive or unfair debt collection.