New York-based digital lender Better Home & Finance Holding Company has partnered with information technology consulting company Infosys on a mortgage-as-a-service platform.
The integrated end-to-end digital mortgage white-labeled platform aims to cut origination costs and helps partners limit operational volatility in the current interest rate environment, Better said Thursday in announcing the launch.
“Better’s mortgage as a service platform is the first full-stack, end-to-end solution that handles all aspects of the mortgage process including point of sale, pricing, underwriting, loan origination, closing, funding and investor sale,” Vishal Garg, CEO and founder of Better, said in an e-mailed response to HousingWire.
Better’s mortgage as a service currently consists roughly 20% of its revenue and the lender aims to grow this business line, Garg said.
The partnership with Infosys is in line with Better’s new strategy to become a leading mortgage-as-a-service company or a white-label provider of mortgage technology.
Before Better debuted on the Nasdaq after a two-year journey in late August, the digital lender strived to be a one-stop shop where the firm does everything in-house. Prior to its initial public offering (IPO), Better shifted its strategy to doing only what its best at in-house and partnering with other businesses for the rest.
The company’s latest efforts to become a digital homeownership company includes the launch of Better Insurance.
The white-label solution eliminates redundancy and offers competitive pricing for customers without engaging with insurance agents, said Nick Taylor, head of real estate at Better.
When a buyer applies for home insurance, Better Insurance asks questions about the type of property and estimated home sales price, then the firm provides customers with a preview of insurance options.
The digital lender reported a net loss of $45.5 million in Q2, an improvement from a net loss of $89.9 million the previous quarter.
Better’s origination volume was $900 million across 2,421 loans in the second quarter of 2023, compared to production of $800 million across 2,347 loans funded in the previous quarter.
Better ranked as the 62nd largest mortgage lender in the first half of 2023, according to Inside Mortgage Finance.
The lender is scheduled to report its third-quarter financial earnings on Nov. 14.
Bad credit can feel like the end of your ability to borrow, especially if you are trying to secure a home loan. However, there are options available for borrowers with bad credit to fund the purchase of their dream home.
One of those options is the VA home loan. Luckily, securing a VA loan with bad credit is not impossible. Let’s dive into the details of securing your VA home loan with bad credit.
What is a VA loan?
First, let’s talk about the details of a VA home loan. These types of home loans are an offered benefit to both veterans and current service members.
Va loans make qualifying for financing easier for veterans. Additionally, the VA loan offers other benefits such as a no down payment option which can be beneficial. If you’ve had trouble saving up a hefty down payment, then that benefit will come as a relief.
Although the Department of Veterans Affairs makes VA loans possible, the agency itself does not issue the loan. Private lenders issue the loan to the borrower, but the loan is guaranteed by the Department of Veterans Affairs. Based on this guarantee, VA loans do not carry private mortgage insurance that is typically required without a down payment of 20%.
All of these benefits can add up to a great deal for veterans looking to purchase a home. Even if you have bad credit, it is possible to take advantage of the benefits that a VA loan has to offer.
Who is eligible for a VA loan?
Before you apply for a VA home loan, you’ll need to obtain a Certificate of Eligibility. With this, you’ll be able to prove to your lender that you are in fact able to obtain a VA home loan.
Luckily, the process is not very complicated and almost every member or veteran of the military is eligible. Additionally, members and veterans of the reserve and National Guard are usually eligible. Finally, spouses of military members that died on active duty or from a service-related injury may be eligible for the VA loan.
If you are an active-duty military member, then you will need to serve approximately 6 months before you are eligible.
Keep in mind, you will need to use this home as your primary residence and move into the new home within 60 days of purchase. Sometimes exceptions are made to this general rule, but it will require a case-by-case evaluation. If you do not intend to use this home as your primary residence, then the VA home loan is not a viable option.
What are the credit requirements for a VA loan?
The Department of Veterans Affairs does not require a minimum credit score for VA loan borrowers. As far as the VA is concerned, the most important requirement is the certificate of eligibility. Other than that, the VA requires that borrowers have made on-time payments for the past 12 months. The VA also prefers that borrowers have not declared bankruptcy in at least two years.
However, private lenders are the entity underwriting the loan, not the VA. VA home loan lenders are usually willing to work with credit scores much lower than the mid-700s that conventional loans require.
Still, most lenders prefer applicants with a credit score of at least 620 for VA home loans. A 620 credit score is much lower than most lenders will accept without the VA guarantee to back the loan.
