Millennials and Mortgage Lenders: Prepare to Be Frustrated

A lot has been written about Millenials -- those born between 1980 and 2000 -- and how frustrating it is to reach them, engage them and get them to buy. Their home ownership rate is dismal -- they appear to be more interested in technology they can hold in their hands than live in or drive. But are they really less interested? Knowing the answer can help you reach this big group.

A recent study by the Federal Reserve Bank of New York found that high student-debt loads may be one of the biggest reasons young people buy fewer cars, homes and other accoutrements of traditional young adulthood. This generation is graduating from college with a lot of debt and not much income to show for it, and it's created spending habits that don't easily die just because they accrue some earning power. Here's what loan officers need to know about marketing to this category of potential buyers.

They Shop More, Buy Less

Data from NPD Group indicates that the conversion rate -- that percentage of shoppers that convert to buyers -- is lowest among Millennials. While seniors purchase 72 percent of the time, Gen X converts 66 percent of the time and Boomers buy 69 percent of the time, Millenials get out their wallets only 57 percent of the time they shop. Yet, says Shullman Research Center, Millennials love to shop. They just shop cautiously, taking more time and comparing prices.

This group expects information and is not in the habit of waiting for things to come in the mail. Dealing with them means providing what they need to know, when they want to know it, and giving them time and space to come to terms with it. It means answering a lot of questions and it means working for free a substantial part of the time.

This group won't brush off a $50 charge they don't understand -- think of them as a tech-savvy version of your Depression-era grandparents.

They're Cheap!

A SymphonyIRI study titled “Millennial Shoppers: Tapping into the Next Growth Segment,” asserts that Millennials look for cheap prices and are less motivated by brand loyalty. It's likely that with more time than money, they're willing to jump through a few more hoops to save a few dollars. That said, they also prefer convenience and shop online more than any other demographic. This is the group that services like LendingTree were created to help -- an easy-to-use marketplace that helps them gather information quickly and requires little commitment from them until they are ready to pull the trigger. It's less about the name of the lender and more about ratings and pricing.

This group is not likely to respond to attempts to "get them in the door" without solid quotes they can compare before taking the next step. An article in Mortgage Professional three years ago advised lenders to provide as little information on the GFE as possible to avoid being shopped out of business. The author says, "If you really want to win the battle over the hearts and minds of clients, you need to fight the battle on a battlefield where you know you can win." This will not endear you to Millennials who want bottom line figures before they commit any time.

They're Careful

The Shullman study found that even more affluent young people (income at least $75k) are more inclined to save for their purchases, rather than charge them, and less likely to make big-ticket purchases that are not necessities. What’s more, these consumers are fairly likely to wait and save up before buying anything in the luxury category: 30 percent reported delaying gratification and saving for their luxury purchases (compared to 16 percent of adults overall).

As housing markets shift and renting becomes more expensive than owning, those with stable jobs and comfortable incomes are likely to consider buying. A 2013 survey from Trulia found that 943 of renters ages 18-34 plan to buy a home someday.

Programs likely to be especially helpful to Millennials include any that incorporate help from their wealthier parents (who probably want them out of their guest rooms and basements) or down payment assistance. This includes co-signing and co-borrowing, FHA Kiddie Condo, income-based Community Homebuyer loans, other first-time buyer programs requiring the completion of approved education, HUD homes and USDA financing where available. They use credit less, so plan on pulling non-traditional credit and underwriting manually more often. Millennials have proven more willing to take on fixer-uppers (more time, less money), so FHA 203(k) loans should also be part of your arsenal.

This group is huge, and given the number of them that eventually expect to purchase homes, it's worth cultivating.

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