Better.com, a New York-based mortgage lending startup, raised $160 million in a Series C funding round on Monday to develop new products, hire new employees and launch new partnerships. Activant Capital, Ping An Global Voyager Fund, Ally Financial, Citigroup, AGNC, Healthcare of Ontario Pension Plan and American Express Ventures joined existing shareholders Goldman Sachs, Pine Brook and Kleiner Perkins in the round.
Better.com, which has raised $254 million to date, is putting new funding towards disability insurance products and growing its partnerships with banks. It’s also hiring engineers and data scientists to develop the new products.
“It’s a $34 trillion residential real estate marketplace, and the entire industry functions as if the internet was never invented,” said Vishal Garg, CEO and founder of Better.com. “The average American doesn’t think about mortgages every day, all day long. They need something like Charles Schwab or Fidelity for mortgages. That’s what we’re building.”
Better.com launched in 2016, and it aims to remove friction from the mortgage application process by getting information directly from customers’ banks, insurance companies and homeowners associations when underwriting loans. Better.com can provide estimates and pre-approval within minutes to borrowers. The company recently launched homeowners insurance, title insurance and a realtor matching platform, and it hopes to launch its life and disability insurance by the first quarter of 2020.
In addition to the data scientists and engineers it plans to hire, Better.com is hiring loan consultants and customer service personnel. In total, the company aims to hire 400 additional people to its current staff of 700 by year’s end, and it hopes to have 2,000 employees by the end of next year.
By digitizing the entire mortgage application process and cutting out loan officer fees, Better.com said it’s able to cut down on costs and pass those savings on to customers in the form of lower rates. The company said it’s processing about $375 million in loans each month. Its services are currently available in 40 states, but Better.com is applying for licenses in the remaining 10.
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In addition to its core products, Better.com partners with large tech companies like Airbnb to allow homeowners to refinance using rental income. The company also partners with banks, including Ally Financial, which use its platform to support mortgage application processes. Garg said the company plans to partner with “many more banks” in the next two years, but he wouldn’t say which ones.
Better.com is part of an ecosystem of digital lenders aiming to improve the mortgage underwriting process, including SoFi, Blend and LendingHome. Garg said the funding will help Better.com differentiate through more customer service reps, noting that the money instills confidence in consumers who might be wary of online lenders.
“We’re better capitalized than the bulk of mortgage brokers in this country,” said Garg. “When consumers think about someone they can trust, part of it is will these people be around.”
Mike Peretz, housing finance practice lead at Capco, said expanding into title and homeowners insurance are natural for a company like Better.com. Winning market share from incumbents and other digital challengers, however, will be a challenge, he added.
“It isn’t about capital necessarily; it isn’t about having the smartest leadership,” Peretz said. “Businesses that become more efficient will be the winners.”