By Vishal Garg
For the past three years I’ve been pouring my energy into building Better Mortgage, an online mortgage lender that’s built like a technology company.
Most founders have a story they pitch when asked about what their company does — something that ties their overall vision to an existing problem. But mine is pretty straightforward. In fact, you might have your own version of it too.
I learned firsthand that the way people buy homes in America is riddled with inefficient processes, outdated technology, and general frustration.
It began when I applied for my first mortgage in late 2012, just as my wife and I were expecting our second child. Like most Americans, I knew what a great investment buying a home could be. We had rented for ages, but we felt like we’d be better off putting our hard-earned money to work by building up equity in a home. After some consideration, we started house hunting in earnest.
Things began innocently enough. We saw a few nice places and talked to a few brokers. Then, after months of searching, we fell in love with a beautiful home on the east side of Manhattan.
That’s where things started to unravel.
We reached out to the broker, but the broker didn’t respond to multiple calls and emails. We loved the place so much that we tried to contact the owner directly, but without a broker, the owner was skeptical of our legitimacy as buyers.
Like most sellers, he asked that we provide a mortgage pre-approval, so I went online and searched all the big comparison websites. Once I gave them my data, I didn’t get the pre-approval I was searching for. Instead, I got dozens of loan brokers from companies that all sounded similar — some combination of generic terms in their name (First American Home Mortgage Finance!).
I was overwhelmed by options with no idea whom to trust. No one had a secure website where I could complete the process myself. All of them wanted to talk to me on the phone. They all promised amazing service — every single person I spoke to on the phone said “you can trust me.” I was getting sales calls from mortgage loan officers day and night on my cell phone. Pretty soon I shut down and went into procrastination mode.
Then my wife stumbled across a program run through her employer (a big bank) that helped employees get competitive rates on home loans. Since it was a big bank I knew it would be somewhat more rigid and expensive, but I went with it anyway. I just wanted to nail down a lender I could trust wouldn’t totally mess it up.
With a lender lined up, I thought the worst had passed.
I was sorely mistaken.
As soon as we got started our loan officer asked my wife and me, both workaholics and expectant parents, to set aside an hour and a half during business hours for what turned out to be a simultaneous interrogation about our financial histories. He asked us repeated questions about the minutiae of our income and job histories. After all that trouble I expected to get a rate and an approval. Instead he said that “they” would follow up in a few weeks and provided no further details.
I wondered: if a bank treats its senior employees this way, what happens to a regular customer?
Meanwhile, the seller was getting anxious. He wanted to close before the end of the year. Several weeks later the bank mailed us paper packets with long lists of fees. Only then had we found out that there hadn’t been a recent appraisal on an apartment in the building and that this could take us back to the pre-approval drawing board. The seller told our broker that the delays were “not my problem.” He threatened to withhold the purchase contract unless we promised to purchase the home regardless of whether or not we could get a mortgage. In the meantime, the bank wouldn’t move forward with a valuation of the home until we had a purchase contract in place. I felt like a dog chasing my own tail. I didn’t want to be bullied into the biggest purchase of my life over a piece of paper.
In the end, the homeowner got fed up and sold the place to the next-highest bidder.
We still rent to this day.
I remember thinking to myself: “there must be a better way.” It only took a little research to find out there wasn’t.
I couldn’t find a single mortgage lender able to offer a pre-approval online without antiquated paper and phone-based manual processing. None could work on my schedule. And none gave me the peace of mind that they were not only the most efficient, but that they also had my best interests at heart.
The best company I could find was a glorified call center staffed by nice mid-westerners who made the most of putting a human face on really dumb technology; the worst was a shady dude in the back of a strip mall, confusing and ultimately baiting and switching consumers with a combination of “points” and “yield spread premiums.”
Frankly, it was depressing. But there was a silver lining.
I started looking at the things that mortgage investors actually cared about when pricing and decisioning a mortgage. I realized these data elements were actually available in most cases via an API and could be automatically filled for most consumers. From there, I knew we could put the consumer in control, providing a platform that could fetch data automatically and verify it instantly. We could take the current pre-approval process — 3 weeks of brain damage and phone tag — and reduce it down to the point where you could get a pre-approval on your mobile phone in about 3 minutes.
In doing so, we could solve a problem 7+ million consumers face every year, one that affects the largest expenditure for almost every American.
The mortgage industry is huge ($12 trillion), old (people have been lending money against land for the bulk of human history), regulated, and ultimately broken (housing credit crisis 2007–2009). Taking it apart was going to be a tough job, and I knew it would require a crack team.
In 2013, I began assembling a team of brilliant, mission-driven, and hungry partners from the best companies in tech, marketing, and finance. Engineers from Google, Spotify, and Microsoft, financial analysts from Blackstone, marketing talent from JetBlue, and executives from Provident and PHH Mortgage.
We also made the critical decision to purchase a small but well established mortgage originator based in Silicon Valley. Our product team took that lender apart and completely re-engineered it, challenging every industry assumption in order to truly digitize the mortgage process.
Since then, we’ve raised over $30 million in funding from investors who are equally passionate about our mission. We’ve increased our investor base to 17+ major financial institutions (including Fannie Mae), helping us create a competitive price point for every consumer we fund. Our team has tripled in size (we’ve outgrown two offices in Manhattan). All the while we’ve helped hundreds of people purchase or refinance their homes. And we’re just getting started.
While the past three years have been a whirlwind, our core has remained the same. Owning a home is a huge accomplishment for anyone. It takes hard work and responsibility to be able to become a homeowner, but the final part of the journey shouldn’t be a needlessly expensive and time-consuming hassle of phone calls and paperwork.
If you are going through the process, try us out and tell me what you think. Help make us even Better.
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