Millennials have been called a lot of things—the Me Generation, the Selfie Generation, the Boomerang Generation—but they are now increasingly being called homeowners.
In fact, those born between 1984 and 2005 will form more than 2 million new households each year over the next 10 years.1 The generation now makes up the largest percentage of active homebuyers, and a vast majority, 98 percent, rely on financing to make the purchase.2
But despite their growing entry into homeownership, millennials can be a little timid about dipping their toes in the mortgage water—and with good reason, says Amy VandeSand, Director of Consumer Market Research, FVP at SunTrust Bank.
“Depending on how old they are, millennials saw their family members go through the economic crisis and the mortgage crisis,” VandeSand says. “They know people who were affected and heard the aftermath. They’ve been scared away from the process in a lot of cases.”
These first-time buyers are unsure about the buying and financing process and want personalized, individual support from their lenders. They also want to know if this purchase will fit into their lifestyle. And they often have a lot of debt already (think: student loans, for example).
A risk-averse outlook
“Student loans are a huge issue,” VandeSand says. “In some cases, that’s the reason they [millennials] delay homeownership. They don't know if they would be approved for a mortgage, or even want one and can manage it with their loans.”
There are more than 17 million student borrowers in their 20s with a total of more than $376 billion in debt. What’s more, 12 million borrowers from age 30 to 39 have more than $400 billion in student debt.3 This issue plays out two ways: Millennials want to be sure they can afford a mortgage payment on top of their student loans, but they also worry about taking on new long-term debt without fully understanding what they’re getting into.
“When it comes to loans and mortgages, they want advice,” says Bruce McCleary, Client Experience and Loyalty Analytics Manager at SunTrust. “They want to talk to an actual person.”
When working with millennials, VandeSand says it’s important to address the “elephant in the room.” Make sure to fully explain the terms of the loan and the mortgage process, particularly any documents they may not understand. Don’t gloss over the details.
Understanding what they can really afford
Many millennials are also delaying major life events, like purchasing a car or getting married.4 It is partially because of their debt, but it’s also because they don’t see the point in rushing it.
While some millennials are still driven by the emotional desire to fulfill the American Dream of homeownership, others don’t want to do it at the expense of their lifestyle—for example, if they have to forsake a big travel budget. This generation wants a sound investment without being forced to stretch themselves.
“They aren't going in blind,” VandeSand says. “Now, they may not have the right information or enough information, but they are trying to get that information before they move forward.”
Be sure to understand millennials’ current lifestyle and expenses and help them determine what they can afford. Remember, they don’t want to feel too tight: Millennials do actually spend more on restaurants than other generations and are used to having a certain amount of disposable income, so affordability might mean something different for them than other generations.5
Millennials prioritize experiences over material items, so they’re looking for someone who can create that positive experience and be a person they genuinely enjoy knowing.
“Lenders need to prove our knowledge and experience,” VandeSand says. “Let this generation know what to expect and be engaged throughout the process. Be relevant and customized with what we’re sharing with them.”
McCleary recommends, when possible, connecting millennial clients with others who might be able to talk about their lending experience. That real-life connection can help them process the emotional aspects of buying a home. Cultivate a social media presence that is both professional and personable. Millennials may run quick background checks through platforms like Facebook and Twitter to see what kind of person their potential lender is.
Communication and control are key throughout the process, VandeSand says. Millennials expect a lot of feedback. “You want to help them feel in control, feel more knowledgeable and feel more experienced. You can minimize surprises by communicating throughout the process and setting expectations,” she says.