Don’t be discouraged if you have a lower credit score. Applications are evaluated on a case-by-case basis and there are other compensating factors considered. In some cases, a lender may be willing to work with you even if your credit score is below 620. Here are the other factors that VA lenders look at:
Debt to income ratio. If you have a high debt burden, then lenders are less willing to work with you. Generally, VA borrowers should have a debt to income ratio of less than 41%. If you have a low debt burden then your application will be stronger.
Free cash flow. The VA suggests to lenders that the monthly free cash flow of applicants is evaluated. Your free cash flow is based on your income minus all monthly obligations which might include childcare, taxes, insurance, and more.
Job history. The stability of your current job may come into play. If you’ve had a stable high paying job for over 2 years, that can help to strengthen your application.
Evidence of credit improvement. Even if you have poor credit, the lender may consider you an acceptable credit risk if you have been making payments on time for the past 12 months. Plus, if you are working on a Consumer Credit Counseling plan that can improve your application.
Past bankruptcies. If you have declared bankruptcy recently, that will negatively affect your application. Generally, the bankruptcy will prevent you from obtaining a VA loan for at least 1 to 2 years.
Most VA home loans carry a funding fee between 2 and 3.5% of the total loan. Typically, this fee is bundled into the loan, but some lenders may require it upfront. It can be an added expense on an already expensive home purchase process. Make sure to factor this in before you accept the terms of your loan.
VA Loan Choices
If you already have a home loan but are intrigued by the benefits of the VA home loan, don’t worry! You may have the opportunity to refinance an existing home loan into a new VA home loan.
If you are seeking a lower interest rate, then the Interest Rate Reduction Loan (IRRRL) might be a suitable option. Sometimes lenders refer to this loan option as a VA Streamline Refinance loan. The refinancing process through the VA is extremely straightforward. Plus, it is possible to complete the entire process without any out-of-pocket fees.
If you are seeking to take cash out of your home’s equity, then a cash-out refinance loan through the VA may be a practical option. You can use the cash to pay for home improvements and other obligations.
Both types of VA refinance options could help you reach your financial goals. Like the standard VA home loan, lenders may be willing to work with you even if you have less-than-perfect credit.
Other Options for Home Loans with Bad Credit
The VA home loan is not your only option if you have bad credit. Luckily, there are other programs on the market that you may be able to work with if you have bad credit. It is a good idea to check out all of your options. As you are looking, keep interest rates and down payment requirements in mind. You never know which will be the best option until you take a closer look.
FHA
With a minimum credit score requirement of 500, FHA loans are a suitable option for those with bad credit. If you have a credit score above 580, then you may even be able to qualify for a reduced down payment.
FHA loans are backed by the Federal Housing Administration. First-time homebuyers with bad credit are encouraged to use this program to secure their first home purchase. VA loans have more benefits associated with them, but FHA loans are still worthwhile.
USDA
USDA loans can also be a viable option if you have bad credit. The catch is that you must be willing to live in a rural area.
Typically, you’ll need to have a 640 credit score to have your application approved. However, it is not a hard cut-off. If you are planning to live in a rural area, then you might qualify for these U.S. Department of Agriculture-backed home loans.
Start Your Search
When you are ready to start looking through your mortgage options, it is important to get quotes from multiple lenders. Remember, even the smallest reduction in your interest rate can save you thousands of dollars over the course of your loan.
Here are a few places to get started:
LendingTree
LendingTree is not a lender, but the company can connect you to countless mortgage lenders across the country. They’ll match you to your options based on your credit score, debt-to-income ratio, and more.
It is a great resource to find several lender options within just a few minutes. If you want to compare many of your options easily, then LendingTree is a great place to start.
Find out more in our full review of LendingTree.
New American Funding
New American Funding may be the best option for veterans with poor credit. The company works with customers to individually review each loan application and the entire underwriting process.
It may take longer to close if you are working with a human underwriter. However, if you have a poor credit history, the reviewer may be able to stay flexible and push for an approved application.
Find out more about New American Funding in our full review.
Can’t find a lender?
If you cannot find a lender that is willing to work with you, then you may have to accept that your credit scores need improvement. Luckily, there are many ways that you can work to improve your credit score.
Start by checking over your credit report for mistakes. If you find an error, then make sure to have it removed from your credit report by disputing it with the credit bureaus. Next, make an effort to pay all of your bills on time. Timely payments can significantly boost your credit score.
Finally, start paying down your debts. Not only will this help improve your credit history, but also can bring some relief to your heavy load.
