Millennials and Gen Zs are entering the housing market and are the largest customer base in the mortgage industry. With many in this age demographic coming in as first-time home buyers, local lenders must be cognizant of why they want to buy a home as well as what has kept them out of the market previously. This understanding can help these lenders support a growing pool of borrowers and ultimately drive volume in a challenging market.
To truly understand this cohort, lenders must look beyond the stereotypes of these generations. Millennials and Gen Zs are often pigeonholed as having low homeownership rates, poor financial habits, and a heavy reliance on digital technology. While those aspects may provide some background, they do not tell the full story necessary for lenders to help turn these home buyers into homeowners.
We recently surveyed more than 1,000 millennials and Gen Zs regarding their feelings towards the home-buying process. The result is our 1H 2022 Millennial & Gen Z Borrower Sentiment Report, which digs into the motivations, challenges, goals, and lender preferences of today’s prospective borrowers. The good news? A significant segment of those surveyed, 38%, are ready to begin the lending process in the next six months. That means there’s opportunity to capture substantial borrower business—and that lenders should act now to reach these borrowers.
Why do they want to buy?
High prices in the rental market are one of the leading motivations for millennials and Gen Zs to buy a home in the near future. More than half of respondents in the Maxwell survey claim that they want to buy a home because rent is too expensive. With 45% of that group currently renting, the desire to own a home is gaining momentum.
Coupled with a surging rental market, this generation views homeownership as a means to build wealth and equity, securing their own financial future through investment in a home.
What stands in their way?
While millennials and Gen Zs want to enter the housing market, they may not be confident in their ability to buy a home, both due to their finances and their knowledge of the market. About a quarter of millennial and Gen Z adults don’t feel confident about securing a mortgage due to financial hurdles, and almost half (45%) think that the mortgage process is overly expensive. Another third of the group finds the mortgage process confusing and difficult to understand.
Savings for down payment and closing costs, high debt and debt-to-income, and a lack of confidence in their credit history are all concerns for potential borrowers in this age bracket. Adding to financial concerns, some millennial and Gen Z adults worry that a lack of financial savviness may impact their ability to find and obtain a home loan. More than a quarter (27%) feel that they have “very little” or “no” knowledge about the mortgage process. These types of concerns are valid and represent key factors in purchasing a home. They also open the door for local lenders to offer support in the process.
How can local lenders help?
With a massive segment of the customer base ready to buy but unsure of their fitness to make a purchase, local lenders can step in and give support, something that is very much welcomed within this group. Personal support, a hallmark among local lenders, is important to this demographic with more than 78% indicating that personalized service is important to them.
So what does this mean? Offering borrower education through online content, pricing and rate comparison tools, and one-on-one counseling can go a long way towards building trust and knowledge within millennials and Gen Zs. An approach that combines online tools with face-to-face options can position a local lender as an advisor while also generating new business.
In addition to borrower education, lenders should keep an eye on their product offerings. Delivering products, even potentially new products, that lower the barrier of entry for first-time homebuyers can separate local lenders as a lifeline for young borrowers. Accounting for the financial concerns among this cohort, local lenders have the opportunity to build upon their existing relationships within their communities to provide these potential borrowers with solutions.
Local lenders can improve the process for these potential borrowers by investing in point-of-sale technology to simplify the application process and free up loan officers and processors to deliver the personalized support this demographic desires. Maxwell Point of Sale’s recently enhanced loan application, for instance, features mobile-first functionality by adjusting to any device or screen size without requiring a download. Plus, features like QuickApply™, which autocompletes required fields when borrowers input their zip code and the last four digits of their social security number, make filling out the loan application easy and straightforward. This leads to an over 90% completion rate, removing rote work from lending teams and positioning your brand as modern and customer-forward—attributes every millennial and Gen Z borrower seeks.
Want more insight into millennial and Gen Z borrowers?
Download our 1H 2022 Millennial & Gen Z Borrower Sentiment Report for an in-depth look at our survey results. In the report, you will find:
- Attitudes, concerns, and plans among millennial and Gen Zs in the mortgage market
- Feelings about local, national, and online lenders
- How this demographic is researching the mortgage process
- Insight into desired borrower experience
- Tips for local lenders to effectively reach millennial and Gen Z borrowers
Get your free copy of Maxwell’s 1H 2022 Millennial & Gen Z Borrower Sentiment Report