In a generation with instant access to information, online and at their fingertips, how do you get their attention? Millennial homebuyers are looking for more than a sales pitch. The best way for a mortgage lender to reach this younger generation of buyers is by understanding their needs first.
How to identify what millennial homebuyers are looking for
Cornerstone Home Lending, has been serving borrowers for almost 30 years. That adds up to three decades of experience we can use to examine the changes in our borrowers.
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Millennials buyers are different. Consider adapting your lending practices to meet millennial borrowers halfway:
1. Make communication top priority.
At the median age of 33, roughly six out of 10 first-time homebuyers are millennials. Millennials are also the most likely of all buyer age groups to negotiate with their real estate agent about commission. What does this say about the millennial buyer? They have easy access to information (in this example, the need to negotiate), which they’ll use to their benefit throughout the homebuying process.
Millennials also want easy access to the professionals on their homebuying team — their realtor and their lender — when they need it. Speaking the language of the millennial homebuyer doesn’t mean that we as lenders need to be clever or trendy. We simply need to give them what they are asking for: an easy way to contact their loan officer using their method of preferred communication. This is most likely text, as well as social media and email. Notoriously, millennials hate phone calls. About two-thirds of 18 to 29-year-olds text frequently.
2. Keep it personal.
Tech-based communication is critical for lenders to use to build relationships with the information generation. We created our LoanFy app to offer this complete mortgage experience, seamlessly connecting the borrower with their loan officer from any location. Using LoanFly can speed up and simplify buying a house for millennials and for all buyers. Our app allows the borrower to prequalify quickly online, track and upload loan documents remotely, and often own within 10 days. The success of LoanFly hinges on seamless communication. Millennial homebuyers who download and use our free app to stay in touch with their loan officer can get important questions answered anywhere they happen to be.
Younger buyers value personalized service as much as any other generation. A loan officer who assumes millennials prefer doing everything online misses a great opportunity. Millennials use technology daily. Yet, they’ll still pick a real person when they need help making the right choice in a home loan.
What does real-person communication look like when meeting with the millennial buyer? A loan officer who gets good at running multiple scenarios can provide a young borrower the information they need to decide between multiple loan products that fit their needs. As a loan officer, loan originator, or lender, you have the expertise. You set the scene and help a millennial borrower to see the loan product options with their own eyes to verify what’s right for them.
Millennial buyers who are ready to get the ball rolling can get prequalified fast. Our free LoanFly app offers the complete mortgage experience.
3. Offer transparency.
Millennials value transparency over salesmanship. In translation, never overpromise a loan product to a millennial buyer you are not able to deliver.
Millennial women from ages 18 to 34, also a group called “millennial moms,” may be the buyers who value transparency the most. Label Insight’s 2016 Transparency ROI Study was conducted on food products, but its results apply to all industries — especially lending. Younger borrowers are attracted to transparency and will seek out an honest lender above all competition.
4. Give free financial education.
Currently, millennials have the bleakest forecasted financial future. Millennials are not cash-rich. Millennials now make 20 percent less on average than what their parents did. Almost half of millennials have used a credit card to pay for their basic necessities.
Understanding millennial homebuyers’ financial needs and offering well-planned solutions can bridge this gap. A loan officer should:
- Explore inexpensive lending products with lower down payment options. Millennial first-time buyers often find the prospect of a down payment intimidating. To sit down and express to a young, new buyer that everyone’s financial situation is unique — and suitable loan programs are presumably available — can ease their fears right out the gate.
- Learn how to work with higher debt ratios. Carrying too much debt is the number one homebuying setback for struggling millennials. Fannie Mae’s recent DTI changes from 45 to 50 percent provide direct benefit to these new buyers (in effect as of July 29, 2017).
- Educate millennials on how to leverage their home purchase for overall financial health. Many millennials saw their parents lose their homes during the Great Recession and are not keen on making the same mistake. Most millennial buyers are very cautious when taking on a mortgage loan.
- Remain open to working with parents as co-buyers. 40 percent of millennials get financial assistance from their parents.
“We exist to use and improve upon our God-given talents to make a positive difference to the lives of our Team Members, customers, shareholders, and the people who provide services to us.” – Read more about the Cornerstone mission here.
*Cornerstone and its affiliates do not provide financial advice.
Providing accurate, detailed financial education as part of a home lending package gives millennial buyers a service they may not find anywhere else.
For younger millennials, their biggest hurdle may be credit history. A LexisNexis® whitepaper explains that many young adults’ financial health is on the decline because they can’t get enough credit to buy a house and begin building their wealth. Millennials buyers are facing pressure on all sides. So, understanding how to use alternate credit-building programs like FHA is useful. Educating younger buyers about building credit with secured cards can help them buy at a later date. Thorough financial education can also protect against the common phenomenon of “new buyers’ remorse.” With the guidance of a loan officer, a millennial buyer will know exactly what they are getting into and feel confident in their decision.
Millennials are looking to save time and money, and they want support from a trustworthy, knowledgeable lender. This may be a generation that’s no longer on the hunt for the “bottom line” mortgage rate. The extras matter too. A mortgage lender that can do it all in-house offers even more value to younger buyers. A lender that provides education and access to hundreds of nationwide loan products, along with in-house processing, underwriting, and funding, can offer millennial buyers the assurance of closing on time.
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources are deemed reliable but not guaranteed.