Better.com announced Thursday that it’s launching fully digital U.S. Department of Veteran Affairs (VA) loans through its Tinman platform. The product, which has no minimum down payment requirement, is expected to reach about 10% of the lender’s portfolio in 2024.
“We’ve been working toward launching a VA product for the past two years,” Vishal Garg, founder and CEO of Better, said in an interview with HousingWire.
“We were focused on being able to take a consumer all the way through on our technology platform for just the conventional loans, and we achieved that milestone back in the summer of 2023. Then, once we were able to take the consumer from click to closing on Tinman, we were then able to start working on adding loan types to the process flow.”
Eligible U.S. veterans, service members, National Guard and Reserve members (and in some cases, veterans’ spouses) can qualify in all 50 states for up to 100% of a home’s purchase price with no down payment. Better’s rate for VA loans was 6.375% as of Tuesday afternoon, the company said.
Garg expects that “a large percentage” of VA loan applicants through Better will also be able to qualify for the company’s One Day Mortgage program, which was launched a year ago and allows customers to apply for a mortgage, get preapproved, lock their rate and receive a commitment letter within 24 hours. Garg said this will be one of the company’s competitive advantages in the VA space.
Conventional loans account for 95% of Better’s portfolio, with the remaining 5% tied to other products such as jumbo loans. The lender’s overall production fell from $57 billion in 2021 to $11 billion in 2022. In third-quarter 2023, it posted mortgage volume of $731 million, down from $900 million in Q2 2023 and $1.1 billion in Q3 2022.
“VA loans are 12% of the mortgage market,” Garg said. “So, we are hoping that we can get to the industry average, at least having 10% of our volume to be VA loans in 2024.”
Better has a small team of employees dedicated to VA loans, which Garg said will grow in correspondence to the company’s market share in the segment. He did not disclose the current size of the team. The VA team reflects a different strategy for the company when hiring employees, Garg added.
“More recently, we’ve been hiring loan officers, processors and underwriters as the company has been starting to grow,” Garg said. “The loan officers we’ve been hiring are industry experts that we’ve been bringing onto our platform, rather than the traditional noncommissioned loan officers that we used to hire in the past and who used to be usually people who had never worked in the industry.”
Better had to adapt its operations to a different workflow for VA loans, which have different forms, including veteran status checks. The company will target customers online and via social media to work with its fulfillment center. The plan is to distribute the product through its network of partners as it scales.
Looking ahead, Garg expects the Tinman platform to expand to Federal Housing Administration (FHA) loans, nonqualified mortgages (non-QM), home equity lines of credit and other consumer finance products unrelated to home lending.
Better Home & Finance Holding Co., the parent of Better.com that went public in late August, is struggling financially. The company posted a loss of $340 million in the third quarter. Its stock was trading at $0.58 on Tuesday afternoon and the company is at risk of being delisted at Nasdaq. Garg declined to comment.
“All I can say is that it’s great to have over, you know, the $530 million of new capital that we raised; it is incredibly powerful in a market where mortgage companies are very thinly capitalized and don’t have the room to invest in growth coming ahead,” he said. “And so we’re very excited for what is coming next.”
