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How Alexa and Siri Could Help You Get a Mortgage

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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In the distant past, if you wanted to know your bank account balance or to make a transfer, you had to call your bank, or worse, visit in person. As the Internet age has progressed, you’ve been able to do more and more of your banking online. Web services came first, followed by smartphone apps and mobile deposit technology — eliminating the need to leave the house for a financial transaction unless you wanted to withdraw cash. Voice-activated technologies like Apple’s Siri and Amazon’s Alexa are the latest frontiers for online banking. The Apple iPhone is the most popular smartphone on the market, and nearly a third of people between 25 and 34 years old own an Amazon Echo speaker, according to an April 2018 report by advisory firm Javelin Strategy & Research.

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Financial institutions are taking advantage of this trend. Some, like Bank of America, are investing in their own voice-activated technologies. Others are utilizing Alexa’s custom platform to help customers. These technologies are currently limited to basic transactions, but according to banking technology experts, mortgages could be the next big financial product for voice assistants.

How digital voice assistants are transforming banking

Both Amazon and Apple have moved progressively further into financial technology through their voice assistants.

Amazon’s Echo speaker, which comes with its built-in Alexa voice assistant, lets you interact with Amazon in a variety of ways. You can ask Alexa for the weather forecast or to read news headlines. Amazon also allows third-party brands to develop “Alexa Skills,” which give the devices additional abilities. There are now tens of thousands of them in the Alexa Skills Store.

 

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In 2016, Capital One became the first business to use Alexa Skills as a way for consumers to interact with their financial accounts. The bank’s Alexa Skill currently allows customers to check account balances, track their spending and pay their Capital One bill.

Since then, many other financial institutions have jumped in. At last count, Javelin found that 30 different banks have Alexa Skills, said Al Pascual, senior vice president of research and head of fraud and security at the firm.

However, they’re generally made for basic services like checking account balances or recent transactions, Pascual said. “They’re not designed to do anything like money movement, or in essence, higher risk transactions,” he said.

Why? Because it’s difficult to authenticate the user. For example, if you’re at your friend’s house and ask their Alexa to transfer you money, the device can’t really know if it’s you or the friend making the request, Pascual said. Requiring a PIN is how banks typically tackle authentication, but it’s not very secure.

“I think they have a while to go until they get that figured out, but once they do, I think that opens the floodgates a bit,” Pascual said.

Arguably, Siri — Apple’s digital voice assistant — is more advanced than Alexa, said Chris Ward, principal consultant at financial intelligence company Mapa Research. This is because globally, more banks have integrated with Siri, and it allows customers to make peer-to-peer payments. Alexa, on the other hand, is currently only about reviewing account information, such as balances or credit card payment dates, Ward said.

 

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‘What you see right now is still very basic’

Regardless of whether you’re looking at Alexa or Siri, “what you see right now is still very basic, and banking through these channels certainly isn’t replacing the experiences customers can have via mobile app or an online platform,” Ward explained.

But there’s clearly demand for more voice-assisted banking. The Javelin report found that 35% of respondents would use services like Siri and Alexa to transfer money between accounts, and a third would use them to contact customer support with a question. About a quarter would likely use it to send money to someone else.

Rather than having to go through Amazon or Apple’s technology, some banks are creating their own voice assistants. For example, Bank of America has developed a digital assistant called “Erica,” which is housed within the bank’s smartphone app. Because the voice assistant technology is within an authenticated (logged in) session, it offers more security. Therefore, it gives you the ability to do more, Pascual said. For example, in addition to basic transactions like checking your balance, Erica lets you transfer money between your accounts, pay bills and send money to others.

How mortgages have been affected

Currently, due to the complexities of mortgage loans, digital voice assistants have barely entered the mortgage space. LendingTree, MagnifyMoney’s parent company, has a free Alexa Skill that allows borrowers to access mortgage rate quotes from lenders and send the results to their phone.

Rocket Mortgage from Quicken Loans has an Alexa Skill that lets customers initiate their mortgage payment, check mortgage rates and get in touch with a home loan expert. There are also several Alexa Skills that have mortgage calculators or can teach you about mortgage basics. However, we couldn’t find any lenders that currently allow consumers to apply for a mortgage via voice technology.

