How Millennials Have Changed Mortgage Shopping

millennials first house Perspectives

How Millennials Have Changed Mortgage Shopping

Tech Savvy Mortgage Millennials

You’ve probably seen us mention (multiple times) that Millennials are the single largest segment of home-buyers in America.

It’s still true. For the 4th consecutive year, Millennials were the largest group of home buyers (34%) according to NAR’s 2017 Home Buyer and Seller Generational Trends study. By comparison, baby boomers were only 30% of buyers. Additionally, Millennials represented 45% of the purchase loan volume in the first three months of 2017.

However, the differences between Millennials & Baby Boomers on how they search and shop for a mortgage lender are drastic.

What Differences Separate Millennial Borrowers from Baby Boomers?

When studies or data on “Millennials” is cited in reference to real estate, many of these “Millennials” do not feel like the term is the best fit or description, as they are 29-36 years old. A large percentage of this population only had a flip-phone in their teenage years, and didn’t get a “smartphone” until their adult years (remember, the 1st iPhone came out in 2007).

However, this Millennial or “Xennial” group has integrated technology into their daily habits. When it comes to mortgage shopping, their first action is not to call a real estate agent or ask their parents –> they go to Google.

Millennials are more likely than older adults to shop around for a mortgage and compare apples-to-apples rates: 86% of 18-34 year-olds shopped around for a loan vs. 75% of 35-54 year olds and 55% of those 55 years and older, According to a Survey of adults in 2016 by Ipsos on behalf of Zillow,

This is why 90% of new prospective homebuyers will use online resources to research homes and the mortgage process before they speak to a real estate agent, mortgage broker or lender.

Millennials Are Actually Comparison Shoppers

Millennials are far more willing to obtain multiple quotes from lenders vs. Baby Boomers or Generation X – on average, Millennials obtained 6 quotes, vs an average of 4 quotes by Gen X shoppers and 3 quotes by Boomers. Websites like Kayak, Yelp!, and even Amazon have honed our Millennial demographic into savvy comparison shoppers, which is why we started STEM Lending as a way to closely align ourselves with this trend.

Lastly, even though 90% of Millennial purchasers still engage with a real estate agent, Redfin data shows that 73% of millennial sellers try to negotiate with the listing agent for a lower commission, compared to 44% of Gen-Xers and 24% of boomers. Nearly 63% of the millennials who tried to get a lower commission rate percent reported being successful.

Millennials (18-36) have changed the way individuals shop for a mortgage; they demand transparency, simplicity, and multiple lender options.

Are Millennials Engaging With Traditional Lenders Differently? How?

Since the financial crisis began in 2008, we’ve seen the percentage market share of the mortgage market shift dramatically. To put it in perspective, By the end of 2016, 6 of the nation’s top 10 lenders were non-banks, while banks contribution to new mortgage loans fell to 21%, according to The Washington Post. Keep in mind that as recently as 2011, 50% of all new mortgage money was loaned by JPMorgan Chase, Bank of America and Wells Fargo.

Banks No Longer Make the Bulk of U.S. Mortgages

As lenders have changed, so have consumers, and their behaviors. Millennials have reported a higher willingness to switch banks (A recent Accenture study showed 18% of millennials switched their consumer bank partner within the last 12 months).

Millennial Expect a Digital First Mortgage Process

Whether a preference for technological automation, or the desire to educate themselves online first to narrow the knowledge gap, Millennials’ expectations when engaging with mortgage brokers or lenders demands the following:

  • Seamless user experience enabled by technology 
  • Trust through transparency on pricing and fees
  • Honest, transparent communication from mortgage experts 
  • Educational tools for customers with a longer lead time until they buy

Millennials want a parallel track –> they want a seamless process that can be 100% online, and a mortgage product expert ready and able to step in to provide concierge level help should they have a question.

Trust through transparency means having a bulletproof platform where a customers’ personal information will reside, should they need to work on their application in chunks over a period of days or weeks.

With apps like Acorns, Clarity Money, and now Rocket Mortgage, today’s mortgage shoppers expect to be able to access all their information digitally, even if the application itself still happens at home on a desktop. Companies like STEM Lending who can integrate with third party vendors such as Plaid, Finicity, and TurboTax to verify income and assets seamlessly, are in the best position.

How Have Lenders and Brokers Responded?

A number of mortgage lenders have created incentives to attract and retain Millennial homebuyers. Chase Bank recently announced it will give 100,000 reward points, to existing credit-card customers who take out a home loan with the bank for a limited time. Capital One offered cardholders earned air travel miles if they purchased property or refinanced their home with the bank. Wells Fargo gave out rebates to cardholders to use for its mortgages and home equity loans. Several other lenders have announced similar programs to launch in 2018. Eagle Home Mortgage, a mortgage lender and a subsidiary of Lennar, also recently announced a new mortgage program that will help homebuyers pay off their student debt, by directing up to 3% of the purchase price to pay their student loans, with the caveat that they buy a new home from Lennar.

At STEM Lending, as a leading online mortgage broker, we will work with you to understand your specific financial situations, your priorities in the homebuying process, and find you the best mortgage rate, regardless of lender. Explore your options on our website, here: https://www.stemlending.com/apply/