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Mortgage Software Development: Guidelines on the Process, Features and Cost

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The market that will always be attractive and that is treated by many people as an investment that will give stable income no matter what happens in the world - is the real estate market. It is often listed among the most prominent investment assets, and this is one of the most frequent reasons why people take bank loans. It speeds up mortgage loans business among banks and more lenders decide to make a mortgage app today.

For sure, buying a house or an apartment requires a lot of money at once, and it’s quite logical that not everyone can do it. In the USA, only 4 families out of 10 live in the houses they own completely. In other countries the situation is quite similar today, thus banks constantly get mortgage clients. What is a mortgage? It’s a bank loan that usually covers 70 - 80% of the real estate price, which bank clients must payback, including the bank’s commission, over an agreed period of time. 

As it is a big part of the banking business, it has appeared in the digital form too. Almost each and every medium or large bank today has a mortgage application that allows people to make the most part of their loan finance operations with several clicks and swipes on their smartphones. How to build a mortgage app that will offer something new? What is mortgage software development? Let’s find it out together!

Mortgage Apps Market in 2021

The mortgage applications market is growing in quite a predictable way - no matter what happens, people need places to live in, and they are ready for a loan. Like any other market, it has fluctuations, but real estate will always be in demand due to its nature of interest. Statista report shows that in 2020 the value of transactions in the consumer lending market equaled $20 mln., and by the end of 2021, this figure is estimated to reach $22.4 mln. By 2024 this market is set to beat the target of almost $25 mln. Making it a prospective place to start a business.

Statista report

The number of applications where people can apply for a mortgage and manage their operations continues to grow too. Energias Market Research estimated the global lending software market growth to keep the pace of not less than11.6% annual growth mark till 2024 and the whole industry to reach the volume of $5.5 billion in revenue. A great part of this market value comes from digital mortgage software. 

Eager to find out how you can develop a mortgage app that will beat the competition? We’re here to help! Drop us a line, we’ll respond fast!

The vivid trend now is the rise of mortgage applications developed by banks.  Accenture report showed interesting statistics - they say that the banks and credit unions that will prioritize traditional banking to mobile banking are most likely to lose over 35% of the market share that will be conquered by digital service providers.

What is a Mortgage App and its Workflow

Mortgage application is a digital form of interaction between the borrower and lender. Platforms of this kind offer its user the functionality that was only available offline before - application for a mortgage, managing payments and customer support. Developing a lending and mortgage app means creating the real-life experience of mortgage application in digital form. 

Mortgage app users are choosing between three types of lenders - banks, credit unions, P2P (peer-to-peer) lending platforms. Compared to traditional types of lenders (banks and unions), P2P is more innovative and sometimes more beneficial, as it is a direct connection service between lenders with borrowers through a lending platform without any intermediaries. On the other hand, people have quite a high level of mistrust towards this type of mortgage as buying a house or an apartment in most cases is the major purchase in their lives, and they tend to do it with the most reliable partners and lenders. 

A mortgage is stressful no matter how easy it can be to apply - it’s a big chunk of money to be paid during a long period of time. McKinsey says that mortgage is perceived as one of the most frustrating and “long-reading papers” industries and less than 50% of the borrowers do not complain about the application process and user experience. 

This situation will change in the course of time as lenders pay a lot of attention to the mortgage applications workflow finetuning. The key areas that they focus on are:

  • User-friendly and well-guided borrower experience. Analytical data shows that this is the first and the most important area to focus on. Most of the people who decide which bank they are going to partner with, seek exceptional customer experience. Everyone feels better when going into the mortgage experience when they understand each and every point and have comfortable guidance on legal issues. It can be done within a mortgage platform with real-time assistance when required.
  • Better application process. Interestingly, half of the mortgage applications are never ended as people are not guided properly. If a user doesn’t find the exact answer to his question, he’ll immediately switch to another app. The must-haves of a mortgage application include intuitive navigation and an opportunity to save application progress (when a user can get back to his application whenever he intends to). When it is simple to apply, users tend to trust the lender more.
  • Better process automation. If a lender can turn all the paper-based loan approval procedures into digital, automate it and offer verified pre-approval, the conversion from starting an application form to the new mortgage client will grow considerably. It stimulates instant decisioning and creates a good word of mouth abound the application.

