AI in Mortgage Lending: 8 Potential Use Cases and Top Tools

Modern problems call for AI in mortgage lending solutions. With the help of AI, lenders can speed up application approvals, flag signs of potential fraud, and improve risk assessment.

AI in mortgage lending is gaining interest, just look at the numbers. According to Fannie Mae, 30% of lenders have already adopted or tried AI software. The figure is expected to climb to 55% by 2025.

In this article, we’ll explore the emerging role of AI in mortgage lending, mortgage AI use cases, and share digital AI mortgage brokers that you can incorporate into your loan origination process.

Both borrowers and lenders can discover new ways to implement AI in mortgage lending and stay ahead in an increasingly competitive market.

What is AI in Lending?

AI in mortgage lending is built on machine learning (ML) algorithms that ease the lending process. Mortgage AI lending uses data analytics to evaluate risks, creditworthiness, property valuation, fraud detection, and more.

Global AI in Lending Market | Market.us

AI in mortgage lending is expected to reach $10.4 billion by 2027, growing at a remarkable CAGR of 23.5% (source).

Since AI in mortgage lending runs on machine learning (ML) it identifies patterns and trends humans might miss. For example, AI can detect that borrowers who make frequent, small payments are less likely to default. This helps lenders make better decisions and reduce risk.

Challenges in Mortgage Lending

How AI in Mortgage Lending is Transforming Loan Management

Let’s see in practice how AI in mortgage lending is helping professionals in real estate:

1. Automating Mortgage Document Processing

Traditionally, a loan officer would manually review your credit history, financial statements, and other documents to determine if you qualify. This process can be slow and prone to human error or bias. With mortgage AI tools, the experience is much more efficient and accurate.

Document automation focuses on processing financial statements, tax returns, pay stubs, and other relevant paperwork. As shown in the picture below, you start by uploading a static document, whether it’s a PDF, Excel sheet, Word file, or a hand-written note. The AI tool with the OCR component then converts it into text that you can easily copy and paste.

The best part is that you can also ask the AI to summarize the document or extract key information. For example, if you want to know the mortgage interest rate for a customer back in 2018, you can simply ask the tool, and it will quickly find and present that information in a concise, easy-to-read format.

Document automation goes beyond just speeding up the process. It allows lenders to handle large volumes of documents and flag inconsistencies or missing information.

2. Enhancing Credit Scoring

Credit scoring is a long and meticulous process. One must check the borrowing history, review payment patterns and total income, as well as the client’s financial stability.

AI in credit scoring switches the process to quick and seamless. Machine learning algorithms help you process vast amounts of information, identify patterns, and provide a more comprehensive view of a borrower’s creditworthiness.

Here’s a better overview:

• AI helps you see the details, like spending habits and income sources. For example, it might consider regular but small savings that a person makes, which human reviewers might overlook.
• AI can scan documents in minutes, so you get faster results.
• AI in credit scoring can spot early signs if someone is likely to miss a payment before it happens, helping lenders make better decisions.

3. Personalizing Micro-Lending Solutions

Every borrower has different financial situations and needs. But traditional mortgage products often lack the flexibility to adapt to these individual circumstances.

How can AI help? With AI, lenders can craft lending solutions that fit the specific needs of each borrower. By analyzing extensive data, AI finds patterns in borrower behavior and preferences. So, lenders know how to create personalized micro-loans. It’s beneficial for clients of every walk of life: first-time buyers, freelancers, or those with non-traditional income. Using AI, lenders make the lending process more relevant for the borrower but also boosts the chances of timely repayment.

4. Automating Underwriting

Automated underwriting leverages AI to assess loan applications more quickly and accurately than traditional methods.

Mortgage AI underwriting systems evaluate borrower data, credit scores, employment history, and other relevant factors to make real-time decisions. This not only speeds up the approval process but also ensures consistency and reduces human bias. Automated underwriting can identify potential red flags, such as discrepancies in income reporting or previous defaults, allowing lenders to make informed decisions and offer suitable loan products.

5. Detecting and Preventing Fraud

With AI in mortgage lending, you can detect and prevent fraud in a smart way.

AI systems analyze patterns and behaviors to identify suspicious activities. For example, they can detect anomalies in loan applications, such as inconsistencies in reported income or employment history. AI can also monitor transactions for signs of money laundering or identity theft. By flagging these issues early, lenders can take preventive measures, safeguarding their operations and maintaining regulatory compliance.

6. Enhancing Risk Assessment

Mortgage AI enhances risk assessment by analyzing vast amounts of data.

AI in mortgage lending can assess risks by identifying potential environmental hazards, local market fluctuations, and neighborhood crime rates. For example, if mortgage AI detects that the property is in a flood-prone area based on historical data and recent weather patterns, it might flag this as a risk. This allows the lender to adjust the loan terms or require additional insurance to mitigate potential losses.

