Can You Really Buy A House Without Selling Your Crypto? | Vishal Garg

Better.com founder Vishal Garg estimates the US mortgage industry spends approximately 12,000 dollars to originate a single loan, with roughly 9,500 dollars of that being labor cost, and that US households collectively lose around 450 billion dollars per year to the mortgage document manufacturing process. Banks exited the market after post-crisis compliance pushed their per-loan cost to 15,000 dollars, and even large non-bank lenders like Rocket still spend around 12,000 dollars because they run linear processing platforms that pass loans sequentially through six or more roles. Better's marginal cost to originate is under 2,000 dollars, and its total direct-to-consumer cost is about 6,000 dollars, of which roughly 4,000 dollars is customer acquisition, leaving approximately 2,000 dollars in profit per loan sold to investors at a 2 percent premium.

Better has originated 110 billion dollars in mortgages since its 2014 founding and is currently running at approximately 8 billion dollars in annualized volume, roughly doubling year over year. The company deployed AI loan officers, processors, and underwriters that compress underwriting time from 21 or more days to minutes. Garg argues AI disruption in mortgages operates at the reasoning, communication, and orchestration layer rather than the underwriting layer, because underwriting rules are preset by Fannie Mae, Freddie Mac, FHA, and VA. He describes the bulk of what the approximately 550,000 licensed mortgage workers do daily as stare and compare work, making the industry highly susceptible to AI replacement. Better's AI can also calculate precisely which debts a borrower should pay off to raise their credit score enough to reduce their mortgage rate, which Garg frames as delivering top-one-percent financial advice to the other 99 percent of Americans.

Better executed what it describes as the first Fannie Mae eligible Bitcoin-backed mortgage funded via a Coinbase account. The product lets borrowers pledge Bitcoin or USDC on Coinbase custody in lieu of a cash down payment, with no margin calls as long as mortgage payments are made on time, analogous to how lenders do not margin call on home price fluctuations. A couple in Michigan received a 6.5 percent fixed 30-year rate on a fully financed home using the product. Garg contrasts this with competing crypto mortgage products that require pledging 100 percent of the home value in crypto and carry margin call features. He notes that if the pledged Bitcoin appreciates more than 8 percent per year, the Bitcoin effectively pays for the house. Better is already in conversations with large ETF providers and S&P 500 companies to expand accepted collateral to any tokenized asset, including stocks, bonds, currencies, and commodities, and says Fannie Mae and Freddie Mac have signaled support for tokenized asset collateral.

Better partnered with Sky and Framework to secure access to a 500 million dollar credit line backed by tokenized mortgages, though the facility is not yet live. Garg argues tokenizing a mortgage makes more sense than tokenizing real estate because the mortgage market trades 180 billion dollars a day and a standardized agency mortgage is already a liquid, government-guaranteed instrument. He estimates that short duration capital from Sky could reduce cost of capital by 25 basis points and long duration tokenized capital by 100 basis points, with the combined effect potentially lowering mortgage rates by 50 to 100 basis points and improving affordability by roughly 1,000 dollars per month.

The platform and partnership business now accounts for over 50 percent of Better's revenue, with clients including Credit Karma, Coinbase, Finance of America, and Lending Club. Better's B2B sales team for platform partnerships is three people plus Garg, and he says a new partner can have a demonstrated customer journey within one week of meeting. Garg's longer-term ambition is for the platform business, modeled on Stripe's role in payments, to eventually exceed the direct lending business in size. Every mortgage originated is described as producing two assets: a financial asset and a context graph of cleansed borrower and property data, with Garg's stated goal being clean labeled data on all houses, appraisals, and consumers in America.

Better has publicly committed to breaking even on an adjusted basis by September, roughly three months from the time of recording. Garg stated the company could reach profitability without blockchain but not without AI, and credits a knowledge graph and labeled data collected between 2016 and 2021 as a competitive moat no rival has replicated. He observes that financial services companies have historically absorbed internet efficiencies to lower their own costs while maintaining margins through friction rather than passing benefits to consumers, citing credit card rates at 36 percent today being the same as when Citibank rolled out credit cards in the 1980s. He predicts AI on the front end combined with tokenization on the back end makes money the asset class most disrupted by AI.