LoanSnap, the mortgage startup that uses artificial intelligence to help people get out of debt, is aiming to disrupt the industry again, going after the time it takes to close a home loan.
The San Francisco-based FinTech, which raised $17 million in venture funding since launching about a year ago, already closed five loans in June in eight days. The aim is to get that to an average of seven days by the end of the year. “We’re automating and creating efficiencies,” said Karl Jacob, CEO, and founder of LoanSnap. “We’re reducing the mountain of data you have to supply.”
LoanSnap is among a crop of new mortgage lenders that are trying to change the way people borrow money to purchase a home or refinance an existing loan. The startup uses AI and machine learning to analyze a person’s financial situation in seconds and then provide options to save money. After that, its technology sorts through thousands of loans to find the best one based on the borrower’s situation. While most consumers shop on interest rate alone when getting a mortgage, LoanSnap looks at all the debt outstanding to figure out the best way to pay it off and save money. The company is currently operational in Florida, Illinois, Colorado, and California with plans to expand into other states.
To date, LoanSnap says customers have saved hundreds of dollars each month using its platform. Take a borrower who had a mortgage payment of $5,296 per month and debt payments of $6,140 per month for a total monthly payment of $11,436. After refinancing with LoanSnap, the payment was reduced to $7,244 a month, saving nearly $50,000 a year and eliminating the unsecured debt. In another scenario, a customer with a mortgage payment of $2,600 a month and debt payments of $1,700 was able to save $423 a month, removing all of the debt and taking out $50,000 for a home remodeling.
“Our goal is to analyze the borrower’s financial situation and use that information in order to give the best recommendations,” said Jacob. “We continue to analyze their financial future and alert them if interest rates come down or the amount of equity rises that could be freed up to pay down more debt.” The entrepreneur said the service has resonated with customers, with thousands of people saving money through the platform. He said LoanSnap is focused on expanding and shortening the time it takes to close on a mortgage loan.
The startup, which counts Richard Branson’s Virgin Group and Joe Montana’s Liquid 2 Ventures as backers, isn’t looking to raise any more funding in the near term. Other investors including True Ventures, Baseline Ventures, Core Innovation Partners, OVO Fund and Transmedia Ventures. Jacob said the investors were drawn to the company because its not only about issuing loans. “Financial companies are focused on competing on price,” said Jacob. “The new generation like us are focused on trying to help consumers make financial decisions without having to become a financial genius.”
The ability to cut down the time it takes to close a home loan will be welcome news to the scores of borrowers who have to wait weeks to get the keys to their new home or refinance an existing mortgage. The process has long been arduous, often resulting in borrowers losing a low-interest rate because it took too long to close. According to the Mortgage Bankers Association as of last February, it took an average of 42 days to close a mortgage. LoanSnap wants to reduce that by a lot.
“Smart loans are different because they understand your financial situation like your debts and how much they are costing you,” said the executive. “Traditional mortgages take an average of 45 days to close and focus on selling a low rate without taking into consideration other factors like high interest debt that cost home owners $58 billion in 2017, as an added advantage smart loans are fast and some can even go from choosing a loan to ready to fund in 8 days.”
LoanSnap isn’t alone in trying to speed up the loan closing process. Blend, the San Francisco FinTech created a mortgage lending platform that enables banks and lenders to cut the time it takes to underwrite and approve a loan. Blend’s vision is to create a one-tap access to borrowing similar to how Amazon has perfected the one-click checkout. To date the company has raised $310 million in venture funding, completing a Series E round of $130 million led by Temasek and General Atlantic in late June. The company claims to process about $2 billion in loans each day via its partnerships with 150 lenders. In June it also announced the introduction of automated self-service pre-approvals, enabling consumers to apply online and receive a mortgage pre-approval that can be downloaded on the spot. “Consumers browsing online home listings on a Saturday night can now have a similarly comfortable digital experience starting their pre-approval — and have a pre-approval letter ready for an open house on Sunday morning,” Blend said in a recent blog post.