Meeting the unique needs of millennial borrowers will enable mortgage lenders to expand lending to this generation of homebuyers, experts say.
The millennial market is expected to grow in coming years as more of the estimated 83 million millennials — those born between 1981 and 2000 — enter their prime home-buying years.
But the millennial generation, now the nation’s largest, differs in significant ways from baby boomers, who make up the second largest group.
Millennials are far more likely to use the Internet to search for their properties and shun traditional advertising strategies, according to Darius Mirshahzadeh, CEO of The Money Source, Inc., a national technology-driven mortgage company.
One winning way for mortgage lenders to approach these borrowers is with a values-centric approach, said Mirshahzadeh, who wrote an article for ChicagoAgent Magazine about adapting the mortgage industry to the millennial marketplace.
“The puzzle of marketing to millennials won’t be solved with spreadsheets and numbers. Mortgage lenders need to look for an emotional hook based on values,” he wrote in the article.
“Millennials have grown up suspicious of marketing claims, and they are even better than their elders at sniffing out the fake and disingenuous,” Mirshahzadeh wrote. “The way to appeal to values through marketing without looking fake is by not being fake.”
Embrace social media
Mortgage lenders should embrace social media to communicate these values, according to Aaron King, founder and CEO of Snapdocs, a loan closing automation platform for the mortgage industry.
Companies doing well with millennials “have crafted genuine, transparent brands and have embraced social media as a channel to convey their values and earn trust,” King said.
“The mortgage process can be stressful, so the players that use social media to illustrate their dedication to transparency, convenience and authenticity will absolutely set themselves apart,” he said.
Technology, especially mobile, is one of the best ways to capture millennials’ attention, experts say.
“Millennial consumers are accustomed to having groceries ordered online delivered to their doorstep, finding a popular nearby restaurant while sightseeing, and dispatching a car to the nearest corner with the tap of a screen,” King said.
“Convenience, ongoing communication and transparency via the channels millennials prefer, particularly mobile, are indispensable for creating a positive borrower experience with this younger generation,” Aaron King, founder and CEO of Snapdocs
Lenders can connect by offering remote mortgage loan closings facilitated by a mobile notary and more personalized experience outside of a local bank branch or title office such as at a coffee shop, a library or even the borrower’s own home.
“Out-of-office mortgage closings offer the convenience that millennials expect, but that the mortgage industry has yet to fully embrace,” King said. “A lender making it known that they offer mobile closings can be a valuable differentiator.”
Communicating via telephone and email is no longer enough, according to Heather McRae, senior loan officer, Chicago Financial Services, Inc. “Texting, the use of online document storage sites like Dropbox, providing electronic signatures through companies like Adobe, DocuSign, and Dot Loop are all necessities these days to work with millennials,” she said.
Lending companies also need to be transparent and convenient since ambiguity or difficulty can result in the loss of a client, said Sacha Ferrandi, founder, Source Capital Funding, Inc., a lender based in San Diego.
“This is especially true when there are several competitors that can be found with the click of a few buttons on the phone,” she said. “Just as the travel industry and insurance industry have become more convenient through both online and in-person interactions, we believe the lending industry will soon follow suit.”
According to the National Association of Realtors, the median age of millennial homebuyers in 2014 was 29. The typical home was 1,720-square feet with an $189,000 price tag.
Millennials tend to prefer a smaller footprint.
“It used to be ‘What do I qualify for?’ Now, people say, I don’t want to pay over this amount,’” said Ken Maes, vice president of Skyline Home Loans, based in Clackamas, Ore.
Millennials look for a combination of features when buying a home, including urban, walkable locations, a strong creative, ample local businesses and good schools, experts say. Around age 30, millennials increasingly move to the suburbs.
Many millennials are getting help to buy homes from older relatives who are providing down payments as gifts. In other cases, millennials are purchasing homes as investment properties, Ferrandi said.
“It seems like they have the energy, time and money to buy an investment property, remodel it and flip it to sell,” he said. “This is a big part of the real estate market now.”
Clear values and communication, transparency and convenience during the mortgage process will drive growth for mortgage lenders.
Mirshahzadeh said lenders also need to provide millennials with personalized attention.
“They want to be assured they are special, and that their journey to homebuying is being addressed with care and attentiveness,” he said.
Freelance writer Robin Farmer contributed to the writing and research of this article.