Shelter is a basic human right. It’s right next to food and water in Maslow’s Hierarchy of Needs.
From this, it goes without saying that buying a home is one of the core purchases we will make during our lifetimes. Many people consider owning their own home to be one of their greatest achievements.
Vacations, buying a new television, starting your own business, buying a new car, and even sending your kids off to college are all optional expenses. But having a safe place to live is a necessity.
Very few people are able to buy a house outright. This means that for most people, aside from living with friends or family, the only options for finding a suitable place to live are either renting a house or taking out a mortgage. In the US, 65% of homeowners have a mortgage.
So, if this is the case, why is buying a house so difficult?
Why is it So Difficult to Get a Mortgage?
If you’ve ever tried to get a mortgage, you know how lengthy and tedious the entire process can be. To even get your application considered, you need to endure a ton of tedious paperwork and overhead costs.
As well as being extremely expensive, this can end up sapping up a considerable amount of time for everyone involved. This is a huge problem when the process continues to require the involvement of so many parties.
In addition to requiring an extensive amount of time from both the lender and the borrower, taking out a mortgage loan requires input from rating agencies, appraisers, brokers, and various other financial institutions.
Finally, one of the most bizarre parts of the entire process is that despite the fact that the vast majority of other financial areas have shifted over to digital, the mortgage process is still largely paper-based.
Simplifying the Process Using Blockchain Technology
As a distributed ledger system, the blockchain might just provide the perfect solution to our problems by simplifying the transfer of and access to information between parties.
The blockchain is a trustless, transparent, immutable system that is pushing forward the digitization agenda in virtually every industry imaginable.
Blockchain startups like Homelend are using blockchain technology to disrupt the mortgage industry and help users to crowdfund their mortgage loans without relying on banks.
The team behind the startup aims to open up new peer-to-peer funding and investment opportunities, provide better managing information, and automate cumbersome business processes through the use of smart contracts.
The platform will also give users the opportunity to fund the loans of other users and get a predictable return on their investments.
All actions will be carried out on a single platform. As well as making the process of getting a loan significantly faster, this model will also eliminate the need to chase and mediate all of the parties involved in the mortgage application process – it can now all be done in one place.
Homelend is developing three key peer-to-peer lending methods: crowdfunding, pooling, and auction.
The crowdfunding method will enable potential lenders to find investment opportunities. The pooling method will enable lenders to invest money through smart contracts before the specific mortgage loan to be financed has been pre-approved. Finally, the auction method will allow lenders to offer borrowers better conditions than those that have been pre-approved by the platform.
In each of these methods, the flow of financial resources will be fully controlled by smart contracts, eliminating the need for middlemen to oversee the process.
Reinventing the Future Through Smart Contracts
Smart contracts are nothing more than code stored on the blockchain. However, it’s becoming increasingly clear how important they are becoming to the future of our society.
Having the ability to facilitate the performance of credible transactions without the involvement of a third party would be a significant step forward for many organizations, and would save a lot of time, money, and effort.
Fortunately, the technology is developing extremely fast, and it’s only a matter of time before many of these possibilities become a reality.
Smart contracts will soon become a key feature of our everyday lives.
Images courtesy of Homelend, Shutterstock