According to a Bank of America spokesperson Betty Riess, the Erica app doesn’t have any features related to mortgages as of now. “Currently, if a customer asks Erica about applying for a mortgage, the customer will be directed to the ‘explore our products’ page to select mortgage,” she said in an email.

 

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Why aren’t mortgages there yet? Pascual says it’s because there are still many challenges around risk. How comfortable will borrowers feel about giving Alexa their sensitive personal information like a Social Security number if they’re not authenticated?

“People still have an element of hesitancy when it comes to interacting with machines,” Pascual said. Javelin’s report found that nearly two-thirds of consumers who aren’t interested in making financial transactions with smart speakers like Alexa say it’s due to security concerns.

Ward said many consumers, even those who own products with Siri and Alexa, have concerns about the voice-activated speakers listening to what they’re saying. Also, with Siri and Alexa, you’re interacting with your bank in addition to Apple or Amazon, which makes some people more wary about sharing their personal information, Ward said. Plus, you’d have to say confidential information aloud, which limits you to private areas. All of these security risks have to be sorted out before mortgages are ready for the big time on these devices.

What comes next?

Banking technology experts believe that going through the entire mortgage process with digital voice assistants is possible in the future, but it might never be fully automated.

Pascual predicts that the next step for this technology would be Alexa serving as a starting point for a mortgage application. He anticipates that Alexa could help a borrower learn about mortgages — pulling potential loan terms from a bank after the user shares less-sensitive information, like their income. The borrower could even possibly provide the address of the home they want to buy, and Alexa could check on the home prices and calculate what a mortgage might cost them.

However, from that point, Pascual thinks Alexa might drive the consumer to a different digital channel. Perhaps it would send a message through their mobile banking app, or a text or an email that allows them to continue the application in more depth elsewhere.

He also said he could see banks or lenders bringing a loan officer into a conversation. For example, if you’re looking for something more complicated than a conventional loan, like a jumbo loan or low down payment loan, Alexa could say, “This sounds really complex” and pipe in a loan officer to continue the conversation with you via voice, Pascual said.

In other words, you wouldn’t use Alexa from start to finish, but it would be used to get the process started, Pascual said. After all, he explained, mortgages are complex, and there will be limitations.

He said many consumers had bad experiences in the past with old chat bots that have been less than helpful. If lenders can recognize the limitations and address them by incorporating human beings or other digital channels, applying for mortgages via voice could be a reality — especially if the lenders can find ways to make it less tedious than filling out an online form.

“It can, in some ways, just be easier to talk to somebody,” Pascual said, even if it’s not a human. “Machines are very good at collecting data, especially uniform data. Rather than me having to sit there and type it all on a tiny phone screen, I’m having a conversation with Alexa.”

Since voice assistants from banks — like Bank of America’s Erica — are housed within their secure app, there’s more trust there from customers than with Siri or Alexa, Ward says. For this reason, he anticipates that any future developments in this space might first evolve with bank-owned technology first. “To me, containing all of that in the experience of the app is going to be quite interesting and might resonate more with customers because they feel like they’re in that secure environment,” Ward said.

While Ward thinks it will be possible to complete a full mortgage application via Siri or Alexa one day, he’s not convinced that it’ll happen within the next five years or that it will be easier than an online form.

“For me, Siri or Alexa Skills need to actually deliver a smoother, easier experience than the customer can get elsewhere,” Ward said. “Until they can do that, I’m a bit skeptical about to what extent Siri and Alexa will be the interface where consumers want to go through a full mortgage application.”

What he believes is most likely to happen is that technology like Alexa could help expedite the application process by drawing in data from other sources. For example, he said, rather than having to enter all of your information manually, you could ask Alexa to give Chase Bank your Bank of America information to expedite the process of applying for a mortgage with Chase. Or you could have your professional information pulled in from LinkedIn.

Of course, we might also see developments from banks with their own digital voice assistants. Small mortgage loan originators probably won’t be getting into this space anytime soon, Pascual predicts. But he expects that bigger banks — especially tech-forward ones like BBVA and USAA — will be the ones to watch.

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Here are the Best Low- or No-Down-Payment Mortgages

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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It’s an often-cited rule of thumb, but you don’t actually need a 20% down payment to get a mortgage. In fact, you can get a home loan with little money down, and even a no-down-payment mortgage.