7. Better Data Organization Customer Relationship Management (CRM) Systems

AI-boosted CRM systems, like Salesforce, manage and analyze customer interactions and data throughout the customer lifecycle.

Imagine a mortgage broker using an AI-enhanced CRM system. Here’s how it could work in a real-world scenario:

A client recently inquired about refinancing the mortgage. Mortgage AI in CRM tracks client’s interactions, such as email exchanges and call logs, and notes her specific interest in lower interest rates. Based on this data, the AI predicts that the client is likely to be interested in promotional refinancing offers.

The next time the client logs onto the mortgage broker’s website, they receive a personalized message offering a new refinancing option with competitive rates. Mortgage AI feature also suggests relevant loan products based on their financial profile and previous interactions. Additionally, the CRM system alerts the broker to follow up with the client at an optimal time, based on their past engagement patterns.

8. Improving Customer Service with AI-Powered Chatbots & Assistants

Chatbots and virtual assistants automate customer interactions. They can cover the following tasks: answer frequently asked questions, schedule appointments, and provide initial mortgage advice.

Interested in implementing AI in your business? You can fully trust Ascendix with the technical part. Our certified software professionals are ready to help you build a custom AI real estate chatbot that elevates your operations. Talk to our team to find out how.

Top 10 Off-the-Shelf AI Mortgage Brokers

AI mortgage brokers offer advanced solutions in the real estate industry. For instance, they can help with risk assessment, property and market valuation, and document automation.

Also referred to as robo-advisors, AI mortgage brokers, run on special algorithms and offer valid financial advice. For instance, an AI mortgage broker can analyze a client’s financial history, credit score, and current market conditions to recommend the best mortgage options.

Some robo-advisers come with many nifty mortgage AI features while others offer tools within their investment portfolio which can aid during the home-buying process.

The interest in the AI robo-advisors is growing in the financial niche. Here’s the 2024 statistics:

Let’s take a detailed look at the well-known robot-advisers that can have AI mortgage broker features.

1. Wealthfront

Looking for a robo-adviser with many sophisticated features? Wealthfront offers all-round financial help with affordable fees. With this robo-advisor you get investment portfolio options, daily tax-loss harvesting, as well as a mortgage AI assistant.

2. Betterment

Betterment combines AI technology with a human broker’s touch. For instance, clients get help with tax optimization, rebalancing, portfolio management, and more. Additionally, customers receive mortgage AI-driven tips regarding investments and credit cards from Betterment. On top of everything, this robo-advisor offers seven-day-a-week customer support.

3. Schwab Intelligent Portfolios

Schwab Intelligent Portfolios is the latest addition to the American financial giant — Charles Schwab Corporation. This robo-advisor provides high-quality insights and various features to its customers.

Schwab Intelligent Portfolios does not directly provide mortgage AI services. But it can help with preparation for a home purchase through its financial planning tools:

1. Schwab Intelligent Income: You can manage withdrawals from investment accounts before buying a property or handling mortgage payments. Optimize your budgeting by setting up predictable and tax-smart withdrawals to support these financial needs.
2. Financial Planning Tools: With Financial Planning Tools clients can access services and guidance to create a roadmap for each financial goal. With these tools, you can model scenarios and run stress tests against various factors when purchasing property.
3. Investment Strategy: Investment Strategy can be used indirectly to mortgages for down payments and other home-related expenses. Customers get tailored portfolios based on individual risk tolerance and financial goals. This can help increase clients’ financial readiness for homeownership.

4. Interactive Advisors

Interactive Advisors launched its journey as the investment advisory back in 2007. This robo-adviser is perfect for managers and brokers since they can:

• Partition brokerage accounts
• Self-direct trading
• Utilize AI in mortgage lending
• Customize goal setting and monitoring tools

The major focus of Interactive Advisors is investing. Hence, this robo-advisor provides strategy-oriented market suggestions, automation features, and adjacent financial services.

5. Ellevest

Ellevest is an investment robo-advisor built around and for women needs in the industry. Unrestrictedly people of all genders can become Ellevest users.

Acting as fiduciary, this robo-advisor provides investing options, focusing on the gender-specific issues of salary gaps, career breaks, and longer life expectancy.

While Ellevest does not have a stand-alone mortgage AI feature, it can provide valuable information for home buying and family planning. Through the guide, they promise to cover the following questions: How much home can I afford? Is a full 20% down payment needed? How does one obtain a mortgage?

6. Merrill Guided Investing

Merrill Guided Investing is another robo-advisor that integrates automated investment with human professionalism.

With this tool users do not have access to mortgage AI features. However, they can benefit from other investment portfolio tools to make more informed decisions about lending investments:

• Goal planning for home, education, and travel investments
• Account integration with Bank of America products and services
• 24/7 customer support
• Tools for beginners and advanced investors
• Financial experts help manage investment strategies

7. SoFi Invest

SoFi is known as the best low-cost robo-advisor. If you are just starting out building your investment portfolio, this tool is a great fit. Additionally, SoFi is a is an all-inclusive online brokerage for both passive and active investors.