As your credit score starts to improve, your approval odds will continue to increase. When the time is right, apply again!
Bottom Line
Owning your home can be a milestone of American success. When you have a place to put down roots and grow into your community, it can be a wonderful feeling.
It is especially important for veterans to achieve this milestone. After their sacrifices made in service to our country, it’s remarkable to see them come home and build their lives. Take action today and start looking for a lender to fund your VA home loan.
While it’s possible to accuse mortgage rates of experiencing volatility over the past few days, this week was exceptionally calm compared to last week. So “everything’s relative,” and relatively speaking, that’s a win.
Here’s a snapshot of the action as told by 10yr Treasury yields, which tend to be moving in the same direction as mortgage rates:
As the chart points out, Thursday’s 30yr bond auction brought this week’s only instance of excess volatility. This refers to The Treasury Department’s regularly scheduled auctions of US debt–some of the only interesting items on this week’s event calendar as far as rates were concerned.
In general, Treasuries are the tour guides for the bonds that drive mortgage rates (MBS or mortgage-backed securities). They tend to hang out closer to the tour bus while MBS go off in search of adventure, but everyone is generally moving to the same places at the same time.
In other words, a big, volatile jump in Treasury yields often suggests the same for mortgage rates. Fortunately, this particular jump wasn’t that big, and the 30yr Treasury bond is less correlated with mortgage rates than 5 or 10yr Treasuries. The result was only a modest increase in rates on Thursday and not one that erased too much of the recent improvements.
Of course we should remember that everything’s relative…
The chart above is not intended to rain on any parades, but merely to put them in context. It shows 3 previous instances of rates appearing to top out and push back against long term highs only to be persistently dragged higher. All that to say: it’s promising to see rates mostly holding last week’s improvement, but as far as long journeys go, it’s best viewed a solid first few steps.
In order to continue the journey, the bond market (which dictates rates) will need to see the same things it’s been wanting to see: lower inflation, softer economic data, and for the Federal Reserve to be seeing the same things. This week was very light with respect to data–especially inflation data–but there was an anecdotal mixed bag on Friday in the form of the Consumer Sentiment Survey.
Consumers were more downbeat overall with the sentiment index falling to 60.4 from 63.8 previously. This is LOW territory–not as low as we’ve seen recently, but nonetheless in line with some of the worse levels in more than 10 years.
In and of itself, low sentiment would be good for rates because downbeat economic data tends to suggest slower growth and lower inflation. But if inflation expectations are contributing to the pessimism, it cancels out the good news for rates. Incidentally, the same survey has an “inflation expectations” component for both 1yr and 5yr time frames. The 5yr is fairly boring, but here’s the 1yr:
Consumers aren’t crystal balls, but the Fed does consider consumer inflation expectations in its assessment of inflation. Fortunately, this isn’t the only place they look for that data and Fed Chair Powell has recently mentioned that other indicators of inflation expectations are showing much more promise. Beyond that, this data series tends to be overly-correlated with fuel prices (although there is an odd and notable divergence from that trend at the moment):
Ultimately, consumer inflation expectations are a sideshow compared to the top tier inflation data. The Consumer Price Index (CPI), for example, has proven capable of rocking the rate market more than almost any other economic report apart from the jobs report. And we won’t have to wait long for the next installment (this upcoming Tuesday).
The Fed has been clear and we should take them at their word that rates could be done moving higher if inflation and growth continue to cool, but that rates could easily move right back up if the data surprises to the upside.
With soaring home prices and mortgage rates putting a damper on the market for new home loans and refinancing options, it’s a challenging time for homebuyers and lenders alike.
But it’s not all grim news.
While the current climate may be causing existing-home sales and inventory to fall, it’s driving renewed interest in home equity options. And that offers an incredible opportunity for banks and non-banks alike to improve their digital channels to better support home equity lending.
Consider this:
The average rate on a 30-year fixed mortgage remains above 7%, the highest it’s been in more than 20 years.
Mortgage holders, on average, now have close to $200,000 of available equity in their homes, making home equity options an attractive alternative.
Home equity line of credit (HELOC) and home equity loan originations increased 50% in 2022 compared to two years earlier, according to the Mortgage Bankers Association’s Home Equity Lending Study.
Bank and non-bank lenders are now confronting the urgency to improve their digital experiences to better support home equity lending.
Here are five best practices lenders can adopt to enhance the consumer lending experience, informed by Keynova Group’s review of 12 leading U.S. mortgage and home equity lenders’ digital customer experiences.