Successful Examples of the Mortgage Apps

There are several applications that show the benchmark of the competition today. If you’re planning to develop a mortgage app, there is no way you can skip these examples. Let’s have a look at them together.

  • Molo - a mortgage service that offers a good set of lending services, including a mortgage calculator, automatic consultation, appraisal functionality (powered by AI),  the Primary Offer tool that shows the user which mortgage solutions they can have with their credit score, and a legal support mechanism. The platform raised £3.7 million in capital during the first round of investment, meaning that their approach is well appreciated not only by users but also by investors. 
  • Sindeo - a lending service that helps clients find new mortgages and refinance the loans that they already have at the moment. This platform is a good example of efficient integration of other services to the main solutions. They have salesforce.com for attracting potential customers, box.com for authorizing the upload of required documents to the portal,  Mortech to calculate quotes, Finconnect for verifying customers’ personal information and Mismo for online credit reports. 
  • MoneyPark is a multi-level mortgage service. It interconnects different banks and clients, focusing on mortgage and insurance services.  It has a website for monitoring the most suitable mortgage deals and calculating a mortgage by user’s request online;  a web-based platform for advisers of banks and making complex assessments and a built-in CRM that ensures internal data processing.  It also offers companies that offer similar services a platform based on MoneyPark technologies that will help them to build their own business. The company also has iOS and Android apps that allow users to interact with consultants and MoneyPark representatives.

Eager to find out how a mortgage application can bring you stable profit? Drop us a line, we’ll share our best cases and develop the most suitable solution for your bank.

mortgage application

How Can a Mortgage App Make Money?

Developing a mortgage app and starting a business in this sphere is profitable. For sure, it’s not the market that everyone can enter - you need to have good financial backing to offer this kind of service. The payback is stable and worth contributing your resources. It comes from several directions:

  • Origination fee. Banks and credit organizations usually operate with their own money when offering mortgage services, and that is the reason why they charge an origination fee from each new client. The amount varies from 0.5 to 1% of a loan value. This commission increases the overall rate of interest paid by the client and the apartment or house price. 
  • Yield Spread PremiumLenders can use other capitals to offer mortgage services. The monetization model bases on the difference between the money they borrow from larger banks (at lower interest rates) and the present to which they extend loans for its users. For example, the lender takes funds at 4% interest and extends a mortgage at 6% interest, earning 2% from each contract.
  • Closing Costs. There are a lot of fees that users pay for the loan they make. Those are an application fee, processing fee, underwriting fee, loan lock fee? And many others. Before the loan is closed, users have to cover all these costs. All of these costs are included in the good faith estimate. This is one of the most stressful parts for bank clients, and the better you can explain why these costs are charged, the higher level of loyalty you’ll have in the overall competition.

What Challenges Can Be Faced When Building a Mortgage App

Before you start the development project in the area of mortgage, you have to consider several challenges you’ll face and get ready to overcome those. The key challenges include:

  • Mortgage compliance. This is the main pain of all companies when they are building a mortgage app. As this area has very strict law requirements, there are a lot of local regulators which you have to listen to. Consumer Financial Protection Bureau (CFPB), Office of the Comptroller of the Currency (OCC), Federal Reserve System (FRB), National Credit Union Administration (NCUA), the Home Mortgage Disclosure Act (HMDA), the Equal Credit Opportunity Act (ECOA) - this list is not short at all. You have to hire a good team of layers to make sure you comply with local laws and policies.
  • Better user experience. It’s not the question of better marketing or a more fancy-looking app interface when you plan to create a lending or mortgage app. Creating a proper user experience in the mortgage industry requires deep expertise in this complicated area and good knowledge of the competition. This is quite challenging as too many things have to be considered at a time, and too many laws and policies are to be followed.

Why is a Custom Mortgage App Better than a Ready-made Solution?

