Major lenders have expanded their digital home equity options
As home equity continues to rise in the US, mortgage lenders are making home lending more accessible to reach more borrowers.
Nearly all home loan companies analyzed have a digital application process, while about half conduct a soft draw before fully underwriting these loans, according to a report released by an intelligence firm on Wednesday. Keynova group.
Keynova’s report assessed the digital capabilities and user experiences at twelve of the country’s largest bank and non-bank lenders. Deposit lenders analyzed included Bank of America, Pursuit, Citi, Citizens, PNC, Truist, American bank And Wells Fargo. Non-depository lenders were included in the study Freedom Mortgage, loanDepot, Rate And Rocket mortgage.
A quarter of these lenders offered accelerated closing options, including two lenders that advertised home equity financing in just one week.
More than half of these mortgage providers allowed customers to fix an interest rate online when interest rates rise. And a third promoted the ability to digitally lock or unlock a fixed-rate loan, allowing borrowers to return to an adjustable rate if rates fall.
To minimize short-term repayment costs, approximately 20% of lenders offer qualified customers the option to make interest-only payments on a home equity line of credit (HELOC) during the draw period.
U.S. homeowners sitting on larger amounts of equity have turned to HELOCs as home prices have soared since the COVID-19 pandemic. According to recent data from Atom.
HELOCs reached $53.6 billion in volume in the second quarter of 2024, up from $42 billion in the previous quarter and just below the volume of $53.7 billion in the second quarter of 2023.
Lenders have also expanded digital access to information about alternatives, such as down payment assistance (DPA) programs for buyers or loan modifications for current homeowners, Keynova’s research found.
Half of lenders assessed for the report provided customized products with low down payments, while 42% provided information about grants and other resources to support affordable homeownership.
For existing homeowners, 83% of lenders offered online content showing how to start the process for a loan modification, repayment plan or alternative financial assistance.
Amid affordability challenges, lenders have rolled out more DPA programs, which have become a saving grace for buyers who can’t pay a lump sum at closing.
In the second quarter of 2024, the number of DPA programs for homebuyers reached a record high, according to a report from Deposit source. First-time buyers could choose from 1,445 programs nationwide, while returning buyers had 970 DPA programs available.
“The confluence of rising home prices, higher interest rates and inflation has increased pressure on consumers’ wallets, and lenders are responding by making it easier for homeowners to use digital resources to tap into their home equity or find affordable alternatives to home loans. find,” says Beth. Robertson, director of Keynova Group, said in a statement.