Now more than ever, consumers want practical financial guidance and support.One way to do this is by helping them make the best lending decision based on their unique circumstances.
Lenders that provide access to a recommendation tool can help consumers select the appropriate loan or line of credit option, such as a HELOC, home equity loan, refinancing, personal loan or credit card. And offering to connect the consumer with a lending specialist to walk through the application process can also help lenders win business.
Presenting a debt consolidation calculator that includes a home equity option (something 25% of the reviewed lenders offer today) can help homeowners determine whether home equity or another lending solution is most suitable for their needs.
Key stat: According to the Federal Reserve, credit card delinquency rates increased in the second quarter of 2023 for the seventh consecutive quarter. With this continuous increase in outstanding credit card balances among consumers, a home equity loan can be a practical debt consolidation option compared to balance transfers, as the rates are often much lower than those associated with credit cards.
2. Include a soft credit pull option in the application process
Enable the home equity application process to determine if a consumer is eligible — as well as how much they may be eligible to borrow and at what rate — by offering a soft credit pull.
This is an excellent incentive for prospective borrowers to test the waters before committing, as it doesn’t impact their credit score.
Few home equity lenders currently enable soft credit pulls within the home equity application process, making it a significant area of opportunity for bank and non-bank lenders.
3. Support digital from application to closing
As the world becomes increasingly digital, expectations for a completely digital lending experience continue to grow. Consumers don’t want to start an application digitally only to have to finish it or complete the closing process at a brick-and-mortar location.
Lenders that support a fully digital process from application to closing will speed the lending process and offer the seamless — and digital — experience that consumers demand.
Only 25% of the reviewed lenders currently offer digital closing for home equity.
4. Accelerate lending approvals
Much like consumers don’t want to have to start in one channel and end in another, they don’t want to wait for answers. And this sentiment holds true when it comes to waiting on lending approvals.
However, just two of the lenders Keynova Group reviewed support same-day approval. Comparatively, it’s a best practice for credit card issuers. Most credit card issuers offer card applicants instant approval for these unsecured credit lines.
Speeding up the approval process for home equity lending will go a long way when it comes to consumer satisfaction.
5. Add support for Spanish-speaking consumers
With over 41 million native Spanish speakers in the U.S. in 2022, support for Spanish-language content and applications are critical. And with a renewed interest in home equity options, deepening Spanish-language support will help home lending become more digitally accessible to Spanish-speaking consumers.
None of the reviewed lenders have a Spanish-language application for home equity. Yet 25% now offer Spanish-language versions of their mortgage applications.
Additionally, Spanish-language educational content about home equity is lacking on lenders’ websites, making this another key opportunity for improvement.
High interest rates and the lack of housing inventory make home renovations and remodeling an attractive alternative for homeowners looking to upgrade their spaces. As well, the rapid expansion in credit card balances offers opportunities for borrowers to consolidate their debt at lower interest rates than are available through credit cards.
Increasingly, homeowners are turning to HELOCs and home equity loans to finance these improvements or consolidate debts, making it a favorable time for lenders to zero in on their lending processes to ensure they’re providing the seamless digital experiences homeowners expect.
Beth Robertson is a managing director with Keynova Group.
Thanks to a record number of price cuts and a big improvement in mortgage rates, home buying conditions have improved tremendously.
Taken together, you might be able to snag a lower purchase price and finance the property with a mortgage rate about .50% lower than what was on offer last month.
Does this mean it’s time to rush out to buy a home? Or does it continue to pay to be patient?
Personally, I’m still in the no-rush camp, but if you do see something you love, the price tag could be a little lower.
And there may be less competition as it tends to drop off later in the year as buyers get consumed with other things.
Unseasonal Increase in For-Sale Listings as Asking Prices Drop
Redfin reported this morning that some “glimmers of hope” are emerging for prospective home buyers.
The first one being that new listings increased 1.5% from a year ago during the four weeks ending November 5th.
This was just the second such increase since July 2022, a testament to the continued short supply plaguing the housing market.
They noted that this increase is partly because new listings were falling during this period last year.
At the same time, active listings are at their highest level since the beginning of 2023, and months of supply ticked up 0.2 points to 3.6 months.
Inventory remains constrained nationally, with 4 to 5 months typically signifying healthy supply. But it is rising, which appears to be leading to price reductions.
And the share of listed homes with a price drop increased to 6.8%, a new record high.