As in many other spheres of IT development, mortgage applications can be built both based on the ready-made application constructor and custom-built. It’s always an intriguing challenge to build a fintech app. The latter method of mortgage management software development (custom-made), even though it in many cases needs more money to be developed, is more frequently chosen by lenders. Why does this happen? Several reasons are usually outlined by lenders. They are:

  • Better user experience. Custom-made mortgage applications can offer its users services at each point of the home buying process. From the very beginning of the application process, users of customized applications have better support in information delivery,  data verification, help in application prefilling, and many more. Vendor-based solutions will have fewer options in these critical areas.
  • Easier maintenance. Creating a mortgage app, taking into account all the lender requirements, is crucial as it makes it much easier to upgrade and maintain the app. The team of IT specialists can change the application faster to meet the customer's needs. Vendor-based solutions require at least six months for making an upgrade, which makes it hard for a mortgage application to be competitive.  
  • Better functionality. Ready-made mortgage applications, in most cases, offer a standard set of services - loan application, streamlining, and automating paper-based document management. When it comes to underwriting, approving, clear to close services, and funding - they fail to compete with custom-made applications. Thus, many IT specialists insist that creating a mortgage or lending app makes more sense when it’s custom-made.

Ready to try and develop your custom client-winning mortgage app? Let’s do it together! Contact our team of mortgage apps development geeks here!

Key Features of a Mortgage App

The logic of your mortgage application follows the logic of the customer’s journey. Let’s follow together with the process from the very beginning and outline the features that every mortgage application should have. Eager to learn more on how to create a banking app? Let’s follow the route together!

  • Step 1 - Registration. Here you need to show how easy it will be to apply for a loan throughout the whole process. Let your users choose between social sign-in, log in with an email address, or authentication via phone number.
  • Step 2 - Creating user profiles. This part includes the users’ personal information, photos, item descriptions, edit and delete data.
  • Step 3 - Loan application form. This is the heart of your application and the place where users decide to continue with your app or skip to another. Add more assistance at every stage and guide them well. Don’t forget to show the progress of the application form filling - people must see how long it will take to go through. 
  • Step 4 - Calculate the loan. The mortgage calculator helps customers to estimate their chances to get approval from the bank based on their income data and other specific information - age, work experience and others. This feature shows how many users can loan as a mortgage, which loan programs to choose (rate, period).
  • Step 5 - Follow the mortgage progress. Here the borrowers will track their mortgage information: disbursements, outstanding principal balance, EMI, payments, bounced check, cash, or cheque receipts.
  • Step 6 - Integrate with the client’s bank account. Open banking is very helpful when it comes to the transparency of the information about the lender to its borrower. Banks will never loan money without checking whether their client is accurate with taxes, has stable monthly income, healthy expenses, loans, and no bankruptcy filings.
  • Step 7 - Protect your client’s personal information. There is a special layer of protection from fraud and personal data theft called KYC (know your customer) identity verification. This is a built-in service that shows users' mortgage history and verifies information from IDs. 
  • Step 8 - Create a payment solution. There are several options of payment - bank transfer, PayPal, credit card or cash on delivery. To make sure your application is comfortable for everyone, you’re to have all of these.
  • Step 9 - Manage client’s updates. Timely alerts about the upcoming payments, new features, system updates, and other significant information are best made with the help of push notifications. 
  • Step 10 - Ensure client’s support. Your clients need to have constant support from your specialist in the handiest way -  call, chat, email or live chatbot.
  • Step 11 - Show the nearest ATM. The ATM locator feature will show users the nearest places to withdraw or deposit cash.
  • Step 12 - Check the client’s credit rating. It’s a crucial feature for a mortgage app that helps to predict a borrower’s ability to pay back the debt.

Architecture of a Mortgage App

Developing a mortgage application, the first thing that should be elaborated on is its overall logic. Based on the logic you’ll be able to define the architecture of your future app as it has to reflect all the needs of your specific target audience. It’s impossible to create an architecture that would suit all the types of mortgage apps, but there are several blocks that all of them will have. Mortgage management applications combine calculation and management capabilities. Let’s have a look at the architectural basis

1. Accessibility layer

Creating user profiles, their accounts and management options to process their mortgage are realized in this layer.  To ensure non-disruptive operation, updates, and support a mortgage app would work better if it uses cloud infrastructure. Speaking of proper working accessibility, it’s the best way to ensure optimal scalability and availability.

