4 benefits of digital asset verification for mortgage

Mortgage lenders have historically faced challenges with asset verification during the underwriting process, including reliance on manual processes and the potential for fraud. Today, open banking technology can connect lenders with faster access to borrower financial data, streamline the verification process, and reduce the risk of fraud. 

Digital asset verification is changing how banks verify assets and calculate creditworthiness, improving the process for borrowers and lenders alike. This change doesn't just help the lender's bottom line and reduce the time to close—it also improves mortgage access to people without traditional credit scores by incorporating alternative sources of financial data. 

Before exploring the benefits of digital asset verification for mortgage lenders, it's important to understand how the process works and how technology changes it.

How does digital asset verification for a mortgage work? 

Digital asset verification provides mortgage lenders comprehensive, fast, and real-time access to a borrower's assets. It achieves this by connecting directly with financial institutions to access bank account balances, assets, income, and other relevant account data like account ownership. Lenders use this information to verify a borrower’s stated income and assets, evaluate risk, and determine if a borrower is creditworthy. 

For example, when a mortgage lender is considering offering a loan to an applicant, they can use traditional asset verification. This includes asking for physical copies of their bank statements, paychecks, and proof of asset and account ownership. However, these documents may be hard to find and require several steps for borrowers. For lenders, they can be hard to read, outdated, or even doctored.

Instead, mortgage lenders like Zillow Home Loans are using Plaid for digital asset verification. This allows borrowers to connect their bank accounts quickly and securely so that Zillow Home Loans can automatically pull real-time bank account and cash flow data, eliminating the need for manual document uploads. By using Plaid, Zillow Home Loans is able to pre-approve 3.2x more loans that have digitally verified assets than with their previous vendor. It also sped up the underwriting process: applications with Plaid are pre-approved 29% faster than those without.

What are the challenges with the verification of assets for mortgage? 

Assets for a home loan are financial account balances and cash holdings that mortgage lenders use to determine if a borrower is eligible for the loan. Assets can also be anything of value that is available to meet a debt, meaning they can be sold to recover the loan if required. 

Gaining access to the documentation to prove assets exist and are owned by the borrower can be a long, complex, and tedious process. Borrowers may have to request physical copies of statements from multiple banks and then find ways to share them with their lender, a process that takes multiple steps. Sometimes, they may turn in the wrong documents and need time to resubmit the correct documents. 

Digital asset verification, however, is faster and easier to navigate—allowing lenders to offer mortgages to a broader range of customers and reducing the time and effort needed to process mortgages. Typically, this can be done in one simple step.

According to Freddie Mac, mortgage lenders believe that fully digitizing the mortgage process can help reduce costs by up to 40%.

Digital asset verification vs traditional asset verification of mortgages

Digital asset verification is changing the mortgage industry in significant ways, as leading mortgage lenders now utilize a seamless digital loan application and onboarding experience. Digital asset verification makes the process faster and easier for customers.

This shift towards digital asset verification is occurring because borrowers have come to expect more streamlined, simplified processes. Traditional verification requires borrowers to obtain specific documents independently and then share them—an inefficient process. 

If the documents are rejected by the lender (for example, if they cover the wrong date ranges, have missing pages, or aren’t signed and dated), the borrower must find the correct documents and resubmit. Even when there aren’t hiccups like this, it’s a long, difficult process for both the lender and the borrower. 

With digital asset verification, borrowers link their bank accounts with lenders using their login credentials (username + password) and instantly share their data via a secure API. Plaid’s digital account linking experience has been used by 1 in 2 US bank account holders—and is up to 23% more successful when compared to other providers.

This enables the lender to access the information they need quickly. It also gives the lender access to single source data directly from the bank or financial institution—allowing them to better assess their risk. 

Digital asset and income verification for mortgage loans saves significant time and effort, which can lead to higher loan funding rates while providing a better customer experience. 

Watch the video below to see how mortgage lenders can verify income and asset information in seconds.

What are the benefits of digital asset verification for mortgage lenders? 

Digital asset verification is quickly becoming a common method for mortgage lenders to verify assets during pre-approval, underwriting, and the closing process. That is because the process is beneficial to both borrowers and lenders. 

Borrowers no longer have to locate multiple documents, verify their accuracy, and submit (and often resubmit) documents to lenders. Instead, they simply connect their bank account to the lender portal during the loan application process. What once took hours or days now takes minutes. 

For mortgage lenders, digital asset verification offers additional benefits, including:

Improved accuracy 

Digital asset verification gives lenders a holistic view of a borrower's financial data, including current income, asset ownership, and transaction history. Using Plaid, lenders can see up to two years of financial data and current account balances, allowing them to quickly verify if the borrower has the funds to cover the down payment and the income history to make monthly mortgage payments. 

Additionally, lenders can access cash flow data and insights to understand borrowers' financial stability and potentially expand credit access to traditionally underserved borrowers. 

Digital verification also makes it easier to confirm income from other sources, such as investments, gig work, or self-employment. Verifying these forms of income is often a difficult process, which may prevent those borrowers from obtaining a mortgage. 

→ Want to verify transaction history, account balance, and account ownership faster? Plaid’s credit solutions provide an up-to-date view of a borrower’s bank accounts, assets, and income.

Faster loan processing

The traditional asset verification process can take days or weeks, especially if documents are denied and must be resubmitted. Digital asset verification happens in minutes, allowing lenders to fund loans faster. Plus, lenders can review financial data in their preferred format, such as a PDF, or through an API to integrate the data into systems. 

Reduced lender costs

In 2023, the average cost to originate a mortgage loan hit $11,600, an all-time high. Digital verification of assets is faster and requires less oversight from the lender, helping reduce origination costs. 

For example, the lender no longer has to invest hours manually reviewing and approving or rejecting documents. Instead, by digitally accessing financial data, lenders can quickly view the data they need in a convenient format rather than combing through pages of bank statements. Reducing the time and the resources required to process a mortgage also means they can close more loans in less time. 

Notably, many types of digital asset verification are accepted by government-sponsored entities. Plaid is a Day 1 Certainty® asset verification report supplier for Fannie Mae’s Desktop Underwriter® and a third-party service provider for Freddie Mac’s Loan Product Advisor® Asset and Income Modeler (AIM).

Reduced fraud risk

Mortgage fraud is a growing issue for lenders. CoreLogic reported an 8.3% increase in fraud risk in 2024. Fraud occurs when borrowers lie about their identity, income, or rent assets to obtain more favorable loan terms or larger loan amounts. 

Digital asset verification reduces the risk of mortgage fraud by providing lenders with direct access to financial data. This allows lenders to see exactly when and where the money came from and determine if the borrower represented their assets truthfully. As a result, lenders can better analyze their risk and extend credit to truly qualified borrowers. Similarly, digital identity verification can make it easier to ensure borrowers are who they claim to be. 

→ Need to fight loan fraud while handling KYC? Plaid Identity Verification meets KYC requirements, reduces fraud, and is the lowest friction ID verification experience available.

Digital asset verification takes mortgage lending into the future 

Fintech lenders are changing the way consumers borrow money and how lenders determine creditworthiness. These changes are more than just an easier way to process loans. Using technology to verify assets and incorporating cash flow data into decisioning models can help expand access to mortgages, helping consumers with a thin credit file or lower credit score build generational wealth through home equity. 

Lenders benefit from digital asset verification as well, through lower costs, reduced risk of fraud, and faster close times. They also gain access to a larger market of creditworthy consumers.