However, the median asking price was still 4.9% higher than a year ago at $379,725, the biggest increase in over a year.
This means the median monthly mortgage payment remains near an all-time high of $2,732, assuming a 7.76% 30-year fixed mortgage rate.
The monthly mortgage payment hit an all-time high two weeks ago when it was $8 higher.
Total Housing Payments Are Up Over 10% From a Year Ago
When you factor in the steeper asking prices and the higher mortgage rates, total housing payments are still up 10.6% year-over-year.
So despite increased inventory and rising price cuts, it’s not as if discounts are rolling in.
The only real improvement has been a pullback in rates, providing a boost to affordability in an otherwise bleak environment.
If you zoom out and look at all of 2023, and ignore the month of October, mortgage rates remain close to their highs for the year.
In other words, while affordability improved relative to a month ago, it remains at/near its worst levels of the year.
As such, it might benefit buyers to continue to wait for prices/rates to come down further.
This counters advice from Redfin economists, who “recommend that serious homebuyers consider locking in a mortgage now.”
The economists, like many others, are cautious with regard to mortgage rates and concerned they could easily reverse course.
They cite the upcoming CPI report, which will be released on November 14th. If you reveals that inflation ticked up again, mortgage rates could resume their climb.
And they’re not wrong that it’s much easier for mortgage rates to go up than come down.
Mortgage lenders are generally defensive in their pricing. They’re happy to raise rates at the drop of a hat, but reluctant to lower them, even if the data supports it.
So if you are far along in the home buying process, it could make sense to lock in a mortgage rate and avoid taking chances.
Prices and Rates Could Continue to Fall into December
It could make sense to continue to wait to buy a home, as pressure has finally seemed to ease on mortgage rates.
At the same time, housing inventory is climbing at a time of year when it typically doesn’t, indicating possible incoming weakness on pricing.
This means it could be beneficial to bide your time on a home purchase, instead of rushing in to nab what could in hindsight be a small discount relative to recent levels.
A while back, I dug through Freddie Mac data and found that mortgage rates tend to be lowest in December.
The 30-year fixed has averaged 5.97% in the month of December, nearly 0.25% lower than the 6.18% rate typically seen in the months of April and May.
Those months also tend to be when homes sell for the most money as it’s the traditional spring home buying season.
There are more buyers out, more demand, increased bidding wars and competition, and higher rates.
So there’s certainly an argument to be made about buying a home in the latter months of 2023, at least relative to other months recently.
But overall, it still feels like it’s not a good time to buy a home, at least from an investment standpoint, in most areas of the country.
Until asking prices and mortgage rates come down, it could pay to continue waiting for better.
ST. LOUIS — BJC HealthCare and Washington University in St. Louis are expanding their “Live Near Your Work” program to support employees and revitalize underserved neighborhoods. The program now offers forgivable home loans, benefiting employees and communities.
“The Live Near Your Work program was designed to ease the financial burden of buying a home for BJC and Washington University employees, while helping to improve the economic health of our region,” said Deidre Griffith, BJC vice president of community health improvement.
This program, open to all eligible employees, now offers $12,500 forgivable home loans, a significant increase from the program’s inception in 1997. The expansion includes neighborhoods hit hard by historical disinvestment, particularly in the City of St. Louis and North St. Louis County, aligning with local initiatives to advance racial equity and economic opportunities.
Have a $2 bill? It could be worth thousands
Applicants can use the forgivable loan toward a down payment or closing costs, with the loan forgiven after five years if the employee continues to live in the home and maintains a benefits-eligible position at BJC or Washington University.
Lisa Weingarth, senior advisor for St. Louis initiatives at Washington University, emphasized the institutions’ commitment to making St. Louis a healthier and more prosperous place for all. “We do that by delivering excellent patient care to the region, supporting local businesses, and expanding economic and educational opportunities for our combined workforce of more than 52,000 employees,” Weingarth stated.
The “Live Near Your Work” program has been around for 26 years, with BJC and Washington University consistently increasing its budget, eligible neighborhoods, and loan sizes. Today, both institutions allocate $300,000 each per year to support the program.
In and of itself, today would rank among the handful of “worst days” of any given year in term of mortgage rate movement. In other words, comparing today’s rates to Friday’s shows a big jump relative to the average day. Specifically, most lenders are offering rates that are at least an eighth of a percent (.125%) higher versus Friday morning.
All that having been said, this is a prime opportunity to “put things in perspective.” Here’s how the rate index chart looks after today’s “big” losses.
