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.
Those born between 1984 and 2005 could form more than 2 million new households each year over the next ten years.1 The generation makes up a large 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 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.”
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.”
Remember, they don’t want to feel too stretched financially: Millennials 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 past generations.7
Even so, as long as they understand their budget and can work within it, millennials are willing to broach the topic of homeownership. Although this generation is shifting the mold, honest conversations and an understanding of their situation can earn their trust.
Identifying individual goals
It’s crucial to learn the unique goals millennial clients have and help them understand the ins and outs of the home buying process. And this means more than simply knowing what they can afford, but what they want to afford and are willing to pay for.
Informed and helpful communication goes a long way toward not only the individual’s process but also their peer group’s. Even if they’re not searching with the intention to buy right away, millennials are always on the lookout for information about the homeowner journey. They want to learn, and much of their information comes from referrals, as millennials trust the views of their peers when it comes to quality service. For instance, 48 percent of those under the age of 37 consider real-estate referrals from friends, neighbors and relatives.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.
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.
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.