Assuming you’re financially prepared for all of the other responsibilities of homeownership, consider the following mortgage programs.

No-down-payment mortgage options

USDA loans

The U.S. Department of Agriculture (USDA) insures home loans made by approved lenders to eligible homebuyers in designated rural areas. As the program states, USDA loans were created to improve the quality of life in rural areas by giving families the opportunity to own a “modest, decent, safe and sanitary” home as their primary residence.

There’s no required minimum down payment or mortgage insurance, but there are guarantee fees. A portion of the fee is paid upfront and is 1% of the loan amount; the other portion is 0.35% of the loan amount and is paid annually.

To be eligible, you must:

  • Have a low-to-moderate income for your area
  • Buy a home in a designated rural area
  • Have a preferred minimum 640 credit score
  • Have a maximum 41% debt-to-income (DTI) ratio

VA loans

The U.S. Department of Veterans Affairs (VA) also offers a no-down-payment mortgage option guaranteed through its VA loan program. These loans cater to active-duty military service members, veterans and eligible spouses, and are offered by private lenders.

Borrowers aren’t required to make a down payment, but there is an upfront funding fee — which ranges from 1.4% to 3.6% of the loan amount — to help offset the program’s costs to taxpayers. The loan must be used to purchase a primary residence.

To be eligible, you must:

  • Have a certificate of eligibility from the VA
  • Have a preferred minimum 620 credit score
  • Show proof of stable income
  • Have a maximum 41% DTI ratio

Low-down-payment mortgage options

Fannie Mae HomeReady® and Standard 97% LTV

Fannie Mae has two low down payment conventional loans: HomeReady® and Standard 97% LTV. The HomeReady® mortgage program is open to both first-time and repeat homebuyers, while the Standard option requires at least one borrower to be a first-time buyer.

Borrowers can’t earn more than 80% of their area median income (AMI) if applying for a HomeReady loan. Additionally, if all borrowers on either a HomeReady or Standard loan are first-timers, at least one of them must complete an online homebuyer education course.

Both programs also require private mortgage insurance (PMI) if you make a down payment of less than 20%, though PMI can be removed after you reach 20% equity.

To be eligible, you must:

  • Have a 620 credit score
  • Have a 3% minimum down payment
  • Have a maximum 50% DTI ratio

Freddie Mac HomeOne and Home Possible

Freddie Mac’s HomeOne mortgage is reserved for first-time homebuyers and doesn’t include any income restrictions. The Home Possible® loan is an option for first-time and repeat buyers with a low to moderate income.

Your income must not exceed 80% of the AMI for a Home Possible® loan. You may qualify without a credit score, but your minimum down payment rises from 3% to 5%. Cancellable PMI is required for borrowers who put down less than 20%.

There’s a homebuyer education requirement for both HomeOne and Home Possible® programs when all borrowers on the loan are first-timers.

To be eligible, you must:

  • Have a 3% minimum down payment
  • Have a minimum 660 credit score
  • Have a maximum 50% DTI ratio

FHA loans

The Federal Housing Administration’s (FHA) low down payment home loans require just a 3.5% contribution and a 580 credit score. You can also qualify for an FHA loan with a credit score of 500 to 579 if you have at least a 10% down payment. Other FHA loans, such as construction-to-permanent loans and 203(k) loans, have the same credit score and down payment requirements.

FHA loans require upfront and annual mortgage insurance premiums (MIP). The upfront premium is 1.75% of the loan amount; the annual premium ranges from 0.45% to 1.05%, is divided by 12 and paid in monthly installments as an addition to your mortgage payment. Borrowers who put down at least 10% only pay mortgage insurance for 11 years; putting down less means you’ll pay MIP for the life of your loan.

To be eligible, you must:

  • Have a 580 credit score and 3.5% down payment
  • Have a 500 to 579 credit score and 10% down payment
  • Borrow within your county’s FHA loan limits
  • Have a maximum 43% DTI ratio

Good Neighbor Next Door

The Good Neighbor Next Door program from the U.S. Department of Housing and Urban Development (HUD) allows homebuyers in certain public service professions to buy a home at a 50% discount. If you qualify for and use an FHA loan to buy a home, the down payment is only $100, instead of the minimum 3.5% that’s usually required.