2. Mortgages types layer 

If you can offer more loan types than your competitors have, you’ll be able to embrace more audiences (and have more benefits from the app). Calculating functionality that will be usable for students, millennials, elder people and many more types of clients, is definitely more efficient from the investment into development point of view. 

3. Data storage layer

Mortgage and loan software stores its client's data and makes it accessible at every loan processing stage. This is one of the most costly points in the overall development cycle.

4. Integrated credit assessment layer

Constant connection with credit bureaus and any other financial institutions responsible for credibility assessment is crucial. At this layer, you have to take care of regular credit data updates and use big data analytics to check the trustworthiness of your clients. 

5. Processes automation layer

Process automation is crucial to streamline rule-based processes. It is a must-have for a mortgage management platform as it helps to avoid human errors and brings client service several levels up, as all your accounts are accurately managed and automatically followed up when it is needed.

6. Built-in analytics layer

Using AI and big data is most helpful in generating reports and evaluating market trends, showing patterns in customer behavior that altogether help to create better mortgage offerings. 

7. External integrations layer

Competitive mortgage apps should be able to integrate with other enterprise software, no matter which services you want to add - more lending modules or remote sales personnel, or any other thing that you might need to improve your offering without extra development. 

8. Security layer

For both lenders and customers, the security of their data is most sensitive and important.  Contemporary mortgage apps should have advanced security capabilities to be sure their network and customers' data are fully protected.

Current trends in mortgage applications development

The main trends in the mortgage development sphere count 3 points:

  1. Artificial Intelligence and Machine Learning
  2. Workflow automation
  3. Mobile presence

Artificial intelligence and machine learning are an absolute must if you want to have a personalized user experience. These technologies make the process of mortgage approval much more efficient and faster, helps lenders to know their borrowers better, and thus render them the services that make the overall experience less stressful. 

Workflow automation. The demand for technological solutions that automate routine tasks (character/object recognition, loan fees recalculation, auto-generation of disclosures, etc) is growing as these features help to reduce many operational costs.

Mobile presence. Developing a mortgage mobile app is a must today - almost all the operations are now made with the swipe of a finger. Financial services are no exception thus when thinking of the mortgage application development, you need to ensure you have all - screens presence.

Technology Stack for a Mortgage App Development

Mortgage applications are following all the trends of the fintech industry. Have a look at the list of the most popular fintech apps. To ensure credit users have the same volume of services as if they were taking mortgage offline, developing mortgage and lending apps should be made with the help of the following technologies:

Blockchain

It ensures information transparency and defence from fraud for financial institutions, as all the acts in the application are fixed in blockchain and can never be removed. It helps to reduce operational costs as it coordinates lenders and borrowers and identifies the agents and intermediaries. fraud for financial institutions.

ML and AI 

ML and AI help lenders to make sure they know their users better as they have information about their behavior when they’re using the app. These are the crucial technologies for the development of smart assisting services as they reduce human intervention and automate decision-making processes.

Big data 

Big Data streamlines the main mortgage processes - account servicing, underwriting, regulatory reporting and identifying mortgage fraud risk. It also helps lenders to identify discrepancies in borrowers' applications thus more efficiently fulfill KYC loan requirements. 

Chatbots 

Chatbots in mortgage applications are developed based on AI technologies. Its main asset is to deliver the fastest way to support users on each step of the mortgage application process and any other activities with the application. Chatbots replace bank front-office services that help to personalize the customer experience.

How Much Does it Cost to Develop a Mortgage App?

Developing your own mortgage app requires rather complicated software development. Its price depends on several factors -  how many features you will have, what product design you’ll prefer, which technology stack you will take and how many people will be involved in the process.  If you will have ML and AI technologies integration, blockchain and smart contracts feature or big data use, the price will grow up considerably.

Let’s divide the question of price into two parts - MVP development cost and the price of the full functionality mortgage app creation. It’s a draft estimate that is aimed to give you an understanding of pricing in this sphere. 

