How to Build a Successful Online Mortgage Service: Tips and Insights
Having started its rise to prominence in the 2010s, fintech has changed the image of traditional financial services. The existence of online banking, online investing, and online payments made it only a matter of time until mortgage and loans would also become digital products. Today, they are becoming much more convenient than their traditional versions, more customer-oriented, and less time-consuming. And all these benefits combine with the fact that millennials, one of the forces that powered the rise of fintech, are ready to become the target clients of the housing market. As the demand for mortgages grows and the market orients itself toward digital users, online mortgage services are poised to meet the needs of the present and replace traditional loan services.
Below, we will reveal the details of online mortgage software development: the pitfalls, recommendations, and best practices.
Online Mortgage Software Development
Why online mortgages are thrive
My colleague once wrote that fintech appeared as a result of the never-ending struggle between the everyday need for financial services and the difficulty with which we carry them out. We can conclude that one of the many factors that promoted fintech was the human unwillingness to deal with inconvenient and highly bureaucratic traditional financial institutions.
In terms of service automation and the rise of mortgage application software, a whole generation of people referred to as millennials has influenced the worldwide escalation of digital loan services. This is happening partly because millennials – people born between 1980 and 1999 – are now mature enough to be consumers of such services and comprise most of the purchasing population. As a result, businesses are shifting their strategies to satisfy millennial shopping habits by offering things like instant purchases, lower prices, and easy-to-use products.
Online mortgage platforms are (1) more understandable than traditional bricks-and-mortar mortgage services (brokers, banks, etc.), (2) likely to move faster than a bank, and (3) probably cheaper.
According to JD Power & Associates, online loan services are experiencing a 30% higher loan growth rate compared to loans offered by traditional institutions. The possibility of giving out 30% more loans should be sufficient motivation for companies to reevaluate their approaches and turn to a more customer-centric way of running their business.
But this doesn’t mean that developing an online mortgage service online will instantly make you rich. There are many things to consider before and during the creation of such a service. In this article, I will share what I and my team at Django Stars learned as we developed an online mortgage service for a client.
I’ll start with the tech trends currently shaping the industry and highlight features your platform must have to stay competitive. Then I’ll touch upon what your development team should know beforehand and what to focus on when designing a user flow. Finally, I will discuss integrations with third-party services, describe the peculiarities of UI/UX in fintech products, and offer you a couple of examples of successful mortgage platforms and startups.
Trends in Mortgage Online Services
Though financial institutions (along with governmental and educational ones) are usually the last to adopt new technology, the 2019 trends in alt lending may revolutionize the entire industry. The hottest trends are:
- Artificial Intelligence and Machine Learning
- Workflow automation
- Mobile presence
By the way, in our new article we discuss the impact of digital transformation in the mortgage industry and how technologies are transforming the way people buy and sell homes.
Artificial intelligence and machine learning for a more personalized user experience
A recent study by Accenture revealed that financial services consumers strive for more personalization from their banks and insurers. As well, 2019 research by Business Insider found that 75% of banks are eager to implement AI solutions, and cite the desire to get personalized insights about their customers as one of their reasons for doing so.
If you decide to build mortgage platform, you should keep these findings in mind. AI doesn’t only speed up the process of getting a loan, but also empowers alt lenders to know their clients better and provide them with a more tailored experience.
Intelligent workflow automation
Recent interest rate cuts are causing financial institutions, including online lenders, to look for operational cost reductions. For customers, this may complicate the process of obtaining a loan. For digital mortgage services, it is a challenge to spend less on time-consuming processes and employees. This fact will also increase the demand for technological solutions that can streamline and automate routine tasks such as character/object recognition, loan fees recalculation, auto-generation of disclosures, etc.
Mobile phones have already become a third hand for most financially capable people. To make their services more user-friendly, online lenders should go mobile. This doesn’t mean that if you want to create mortgage website you should abandon the idea and start working on a mobile app. It simply means that developing your platform with a mobile-first approach will enable a smooth, device-agnostic experience for your customers.