Just like many investment portfolios, SoFi does not directly have AI mortgage lending tools. However, users have access to:

• Automated investing solutions (goal planning, property purchase, travel, marriage, etc.)
• Portfolio rebalancing
• Accounts: individual, joint, IRA

In case you are not finance-savvy, SoFi can offer you help of financial experts.

8. Zillow Home Loans

Zillow Home Loans is an online mortgage AI tool through which you can get:

• Conventional Loans
• FHA Loans
• Jumbo Loans
• Veteran Affairs (VA) Loans

Zillow Home Loans uses AI to match borrowers with the most suitable mortgage options. The platform analyzes borrowers’ financial profiles, including credit scores, income, and debt-to-income ratios, to suggest the best loan products. The AI mortgage lending feature helps in optimizing the loan search process and providing accurate recommendations.

Zillow Home Loans benefits:

• Personalized Matches: AI finds the best mortgage options tailored to individual financial situations.
• Optimized Loan Search: Simplifies the process of finding and comparing loan products.
• Efficient Application Process: Streamlines application and approval through automated data analysis.
• Financial Profile Analysis: Provides detailed insights into borrowers’ financial health and readiness for a mortgage.

9. Better Mortgage

Better Mortgage uses AI to automate and simplify the mortgage application process. The AI mortgage lending platform collects and analyzes borrowers’ financial data to provide instant loan options and quick pre-approvals. The AI evaluates credit scores, income, employment history, and other financial factors to determine the best mortgage products for each borrower.

Key features:

• Quick Pre-Approval: AI accelerates the pre-approval process, providing results within minutes.
• Personalized Mortgage Options: Tailors mortgage recommendations to fit each borrower’s financial situation.
• Efficient Documentation: Streamlines document collection and verification, reducing paperwork and manual errors.
• Transparency: Offers clear and easy-to-understand loan terms and conditions.

10. Blend

Blend offers users AI in mortgage lending operations. This platform helps lenders streamline the mortgage application process. The mortgage AI feature automates the collection and verification of financial documents, assesses borrower eligibility, and provides real-time loan options. Bonus: lenders can integrate Blend’s platform into their existing systems to enhance efficiency and customer experience.

Blend’s benefits:

• Reduces friction by automating document submission and verification.
• Provides borrowers with immediate loan recommendations based on their financial data.
• Reduces processing times and manual labor for lenders.
• Offers a smooth and transparent application process for borrowers.

Pros and Cons of Robo-Advisors

Robo-advisors are affordable and beginner-friendly platforms in the investment sector. These online financial services automate portfolio management, mortgage planning, and other financial tasks to help users achieve their financial goals with ease and efficiency.

How to Choose AI in Mortgage Lending: Custom VS Ready-Made Solutions

Mortgage brokers are benefiting from the AI uptick. Modern technology speeds up manual labor and helps brokers better understand their clients and properties.

The question is: should they invest in custom or ready-made mortgage AI tools? We provide you with a breakdown of both solutions.

Custom-Made Solutions

Custom AI in mortgage lending is often worth the investment when you are searching for:

• Unique business requirements: Your processes are specialized and cannot be met by generic solutions.
• Enhanced functionality: You need advanced features that provide a competitive edge.
• Scalability: You anticipate growth and require a solution that can evolve with your business.

Ready-Made Solutions

Off-the-shelf mortgage AI solutions may be adequate for:

• Basic functions: Tasks like CRM features, data entry, and standard reporting.
• Cost efficiency: They typically require less upfront investment and can be implemented quickly.
• Simplicity: If your needs are straightforward, ready-made tools can streamline operations without the complexity of customization.

If you want to get ahead of the AI adoption game, contact Ascendix professionals. During the intro call, we’ll discuss your AI readiness, identify key areas for implementation, and assess your current technical resources.

How Can Ascendix Help You Embrace AI in Mortgage Lending?

For two decades the Ascendix team has been a business automation leader in the real estate industry. Over the years, we’ve closely followed the advancements in AI technology and become experts in integrating it into Proptech software.

One of our recent accomplishments — a custom document abstraction framework — tailored specifically for the real estate industry. Our framework is designed to meet the unique needs of real estate documentation, avoiding the pitfalls of generic, one-size-fits-all solutions.

Why is Ascendix a Trusted Partner in AI Mortgage Lending?

• With our extensive experience, we develop software solutions tailored to real estate, including custom AI tools designed for property management and contract data extraction.
• We work with prominent real estate firms like JLL and Colliers, along with over 300 other clients globally.
• Operating from five international offices, we incorporate a broad range of international insights into our solutions. Our US-based team and European partners ensure our tools are informed by global trends and standards.

Book a free consultation to learn how we can assist with creating a custom AI Proptech solution.