In other words, the bond market retains much of what it gained last week. These sorts of corrections are common in situations like this. They don’t tell us much about the future. If anything, it’s more of a confirmation that last week’s drop was as big and impressive as it seemed at the time.
In the coming days, we’ll see whether this is the start of a deeper give-back or just a token bounce after a huge move. The US Treasury auction cycle is one of the only sources of guidance on the calendar when it comes to rate momentum this week. Auction results are announced at 1pm ET on each of the next 3 days and that could lead to more volatile bond trading shortly thereafter (volatile bond trading, in turn, leads to changes in mortgage rate offerings–sometimes even in the middle of the day).
Start closing more contacts with conversations that convert! Today’s guest, Alan Stewart Jr., has mastered the art of conversation and joins us to share tips on converting potential clients. Alan also discusses the steps Realtors should take in order to become real estate authorities, the best measure of success, and the value in finding your why. Tune in and learn how to turn your next conversation into a business opportunity!
Listen to today’s show and learn:
Why Alan Stewart Jr. got into real estate [2:20]
The value in finding your why [5:22]
A better way to measure success: The Six Cs [9:59]
Three categories for increasing conversion [14:24]
Why it can be difficult to win business from friends and family [16:13]
One way to become an authority figure instantly [19:07]
Why niching down is a great strategy for building your business [20:33]
Developing skills in a specific subject matter [22:50]
Creating a database of your ideal clients [26:32]
Identifying sources for sales [27:40]
The three parts of conversations [31:27]
How seemingly forced conversation starters can work [33:59]
Getting good at conversations in order to convert [36:21]
Getting better at social cues [38:29]
Establishing a high-quality follow-up sequence [40:21]
Alan’s advice on real estate CRMs [43:15]
Alan Stewart Jr.’s upcoming book, Becoming More [43:46]
Where to find and follow Alan Stewart Jr. [46:18]
Overcoming call reluctance to build your skills [49:57]
Alan Stewart Jr.
Alan Stewart Jr. started in Real Estate in Late 2015. In 2016, he founded a brokerage out of a basement Called Yellowbrick where he was the only agent. Since then, he has grown the brokerage from himself and a partner to nearly 100 agents and does over 300 million in annual sales volume. The brokerage currently sits at number 15 in the State of CT in both units sold and Volume sold.
He was Realtor of the Year in 2017. He has coached hundreds of agents and responsible for dozens for becoming nationally top-producing Realtors.
In 2021, he founded ASK insurance which currently has over 70 Carriers and a book of business of over 2 million dollars. He is a Real Estate investor that has flipped over 100 properties and owns a few million dollars in rental properties. Alan will say his biggest accomplishment is being a dedicated and present single father of his son, Alan Stewart III.
Alan believes in living a large life through faith, self-improvement and disciplined consistency so he can give MORE, that is why he helps raise 10’s of thousands of dollars for charity every single year for the last half decade for a variety of causes.
Related Links and Resources:
It might go without saying, but I’m going to say it anyway: We really value listeners like you. We’re constantly working to improve the show, so why not leave us a review? If you love the content and can’t stand the thought of missing the nuggets our Rockstar guests share every week, please subscribe; it’ll get you instant access to our latest episodes and is the best way to support your favorite real estate podcast. Have questions? Suggestions? Want to say hi? Shoot me a message via Twitter, Instagram, Facebook, or Email.
Mortgage tech firm Blend Labs continued to narrow its financial losses in the third quarter, driven by strong growth in its consumer banking business.
Its mortgage business outperformed the broader origination market and the company reduced cash burn, putting the firm on track to its goal of reaching non-GAAP profitability by next year.
The San Francisco-based company reported a non-GAAP net loss of $21.4 million in the third quarter, compared to a non-GAAP net loss of $22.7 million in Q2 and a non-GAAP net loss of $42.8 million year over year.
The company’s GAAP net loss in Q3 was $41.8 million, slightly up from a GAAP net loss of $41.5 million in the previous quarter, according to its 8-K filing with the Securities and Exchange Commission (SEC).
“Our third quarter results represent execution on both our revenue and operating loss targets for the third consecutive quarter. We are more focused than ever on delivering for our customers in a way that aligns with our long-term vision, and we believe we are in a strong position to continue our pace of innovation with speed, scale, and efficiency,” said Nima Ghamsari, head of Blend.
The company posted $40.6 million in revenues in Q3, within the range of $40 million to $42 million provided during its investor day in September.
Revenue consisted of platform revenue of $28.6 million and title revenue of $11.9 million.