Must-Have Features for an Online Mortgage Service
To win customers’ love and stay competitive, every online mortgage platform should be:
- Customer-centric. All the features you introduce when you create mortgage marketplace should revolve around your clients’ needs.
- Easy to use. Its design should be intuitive and allow your users to seamlessly navigate throughout your website or mobile app.
- Mobile-friendly. To cover a broader target audience, your service should be easily accessible, even for people on the go.
In addition to these characteristics, an online mortgage service should comprise the following basic features to deliver an outstanding customer experience:
This feature helps loan applicants know whether or not they’re eligible for the loans they’re applying for. A mortgage calculator estimate the applicant’s credit score based on primary details about him or her, like employment details, income, etc. It’s the first touchpoint with your potential customer, it reduces the time needed for decision-making, and triggers automatic loan denials for ineligible applicants.
Open banking integrations
This is the second important feature, as it’s one of the technologies behind your mortgage calculator. Open banking grants access to a customer’s financial data, including information about their taxes, monthly income, spending, other loans, bankruptcy, and so on, that has been captured from banks and other financial institutions. Open banking is an inevitable part of making faster, more precise and weighted decisions about providing loans.
KYC (know-your-customer) identity verification
For the sake of fraud prevention and anti-money laundering, you have to integrate this feature when you build mortgage site. It checks a person’s credit history, validates his or her ID, or even verifies customers through facial biometrics. Along with the previously mentioned features, KYC allows for automated checks and facilitates risk scoring.
Development costs of mortgage online service features
Since most mortgage platforms vary in functionality and complexity, we can only give you an approximate estimate based on average hourly rates for web development.
- Australia and New Zealand: $61-$100
- North America: $61-80
- Middle East: $61-80
- Western Europe: $41-80
- Eastern Europe: $41-80
- Africa: $41-80
- Latin America: $41-60
- Asia and Pacific: $41-60
As you can see, the prices are quite affordable. Still, you should remember that it’s sometimes better to pay a bit more if you want to get the result that meets your expectations.
To be on the safe side when choosing a web development team or a single developer, we recommend that you take into account the developer’s previously completed projects and reviews from their customers or independent resources.
Now let’s look at some other requirements for the team you hire.
Organize the Work Process with your Technical Partner
Here’s what your development team should know in order to build a mortgage platform successfully and organize the work process with an international team. I will focus on the pre-development stage — that is, what inputs are important before the real work begins.
Define the end-user(s)
In “mortgage platform,” platform implies that the service will be available to many types of users. It can be an individual who wants to get a mortgage, or a company (or a sole trader) that issues mortgages. Either way, define the roles in your platform and create a profile of your customer.
Once you have it (or them, if there are many), you need to answer two basic questions:
- Who are we doing this for?
- How do these users interact with each other?
Create a high-level user flow
When you know who is going to use the platform, you can see how they’re going to use it. Create a customer journey map to mark the stages of using the mortgage service and predict any possible integrations with third-party services. In this case, most such services are banks. You may need to use them to identify clients and get their credit records.
Based on the flow, you can see the user’s pain points and consider how to mend them. For example, many users don’t like giving out their personal and banking information. When you’ve identified the step in which this is necessary, think about how to transform a negative experience — ”Somebody is going to see my credit record!” — into a positive one — “I’m going to get a mortgage!”
Remember that banks are still traditional financial institutions, so some processes are bound to be full of foot-dragging bureaucracy. Take this into account when estimating the time required for certain operations in the flow.
Here’s an example of what customer journey mapping can look like in mortgage site development:
Organize the work with international teams
If you’re setting up an online mortgage for the U.S., it doesn’t always mean that Python development services will be offered by the team there. This brief section is about working with international development teams.
To work efficiently, you need to remember the following:
- Third-party services usually work only from 9 to 5, local time. So, if you need the Barclays Bank API, you can access it only from 9 to 5 BST. When you plan weekly activities, schedule meetings with third parties in advance to avoid delays.
- The time zones can be up to 8 hours different. This is a pain when working with international teams. In my experience, it’s best to schedule meetings and plan your activities so that you have at least three overlapping working hours.