MVP Development Cost

On average, developing a minimal vital product for mortgage application needs not less than 3000 hours of IT specialist work. The main components of an MVP include these functions:

  • user registration
  • money lending application (allows to apply for a loan, receive the money, pay via the mobile phone)
  • simple administration module (includes a basic dashboard with overall stats of app performance, user management, scoring settings and reporting)
  • external integrations (to have an ability to check credit history or connect to  virtual credit card service)
  • scoring system (a simple rule-based scoring module, including basic fraud detection functionality)

If we count at the average rates of developers in Europe (70 Euro per hour), we get the price of 210K Euro for an MVP. 

Cost of the Full Functionality Mortgage App Development

A full functionality application needs around 6000 hours of development, the additions to MVP include:

  • advanced scoring module, that can be later on replaced by an AI-powered self-learning scoring engine. It will easily process large volumes of data from different sources. 
  • integration of additional data sources for connecting with bank accounts and transaction data, or even social media profiles of the user.
  • Advanced KYC and security modules (Anti Money Laundering or AML) 
  • Automated bad deal management module, that will automatically inform collection agencies on non-performing loans

So we see that a full functionality version will double the price and it will be around 420K Euro.

It is important to add here, that this price can vary greatly if you take the development from developers in other regions. In India, South America and in former USSR countries the price will be almost twice lower, whereas in North America, where developers earn 160 Euro per hour the total check for development will be around one million.

To get an approximate estimate of your future mortgage app fill in the contact form here.

5 Steps to Build a Mortgage App

So, you decided to start your own development project or consider developing mortgage apps. That’s really good news and a challenging way ahead. You’ll have to try on several roles - of a lender, of a client, of a support team, of a collector - of each and every part of the process. We’ve drafted the list that shows only the main steps that you’ll have on your way:

  1. Market research and product targeting. That is the key moment that will define what features you’ll need and how to design your interface. This process starts way before the development planning - you analyze the market, define your client types, examine their financial capabilities and the needs that they might need a loan for. Having done this, you need to check the competition and find the best way to position your app to outperform them. Only after these actions will you approach the next step.  
  2. Mortgage app monetization, define your type. The typical types are commissions on the loan price,  on the monthly mortgage payment, and selling loans to end-investors. Each type has its own business logic and required user experience - here’s where you’ll have customer journeys examination and best ways to sell and upsell.
  3. Overall Mortgage application architecture planning and choosing the developers team. This is the point when you’ll have the exact price for your app and project timeframe. They will show you your product prototype and it’s high time you go and check your competition again, as now you have an exact vision of the areas where you can offer better service and loan offerings.
  4. MVP stage. Congrats, you’re halfway to your goal! This is the most intriguing point as this is the moment when you start interacting with real clients. Before you invest in the full functionality of app development, you need real-life feedback from users and finetune the list of features of the final version of the application.  
  5. Application testing and launch. The mortgage is quite a rapid market, so you’ll test new features all the time, there is no end in this area. But before you state that your app is all ready to go, you need testing that will take approximately 2-3 months.  
Creating a mortgage app

What Else is Worth Pay Attention to When Developing Mortgage Apps?

There are some issues that many companies have already faced when they were launching mortgage applications that are usually related to inaccurate regulatory compliance, rush in user experience planning and wrong market research. Just make sure you don’t repeat these mistakes - all of them have a high price.

Some features might not seem crucial, but they deliver the feeling of a better quality mortgage application. We suggest you have a look at the list of them before you start to develop your own app: 

  • property buying plan (helps to plan savings for big purchases) 
  • deposit builder (helps to manage savings) 
  • third-party integrations (helps to make the greater part of all mortgage application processes run much smoother)

Eager to learn, which functions would make your app the number one among many others? Let’s discuss it together! Send us a quick message and we’ll get back soon!

Conclusion

The mortgage applications market will continue its growth and gain new users, there’s no doubt in it. Who are those users? Many analysts say that those are millennials mainly - today, they are around 30 and many of them already have their own families.

Our opinion is that they are not the main part of those who are interested in buying their first house or apartment. Actually, this intent can happen to almost everyone (except scholars and people who don't work). It makes this market far more attractive to conquer as there always will be a place for a new and more competitive solution.

Maybe that will be your mortgage app? Why don’t we check it out together! Contact our team of development fans to try your biggest chance!

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