Eligible borrowers must buy a home located in a HUD revitalization area and commit to live in the home for at least three years. They must also sign a silent second mortgage for the discounted amount, though no payments are required if all program requirements are met.

To be eligible, you must:

  • Be a full-time pre-K through 12th grade educator, emergency medical technician, firefighter or law enforcement officer
  • Buy a home in a HUD revitalization area
  • Qualify for a conventional, FHA or VA loan
  • Live in the home for at least three years

Pros and cons of no or low down payment

Pros

Cons

  • Buy a home sooner. It can take years to save up for a larger down payment. By contributing 0% down or the lowest possible amount, you can reach your homeownership goal in less time.

  • Avoid depleting your savings. If you limit how much money you contribute to your home purchase, you can leave some of your emergency savings intact. Lenders want to know that you can weather financial hiccups, such as a job loss or income reduction.

  • Start out with less equity. The less money you put down, the less home equity you’ll have initially. This means your ownership stake in your home is much smaller, which may lead to pocketing less money if you need to sell in a few years.

  • Take out a larger mortgage. A no- or low-down-payment mortgage means you’ll be close to financing 100% of your home’s purchase price. A larger mortgage means a higher monthly payment amount.

  • Pay more in interest over time. The more money you borrow, the higher your interest rate typically will be. This also means you’ll pay more in interest over the life of your loan.

FAQs about mortgage down payments

Yes, there will be closing costs to pay on your home loan. Mortgage closing costs can range from 2% to 6% of your loan amount. You can pay these costs out of pocket at the closing table, or ask your lender about a no-closing-cost mortgage. With this type of loan, your lender will either increase your mortgage rate or add the closing costs to your loan amount, instead of having you pay those costs upfront.

It depends on the type of mortgage. Conventional loans require private mortgage insurance when you put down less than 20%, and it can be canceled after you’ve built at least 20% equity in your home. All FHA loans require mortgage insurance premiums, but if you put down 10% or more, you can get rid of MIP after 11 years.

Reach out to your loan officer and real estate agent for help identifying any down payment assistance programs you might qualify for. You should also check with your state’s housing finance agency.

Many loan programs let you use monetary gifts from family members, friends and others to help cover your down payment, but there must be a specific paper trail for the gift. The donor will need to submit a gift letter to show that you won’t have to repay the money being gifted to you. Consult your lender for specific guidelines.

Yes, your down payment amount can affect your mortgage rate. The less money you put down, the riskier you can appear to lenders, and they can account for this risk by raising your mortgage rate.

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Fact Checked By: Deborah Kearns

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By clicking “See Rates”, you will be directed to LendingTree. Based on your creditworthiness, you may be matched with up to five different lenders in our partner network.

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5 Home Loans for People With Bad Credit

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

You don’t need a perfect credit score to get a mortgage — there are home loans for people with bad credit. But before getting this type of mortgage, find out how a lower credit score affects your overall borrowing costs.

Buying a home with bad credit

It’s possible to buy a home with bad credit — you could have a credit score as low as 500 and still qualify for a mortgage. The lower your credit score, though, the fewer lending options you’ll have and the higher your mortgage rate will be.

FICO scores, the credit scores used by most lenders, typically range from 300 to 850. Having a lower credit score translates to higher risk for a lender, and vice versa. Any score 669 or lower is considered “fair” or “poor.” Here’s a breakdown:

  • Exceptional: 800 and higher 
  • Very Good: 740-799
  • Good: 670-739
  • Fair: 580-669
  • Poor: 580 and lower 

Lenders like to see high credit scores because it exhibits an ability to manage debt, make on-time payments and use credit responsibly. Your creditworthiness will come into question if you plan on buying a home with bad credit, but it doesn’t have to hold you back from homeownership.

5 home loans for bad credit

Consider one of the following home loans for bad credit.

Fannie Mae HomeReady

Fannie Mae’s HomeReady mortgage program is an option for both first-time homebuyers and repeat buyers with limited access to down payment funds and a fair credit score. This conventional home loan has cancellable mortgage insurance for those who put down less than 20%, and gives borrowers the option to use boarder or rental income to help them qualify. If all borrowers on a loan are first-timers, at least one borrower is required to complete a homeownership education course.

