Fintech must complement, not dictate, the millennial mortgage experience
When the housing market returns to full steam, lenders will have millennials to thank. For the fifth consecutive year, they did more home buying than any other generation. The cohort known for adoring avocado toast made just over one-third of all home purchases in 2018, according to the National Association of Realtors.
As their share of home buying activity continues to rise, lenders will have to conform to (or exceed) millennial expectations to succeed. One might think that means having a quick website or making the 1003 form available online. In reality, millennials have far higher expectations of lenders, expectations that have been shaped by tech titans like Apple, Google and Netflix.
About 80% of lenders think borrowers prefer online product offerings, according to a recent study by Dimensional Research and Blend. Even more lenders (87%) think online loan processes are faster than their traditional counterparts. As the co-founder of a fintech company that's working to reimagine lending for borrowers and lenders alike, I see that there are a number of key areas where lenders are falling short in their efforts to reach millennials.
Elevate customer service
A common misconception about fintech is that it's automating lending professionals out of the process. In our experience, lenders take their products and experiences into the cloud because it makes their operations more efficient. It also enables their teams to provide the personal touches and guidance that first-time homebuyers often want. One tactical way to do this is by giving loan teams tools that automate manual tasks like document collection. This gives loan officers more time to focus on driving new business and, in turn, grow revenue. They're also able to spend more time providing the kind of advice that drives borrower satisfaction
Know where the borrower's journey starts
When my generation's parents bought their first home, they had to show up to countless open houses for houses they'd soon learn weren't actually a fit. Thanks to sites like Zillow, millennial homebuyers can peruse dozens of homes from their couches before deciding to see a handful of properties in-person. Whether or not lenders have caught on, online marketplaces have set millennials' expectations around design, user experience and speed for the entire home buying process, not just the home search. About 65% of borrowers will start their real estate search online, according to PWC's Digital Mortgage 2.0 report. That's more than any other channel.
PWC also found that borrowers who search for lenders online are also looking for online tools throughout the home buying process. They know an online application can automate tasks they'd otherwise have to spend time on. For example, they can connect directly to their financial accounts so they don't have to sift through and provide documentation of their reported financial assets, and they can continue their mortgage applications anywhere, anytime. More than half of Blend's application activity happens outside the 9-5 workday. The days of walking into your local branch to fill out a paper 1003 application are over.
Keep affordability and accessibility top of mind
Some millennials are deterred from getting a mortgage because they perceive closing costs as too expensive, according to a study by Nerdwallet. By streamlining their operations around technology, lenders can shorten application times and lower costs, eventually attracting more millennial buyers and keeping them engaged in the sale through closing.
Access to the application that is available at almost any time and anywhere is just as important as affordability. Over 50% of borrowers using Blend and making up to $50,000 per year completed at least part of the app on a mobile device, and much of that group completed their mortgage application exclusively on their mobile device. In comparison, less than 30% of borrowers making over $250,000 completed part of the app on a mobile device.
Digital experiences have the power to boost loan accessibility by making it possible to complete an application on the device most of us always keep nearby: our phones. By refining and simplifying the process, lenders can encourage hesitant millennials to find out what's available to them.
The future of home buying
There's a misconception about millennials not wanting to buy homes like their parents, but the data shows they do, just later in their lives than previous generations. Now millennials are poised to decide which lenders grow and which struggle in the coming years. Ideally, lenders would have a few years to adapt to millennial expectations, but those shoppers are looking for homes today. We could be on the verge of a late-stage tidal wave of buying. Lenders should be prepared.