With faster loan approvals, Guaranteed Rate is likely looking to gain a competitive edge in home loans. If it can gain a reputation for offering the fastest approvals in the business, it will provide useful differentiation in a crowded field.
In the current Forbes Advisor guide to mortgage lenders, Guaranteed Rate is one of nine – including Rocket Mortgage – that each received 4.5 stars out of a possible 5. Four lenders received a full 5 stars, JPMorgan Chase and PNC Bank among them.
With the time saved, buyers can “move on to the fun parts of buying a house,” like choosing paint colors and sofas, Anastos said.
More importantly, buyers do not need to enter a lien situation into the offer, making their terms appear significantly stronger to a seller who is evaluating the offer or comparing it to other offers.
This can prove especially useful when going up against cash offers, because it makes a quicker closing date, one of the advantages of selling to a cash buyer, more possible for a mortgage buyer.
“You can tell the sellers, ‘Not only are we super interested in your house, we’re ready to close,'” Anastos said. “It gives you speed” and the seller increased confidence in the offer.
Although it was announced today, the speed improvement was already in use at the guaranteed price. The press release says Guaranteed Rate has delivered more than 3,300 one-day mortgage approvals, for loans totaling $1.1 billion.
About 30% of home purchases don’t need an appraisal, Anastos said. For them, the “ready to close” signal can now be immediate, instead of the usual 15 days.
For the rest, getting an appraisal, which typically delays the “ready to close” signal for 25 to 30 days, “is now five to seven days,” Anastos said. He based this figure both on the quick approval loans Guaranteed Rate made before today’s announcement and on the fact that because the real estate market is slow now, appraisals can be quickly lined up.
Two Chicago realtors told Crain’s the change is impressive. None of them are associated with a guaranteed price.
“It’s incredible,” said Kim Kerbis, a @properties Christie’s international real estate agent.
“It’s great for the buyer and for the seller because they’re not sitting on pins and needles waiting up to four weeks for the clearing to close,” Kerbis said. “This will take so much stress and anxiety out of the process.”
Mario Greco of Berkshire Hathaway HomeServices Chicago agreed with Kerbis. “If you could offer to close in a couple of weeks, that would be great,” Greco said.
Some sales will still be slow, Greco said. Among them are apartment sales, where the process of getting all the housing association documents is often a thorny time, and properties where the sellers are in no rush because they haven’t found their next home yet.
“So I wouldn’t say it’s the silver bullet,” Greco said, “but it’s a very positive change.”
Greco said he wasn’t surprised to see it come out of Guaranteed Rate, “because they’ve always moved faster than other” lenders.
Launched in Chicago in 2000 by Victor Ciardelli, who remains on board as CEO, Guaranteed Rate was reportedly the nation’s third-largest mortgage broker in 2020. The firm ranked No. 23 on Crain’s April 2022 list of the largest privately held companies in Chicago, with over 3 .2 billion dollars in revenue. Of the more than 12,600 employees, about 5,400 are in the Chicago area.
Guaranteed Rate follows the lead of Rocket Mortgage, which in 2021 introduced a program called “overnight underwrite.” According to John Perich, the Detroit-based Rockets public relations director, it guarantees that if clients submit their paperwork for a purchase application by 19:00, they will receive a fully confirmed approval by morning.
Guaranteed Rate estimates that about 70% of borrowers will qualify for the expedited approval process. It is essentially an improved version of the now familiar pre-approval that almost all mortgage buyers seek. Buyers provide income and credit verification and other details to get pre-approved before shopping for a home.
Now, Guaranteed Rate can add the information about the specific home buyers choose “and get you approved,” Anastos said.
Designing the process reverses the mortgage industry’s longstanding habits.
“Historically, the industry has looked back from the closing date and said, ‘We don’t need to prioritize the loan because we have two or three weeks,'” says Anastos.
“That two to three weeks is difficult for the consumer,” Anastos said. “We work from the other (direction) and use technology to accelerate the loan.”