Blend’s platform segment includes the mortgage suite, consumer banking suite and professional services.
The mortgage banking suite revenue declined by 11% year over year to $20.3 million despite a 14% mortgage volume drop over the same period as reported by the Mortgage Bankers Association (MBA).
To offer competitive price points for cost-conscious independent mortgage banks, Blend launched Blend IMB Essentials, a lower-cost edition of its mortgage suite that combines all the critical benefits of Blend, Ghamsari noted.
The mortgage tech firm continued to invest in add-on products for lenders in the third quarter, a strategy to “ensure success of existing customers because those customers end up becoming the reference for other banks and lenders to sign up with Blend,” Ghamsari told analysts.
Blend’s new product and services included an AI-powered chat tool ‘Copilot’ aimed at executing precise tasks and deconstructing nuanced questions borrowers have.
As a result, growing usage of add-on products drove Blend’s mortgage suite economic value per funded loan to $86 in the third quarter, up from $77 in Q3 2022.
Consumer banking suite revenue rose in Q3 by 18% over a year ago to $6.2 million. Professional services revenue increased by 18% to $2.1 million during the same period.
“This is quickly becoming the biggest revenue opportunity for us next year,” Ghamsari emphasized.
“As we convert more and more of our customers to Blend Builder, they’re well positioned with our technology to grow their business and their deposit bases, increasing revenue and profitability as a result, which is so important to us to be able to support that kind of success,” he added.
On track to profitability in 2024
On the expenses side, non-GAAP operating costs in Q3 totaled $38.2 million compared to $58.7 million in the same period the year prior.
“The improvement in our non-GAAP operating loss met our expectations benefiting from resilient revenue in our mortgage business, sustained higher margins and the adoption of greater financial leverage through continued improvement and our operating efficiency,” Amir Jafari, Blend’s head of finance and administration, told analysts.
The third quarter marked another period of improvement in the firm’s cash burn of $25.9 million, which was about half of the $50.9 million cash burn the same quarter in 2022.
“Our actions to operate with efficiency in combination with our resilient top line and improved margins are having a real impact as we inflect towards positive cash generation,” Jafari said.
Executives had set a goal of achieving positive cash flow by 2026 in its investor day in September.
As of Sept. 30, Blend has cash, cash equivalents and marketable securities, including restricted cash, totaling $252.3 million. The company has a total debt outstanding of $225 million in the form of the company’s five-year term loan.
Looking ahead, the mortgage tech firm estimates decreased non-GAAP net operating loss between $17 million and $14 million in Q4.
“While the market conditions are sending signs the industry volumes may remain lower in the short term, we are confident our strategy is well suited for the current environment, and will make us well positioned for when the industry conditions ultimately normalize,” Ghamsari said.
2023 has been a difficult year for prospective homebuyers, who have faced soaring mortgage rates, expensive home prices and low housing inventory. But last week, several important mortgage rates began sliding downward in what could be an about-face in long-term highs. There was a marked improvement in 15-year fixed and 30-year fixed mortgage rates, and the 5/1 adjustable-rate mortgage also decreased.
Since early 2022, when the Federal Reserve kicked off aggressive interest rate hikes to combat inflation, mortgage rates have increased steadily from their historic pandemic-era lows. Mortgage rates are now at their highest peak in more than two decades. Home affordability is at the worst level in nearly four decades, and home loan applications have made new cyclical lows, according to the housing authority Fannie Mae.
While the central bank does not directly set mortgage rates, they’re affected by the Fed’s rate decisions. During its Nov. 1 policy meeting, the Fed held its key interest rate steady at a range of 5.25% to 5.5%. Historically, when the Fed stops hiking rates, mortgage rates tend to cool, according to Logan Mohtashami, lead analyst at HousingWire. However, inflation is still too high, and there’s a chance the Fed may carry out one more rate hike in December.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
Fluctuations in the mortgage and housing markets are always going to happen. That’s why experts say it’s a good idea for homebuyers to focus on what they can control: getting the best rate for their financial situation.
Mortgage rate trends
With average mortgage rates around 8%, the question is what the rest of the year has in store for prospective homebuyers. Experts say mortgage rates will remain near their current levels in the coming weeks. Fannie Mae expects the average 30-year fixed mortgage rate to close out the year at 7.3%.
Moreover, wage growth hasn’t kept up with inflation, and household income hasn’t outpaced increased housing costs. According to a recent report by the real estate firm Redfin, homebuyers need an income of $114,627 in order to afford a median-priced house. That’s $40,000 more than what the typical US household earns.
