Whether you have noticed or not, artificial intelligence is being used more and more in all types of sectors. In the mortgage lending industry, two kinds of AI are used: supervised and unsupervised. The former involves humans creating certain rules. AI software then sorts data based on those pre-imposed rules. That means AI can learn things like collateral value and a mortgage lender’s underwriting rules. AI can examine thousands of mortgage applications in a short amount of time. Unsupervised AI does not involve humans making rules. Instead, a data scientist feeds the AI system with a huge amount of data and the AI system then identifies patterns across millions of variables. Supervised and unsupervised AI is already impacting the mortgage lending industry, and as AI evolves further, it is sure to have more far-reaching effects over the coming years.
1. AI Can Determine Creditworthiness
Mortgage rates are currently determined by things like economic growth, the bond market, inflation, and the Federal Reserve’s interest rate moves. But there are micro factors that also determine how much your personal mortgage rate will be. At the top of the list is your credit score. Generally, if you are in good financial standing, you will be able to obtain a lower mortgage rate, whereas if you have a low credit score, the rate will be higher because you pose more of a risk to the mortgage lender. However, you can still find a lower mortgage rate by shopping around. Use a site like Moneywise to compare different lenders and their rates to find the best option for you.
Many mortgage lenders are now using artificial intelligence to predict creditworthiness. It is particularly being used in markets like Africa where there is a lack of traditional credit scores but a growing economy. With AI, mortgage lenders can examine a borrower’s digital footprint to discover how creditworthy he or she is.
2. AI Can Detect Fraud and Defects More Easily
Another way that AI can benefit mortgage lenders is by improving operational efficiency. In turn, that allows an AI system to process data from various sources to identify fraud and detect defects in the underwriting process early on.
3. AI Can Streamline the Mortgage Loan Process
Large mortgage lenders are starting to use AI to reduce delays and underwriting overheads to increase their profits per loan. In fact, some companies, such as Upstart, have gone even further and are automating the whole loan process with AI. That might sound a little scary at first, but experts agree using AI to automate the loan process leads to less bias and better loans for homebuyers.
4. AI Can Help Homebuyers as Much as Lenders
While AI can reduce biases and allow homebuyers to get better loans, it can also have other benefits to people applying for mortgage loans. For instance, a few lenders are using AI to help customers pay off their loans quicker via sending them a no-pressure analysis of whether they could save interest and fees by paying faster. In the future, it is likely that lenders will use AI to give homebuyers a complete financial picture, including ways to reduce expenses and consolidate debts.
Artificial intelligence is here to stay. As the technology continues to evolve and more and more mortgage lenders adopt AI in their everyday operations, it will bring many benefits to both lenders and homebuyers.