Eligibility requirements include:

  • A minimum 620 credit score
  • A minimum 3% down payment
  • A low- to moderate income

FHA Loans

Mortgages backed by the Federal Housing Administration (FHA) could be considered bad credit home loans because they make it easier for low-credit-score homebuyers to get a mortgage. FHA loans have a low down payment requirement, but you’ll pay mortgage insurance premiums (both upfront and annual) for the life of your loan. If you put down at least 10%, you can get rid of mortgage insurance after 11 years.

Eligibility requirements include:

  • A minimum 10% down payment for a 500-579 credit score
  • A minimum 3.5% down for a 580+ credit score
  • Borrowing within your county’s FHA loan limits

USDA loans

The U.S. Department of Agriculture (USDA) insures mortgages funded by approved lenders through the USDA home loan program. There’s no minimum required credit score, but a 640 score could help you get approved automatically if you meet employment and income requirements.

Eligibility requirements include:

  • No minimum required down payment
  • Meeting local income limits
  • Buying a home in a designated rural area

VA Loans

The Department of Veterans Affairs (VA) also offers bad credit home loans through approved lenders for active-duty service members, veterans and eligible spouses. The VA doesn’t have a specific credit score requirement, but lenders may require a minimum 620 score. No down payment is required. Additionally, most borrowers will have to pay an upfront funding fee to offset the cost of VA loans to taxpayers.

Eligibility requirements include:

Non-qualified mortgage loans

The loans discussed above are all qualified mortgages, meaning they meet certain requirements that establish a borrower’s ability to repay a loan. There are also non-qualified mortgage (non-QM) loans, which have more wiggle room for high-risk borrowers, such as accepting credit scores below 500.

Eligibility requirements include:

  • Demonstrating your ability to repay the loan
  • A minimum down payment up to 20%
  • A maximum debt-to-income ratio of up to 55%

How to get a home loan with bad credit

Use the following list of tips as a resource to help you get a bad credit home loan.

  • Avoid applying for new credit. A new auto loan, credit card or personal loan application means you’ll have new inquiries on your credit reports, which can drop your credit score.
  • Dispute any credit report errors. Finding and disputing inaccurate information on your credit reports could improve your credit score and help lenders see you as a less risky borrower.
  • Pay your bills on time. Your payment history makes up the biggest chunk of your credit score at 35%, according to FICO. Making on-time payments can help boost your score and demonstrate your creditworthiness as a borrower.
  • Lower your outstanding debt load. Pay down your credit card and loan balances. Lenders don’t want to see that your income is stretched too thin to afford a mortgage. Keep your credit usage below 30% of your maximum credit limit across each of your accounts.
  • Don’t close any accounts. Closing old accounts, especially credit cards, shortens your overall credit history and can negatively impact your credit score.
  • Have your rent payments reported to the credit bureaus. As long as you’ve been maintaining an on-time rental payment history, having your rent payments reported to the bureaus may boost your score.
  • Make a larger down payment. A larger down payment can compensate for a lower credit score. Don’t completely drain your cash reserves, though. Keep three to six months’ worth of living expenses in a savings account for emergencies.
  • Pay for mortgage points. If you have the extra cash, consider buying mortgage points to lower your interest rate and overall loan costs. One point is equal 1% of your loan amount and can lower your rate by up to 0.25%.

Should you get a bad credit home loan?

Home loans for bad credit come with more risk for lenders, so you can expect to pay more as a borrower. Crunch the numbers with a mortgage calculator to help you determine whether to move forward with a bad credit mortgage or wait until your credit profile improves.

Here’s an example of how your credit score can affect your costs on a 30-year, fixed-rate mortgage:

 620 credit score760 credit score
Mortgage rate4.84%3.25%
Loan amount$200,000$200,000
Monthly payment
(Principal and interest)
$1,054.17$870.41
Total interest cost$179,501.82$113,348.55

As you can see, improving your score from “fair” to “very good” could amount to a mortgage payment that is nearly $184 less each month, saving you more than $2,200 each year and more than $66,000 in interest over the term of your mortgage.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

By clicking “See Rates”, you will be directed to LendingTree. Based on your creditworthiness, you may be matched with up to five different lenders in our partner network.