“As long as prices stay elevated, the way to help ease housing affordability is for wages to grow and mortgage rates to fall,” Mohtashami said.
Over the long term, progress on inflation and other key economic indicators could potentially ease some of the upward pressure on mortgage rates. But even when the Fed stops hiking interest rates, it generally takes 12 months before mortgage rates see substantial declines, according to Niladri Mukherjee, chief investment officer at TIAA Wealth Management.
“Until mortgage rates drift back down to a reasonable level, let’s say 5.5% or 6%, I don’t think mortgage applications are going to pick back up again,” Mukherjee told CNET.
Average mortgage interest rates today
We use data collected by Bankrate to track daily mortgage rate trends. This table summarizes the average rates offered by lenders across the country:
Loan type
Interest rate
A week ago
Change
30-year fixed rate
7.79%
8.05%
-0.26
15-year fixed rate
7.15%
7.19%
-0.04
30-year jumbo mortgage rate
7.75%
8.02%
-0.27
30-year mortgage refinance rate
7.92%
8.15%
-0.23
Rates as of Nov. 6, 2023.
What homebuyers should know about mortgage rates
High mortgage rates discourage prospective homebuyers and potential sellers alike. Most homeowners have an interest rate well below 6% and aren’t willing to move because it would mean giving up their low mortgage rate, said Jason Walter, real estate agent at Realty One Group Complete. “That’s one of the main reasons why existing housing inventory remains 40% below pre-COVID levels,” he said.
While today’s housing market is especially intimidating for first-time homebuyers, it doesn’t mean it’s unrealistic to buy. That all depends on your financial situation and long-term goals.
The most important thing is to make a budget and try to stay within your means. Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right for you.
What is a good loan term?
When picking a mortgage, remember to consider the loan term, or payment schedule. The most common mortgage terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Mortgages can either be fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are set for the duration of the loan. The interest rates for an adjustable-rate mortgage are only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the current interest rate in the market.
When choosing between a fixed-rate and adjustable-rate mortgage, consider the length of time you plan to live in your home. If you plan on living long-term in a new house, a fixed-rate mortgage may be the better option. Fixed-rate mortgages offer more stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages may offer lower interest rates upfront. As a result, a growing share of homebuyers are leaning toward ARMs.
30-year fixed-rate mortgages
The average 30-year fixed mortgage interest rate is 7.79%, which is a decline of 26 basis points from one week ago. (A basis point is equivalent to 0.01%.) A 30-year fixed mortgage, the most common loan term, is a good option if you’re looking to minimize your monthly payment. A 30-year fixed rate mortgage will usually have a lower monthly payment than a 15-year one, but often a higher interest rate.
15-year fixed-rate mortgages
The average rate for a 15-year, fixed mortgage is 7.15%, which is a decrease of 4 basis points from seven days ago. Though you’ll have a bigger monthly payment compared to a 30-year fixed mortgage, a 15-year loan will usually be the better deal if you can afford the monthly payments. You’ll usually be able to get a lower interest rate, pay less interest in the long run and pay off your mortgage sooner.
5/1 adjustable-rate mortgages
A 5/1 ARM has an average rate of 7.08%, a slide of 4 basis points compared to last week. You’ll typically get a lower interest rate (compared to a 30-year fixed mortgage) with a 5/1 ARM in the first five years of the mortgage. But you could end up paying more after that time, depending on how the rate adjusts with the market rate. For borrowers who plan to sell or refinance their house before the rate changes, an ARM could be a good option. If not, changes in the market may significantly increase your interest rate.
How to find personalized mortgage rates
You can get a personalized mortgage rate by contacting your local mortgage broker or using an online calculator. To find the best home mortgage, take into account your goals and current finances. Be sure to look at the annual percentage rate, or APR, which reflects the mortgage interest rate plus other borrowing charges. By comparing the total cost of borrowing from multiple lenders, you can make a more accurate apples-to-apples comparison.
Your specific mortgage rate will vary based on factors including your down payment, credit score, debt-to-income ratio and loan-to-value ratio. Having a higher down payment, a good credit score, a low DTI and LTV or any combination of those factors can help you get a lower interest rate.
The interest rate isn’t the only factor that affects the cost of your home. Be sure to also consider fees, closing costs, taxes and discount points. You should shop around and talk to several different lenders from local and national banks, credit unions and online lenders to find the best mortgage for you.