The Emergence of the Online Personal Mortgage

Marketplace lenders, who mostly conduct their business through unsecured personal loans, are beginning to step further into the online space to offer mortgage loans to borrowers.

According to an article from Bankrate, these personal mortgage loans are for borrowers that prefer a strictly online experience.

Bankrate noted that only a limited number of online personal loan marketplaces offer mortgages including:

• SoFi offers purchase and refinance mortgages for owner-occupied homes in a growing number of states.
• LendingHome says its "sweet spot" is offering short-term mortgages for investors who flip houses. The lender says it will offer "consumer home loans" in an expanding number of states.
• loanDepot began as an online mortgage lender, offering purchase and refinance loans. In 2015, it started offering personal loans, too.

Bankrate said that one of the benefits of getting a mortgage loan from a personal lender is that they have built their systems to enable an online experience that's efficient and user friendly. This enables borrowers to prequalify for a mortgage within minutes and get approved within days all from a mobile device.

"Typically, traditional mortgage lenders who tout their online capabilities get as much information as they can about a potential borrower from the online process, and then tend to direct them to a call center and complete the process offline," the report stated.

Another perk among personal lenders is that they can often underwrite in unconventional ways, so borrowers who may not otherwise qualify for a mortgage loan could be approved with a personal lender.

"This sort of approach bodes well for prospective borrowers who might be at the early stages of their careers and don't have a lot of money saved up, but have high earning potential," Bankrate said. "If you are a younger borrower without an extensive credit history, or if your FICO score is lower but you would be deemed creditworthy from an alternative underwriting approach, you could benefit."

Personal lenders also experience a few headwinds including higher mortgage rates and the time-test processes related to mortgages sold to Fannie Mae and Freddie Mac, according to Bankrate.