- National holidays may be observed on a working day. Ask your technical team about such dates. According to Murphy’s Law, they usually occur during the week of the first release.
Regarding methodologies, there are many approaches to managing the Software Development Life Cycle (SDLC). The most famous is Agile. I wrote an article on why the Agile SDLC model is the best for your startup. The article will give you a basic understanding of Scrum and Kanban, and when to apply one or the other.
Now let’s dig deeper into the study of user flows and integrations with third parties.
Flows, Third-Party Integrations, and Servers
How to ease information gathering
A well-thought-out user flow facilitates higher user engagement. Along with other factors that I will mention later, the flow defines whether a user will turn into a customer. If your high-level flow seems too complicated, you need to optimize it.
One specific trait of mortgage software development is that users have to provide lots of personal information, and developers must figure out how to make this process painless. Filling out online forms can be time-consuming and frustrating. Most users quit websites when they are asked to fill out forms.
Caption: When working on MoneyPark, we emphasized the importance of gathering only basic information in the first step
To ease the process, ask only for necessary information during the first steps. After they get the early feedback — e.g., rough estimates on the mortgage — and are ready to continue, you can ask for more detailed information. If you divide one big step (gathering information) into smaller steps, your user will feel less pressure. The forms should be organized from the most to the least important. If some fields are optional, let users know.
Bank APIs | User flow
Most third-party services integrated into online mortgages are banks. Platforms make requests to retrieve user information such as IDs, customer emails, credit records and so on. Such requests often have a fixed fee per request — typically $1 to $10. To avoid wasting money, you need to build the flow in such a way that you can make as few requests as possible — only when you’re sure that a customer is ready to use your service.
Here’s what we did. When using our mortgage system, users have to go through several stages of the verification process to check whether they’re eligible for a mortgage. First, when signing up for the service, they provide their full name and date of birth. The second step involves providing rough mortgage estimates for the user. If users want to continue using a service and get a real offer, they need to finish the registration process. This flow allows us to reduce the number of paid requests to third-party APIs, and thus waste less money.
Test bank APIs
When you integrate a bank API into your service, you need to test the payment system. To avoid using your company’s own credit cards, the developers can yield results from test data. Many banks provide such test data so developers can check the various outcomes of using payment systems: What happens when a card has expired, is lost or stolen; what happens when the user enters invalid data? And so on. You need to test as many cases as possible to avoid having to change the entire flow later.
Managing the database
We decided to use two different cloud services: one for the platform, and another for the database. The mortgage application runs on AWS EC2, while the database is on a separate RDS server. RDS is great for databases since (1) it uses PIOPS to achieve fast and consistent request processing, and (2) it has two backup mechanisms (automated and user-initiated), which make data administration simple.
In this section, I will summarize the main design obstacles and how to deal with them. I will not talk about general design principles, but focus on the needs of mortgage services instead.
Good design, as Dieter Rams so aptly puts it, is as little design as possible. So, to design well means to create a seamless (pardon the buzzword) flow. If we design it well enough, perhaps people will not know it is a financial service at all.
The first thing to consider is the mobile version. Since we are talking about an online-based application, many users will try to get a mortgage using their phones. The main trouble may be the data grid and how to display it on a 5-inch display. Mint App solves this problem by displaying a diagram rather than a grid. Visualization is what differentiates an Excel sheet (a bad experience) from interactive data (a good experience). Use it often.
What we need to inherit from traditional banking is attention to detail, especially when it comes to money. Every field where users can enter amounts of money must allow decimals, because the number of cents influences the future benefits. You do not want your users to get bad mortgage conditions because your platform lacks a particular functionality.
Changes to personal data
I always recommend restricting the user’s ability to change their personal information. But there may be a situation in the future when some of it needs to be changed — if users get married and want to change their surnames, for example.
For better security, decide which information users can and cannot change and let them know when they sign up for an account that, once they create an account, they cannot change their personal information.
Listening to the customers
When running complex systems, like online mortgages, be ready to get a huge flow of how-to questions on your support channel. Your customers will always offer you your best chance to improve something. Listen to them attentively, because they do know best.
