Most analysts say interest rate hikes and home price increases have ended the seller’s market of the past few years, which was fueled by low interest rates and extremely low inventory of homes for sale, leading to quick sales and rapidly rising prices as buyers fought over the few homes available.
The shift to a buyer’s market is putting a squeeze on underperforming mortgage lenders after a difficult 2018 yielded negative profits for lenders for the first time since 2014, according to a recent HousingWire.com article.
Millennials and Gen Y buyers (ages 37 and younger) accounted for 36 percent of home purchases over the past year, according to the National Association of REALTORS® (NAR). These young buyers will likely continue to drive the market and make an enormous impact on the bottom lines of traditional mortgage lenders.
If you’re a traditional lender, what does this mean for you? Younger buyers often start their search online, so it’s essential that you highlight your strengths to banking customers before they actually go online to shop for a home – and get inundated with pre-qualifying offers from online mortgage lenders, fintechs and big technology firms offering mortgages.
With that in mind, here are Five Things Millennials Want from a Mortgage Lender:
- An Online Introduction – Using the internet to look at homes is the first step in the purchasing process for 42 percent of homebuyers ages 37 and younger, according to the NAR’s 2018 Generational Trends Report. Another 9 percent of buyers in the same age group contacted a bank or mortgage lender as their first step in buying a home. An appealing, up-to-date web presence is a vital necessity for lenders. Your website should be optimized for online search engines so you and your contact information appear near the top of results for buyers using internet search engines to find local mortgage lenders. Consider asking satisfied customers to provide testimonials and reviews that you can add to your website.
- Help and Guidance – After finding a home, Millennials and Gen Y survey respondents say the toughest part of the actual purchase is “understanding the process and steps,” an issue cited by 27 percent of buyers in this age group. This presents an opportunity to showcase your experience and the guidance you can provide, but be proactive: Educate customers about your mortgage capabilities long before they begin a home search. Establish a friendly presence using social media, where you can offer advice and resources to Millennials and Gen Y buyers with questions. Promote your mortgage expertise through regular messaging, advertising and by presenting frequent first-time homebuyer seminars.
- Automation Combined with Personal Service – While Millennials want to be able to call on an expert with questions, they also want an experience that’s largely online and provides a depth of information. In addition, these Millennial and Gen Y homebuyers also have a different communication style than previous generations, preferring the immediacy of texting and emails to making and receiving phone calls. When you get an email from a new homebuyer, it’s likely they’d like your initial response to be with an email in reply. From there, you can learn their preferred style by asking “Would you prefer that I text or call when I have an answer for you?”
- Education – Millennials exhaustively research subjects before committing. Just look at Amazon.com’s volumes of product reviews and comparison tools. Young buyers want access to as much information as possible, preferably through a phone or tablet. In the NAR’s Generational Trends Report, 99 percent of Millennials and Gen Y used the internet in their home search and 82 percent used mobile or tablet devices. Make sure the information you provide is in a format accessible through multiple platforms.
- Comparisons – Millennial shoppers are accustomed to ordering airline tickets from sites that show the prices of every carrier’s flights. When it comes to mortgages, they’re far more likely than older buyers to obtain multiple quotes from lenders. With this in mind, it’s likely these customers will request (or expect) multiple options for down payment amounts, types of mortgage insurance and other loan elements. Equip your website with the tools to make these types of comparisons easy.
The one thing you don’t have to worry about is selling Millennials and Gen Ys on the advantages of buying a home. In the NAR survey, 86 percent of buyers 37 and younger view a home as a good financial investment, which is a higher rate than for Baby Boomers and other older buyers. These attitudes will only strengthen as more of these young people begin to move into their mid-30s, start families and see their financial resources grow. The key is to make potential buyers aware of the resources you offer before they start the buying process.