I suggest that you set up an intranet website to test changes to the website using fake data before deploying it to live servers. You can validate the hypotheses received from users, and by doing so regularly you will improve the UX until most of your users are happy.
Examples of Successful Mortgage Startups & Platforms
All the tips we’ve collected above are based on our 10+ years of experience in the fintech industry. Along with these examples of successful mortgage startups, you can check out the brightest ones, which use all of the best practices listed in this article. They will be good models to follow if you decide to create software for a mortgage service. In one of our other articles, we talked about lending startups, so if you’re interested, check it out.
Launched in: 2016
Funding: £3.7 million capital raised during the 1st round of investment
Distinctive features: Molo speeds up decision-making regarding mortgage loans and requires minimum documentation from the customer. Here are some basic Molo features that deserve special attention:
- Molo’s mortgage calculator was developed from scratch. It gives the user an approximate estimate based on the data he or she entered and internal computations.
- An automatic advisory allows the offer to be tailored to the customer’s needs.
- Evaluation functionality, built on AI algorithms, helps verify the user’s identity through ID photo or selfies, as well as evaluate the real estate.
- The Primary Offer tool matches the user’s credit scores with available mortgages.
- A legal maintenance mechanism ensures each deal complies with applicable laws and regulations.
Launched in: 2011
Funding: Bought by Tamedia; the value of the transaction wasn’t disclosed
Distinctive features: MoneyPark serves as a broker between banks and customers, focusing on both mortgages and insurance services. It has a complex infrastructure and combines the following parts:
- A website for checking the best available mortgage deals, including a free online calculator.
- A web platform for getting in touch with bank representatives and advisors and making more complex valuations.
- An in-built CRM system that empowers internal data processing and handling, as well as B2B CRM system that connects MoneyPark with Finance Park partners.
- Finance Park — a web platform for partners who want to provide similar services, based on MoneyPark technologies.
- iOS and Android applications that allow users to check general info, book a meeting with an advisor, and call or message MoneyPark representatives.
Launched in: 2013
Funding: $6.5 million in total, acquired by Renren
Distinctive features: Sindeo streamlines finding a new mortgage and refinancing existing ones at the same time. The most outstanding features of Sindeo are:
- A mobile-friendly mortgage consumer portal to help real-estate agents originate loans for their clients.
- An internal mortgage advisor portal that allows clients to finish their application by providing comprehensive information about themselves. It also covers identity verification and validation of customers’ credit scores.
The Sindeo solution embraces a number of integrations:
- Salesforce.com for generating leads, tracking communications history, and connecting both potential and existing customers with a specific representative.
- Box.com to enable uploading of required documents to the portal.
- Mortech for calculating a rate quote.
- Yodlee and Finconnect to provide verification of customers’ personal information (like employment, income, etc.)
- Mismo for online credit reporting, and other integrations to ensure the best user experience.
Speaking of an Online Mortgage Platform
Here are the main insights that our team of mortgage platform developers gained while developing an online mortgage platform. These statements summarize the main ideas in the above article and are presented as thoughts from our team members:
- Since we’re developing an online mortgage service, let’s first identify our target end-user and create a flow to define the principal stages and activities in the mortgage application process.
- Our technical team is in another time zone. We must schedule meetings in advance and pay attention to the client’s days off.
- We have to differentiate our product from the traditional mortgage issuing process. What if we don’t ask for all the information at once, but rather divide our information asks into several steps? Only those who are eager to get a loan will have to provide their personal information.
- Requests to bank APIs are expensive, because they provide detailed information about a mortgage. Only paid customers should be able to make them. Otherwise, we’ll go bankrupt very soon.
- Let’s separate the database processing server from the website server. It makes it easier to manage the servers.
- Millennials are crazy about good design. If something should be a top priority here, it’s the design.
Last but not least: sometimes it’s a good idea not to reinvent the wheel, but be inspired by successful examples of online mortgage services. Still, we advise you to entrust your project to a team that has experience in fintech development and can build a platform that will stand out from its competitors.