How to Engage Millenials About Mortgages
Millennials, the generation of young people born between 1980 and 2000, have been the subject of much debate among economists. On one hand, they’re a sizable demographic whose purchasing power is sure to have a major impact on the financial marketplace. On the other hand, they’ve seemed hesitant to engage with bedrock traditions such as home ownership and marriage. Many even eschew purchasing vehicles, preferring instead to take advantage of public transit or car-sharing services.
Of course, comparing the spending habits of this generation of Americans to previous generations is somewhat misleading. Yes, they’ve been reluctant to make big commitments, but they’ve also inherited sizable financial hurdles. Rising education costs and a stumbling economy have made them the first generation in the modern era to face higher unemployment levels and more inflation-adjusted student debt than their parents.
Millenials as Home Buying Prospects
Despite all the hand wringing about the subject of millenials as an engine for economic growth, it would appear that some are getting ready to take the leap into homeownership. Many of their cohort are starting families, and as the economy continues its tenuous recovery, living the American Dream is starting to look like a viable option for those with the desire to do so.
Of course, homeownership is a big part of that puzzle, and analysts are predicting that first-time homebuyers in the 25-34 age group to fuel a stronger and more expensive housing market in the coming years.
Having said that, the research suggests that millenials are still pretty hazy on the actual costs associated with purchasing a residence, especially the less obvious ones such as closing costs.
Mortgage 101: Put on Your Teacher Hat
According to a recent survey conducted by ClosingCorp, a full 66% of people aged 18-34 don’t even know closing costs exist. More than half of millennial homebuyers learn about closing costs from their real estate agents. About 50% also conducted their own research, and just over 40% received closing cost information from lenders. It’s important to note that this survey allowed multiple answers, and that many of the respondents indicated multiple sources of information.
Still, no matter how you slice it, mortgage originators should be prepared to play the role of educator when it comes to young homebuyers.
As a mortgage professional, you have a vested interest in making sure your younger clients are well educated on closing costs, as misunderstandings have the potential to kibosh potentially lucrative opportunities.
Topics to Cover When Discussing Mortgages With Millenials
It’s not just closing costs that millenials are unclear on, too. You should also make sure they understand other steps in the home buying process. In particular, make sure they have a clear understanding of:
- Escrow
- Title Insurance
- Home Inspections
- Pest Inspections
- Interest Rates
- Purchase Offer Contingencies
Final Thoughts on Mortgage Education
Is it really part of your job description as a mortgage originator to also serve as an educational resource? Well, maybe not. Still, helping your younger clients develop their financial literacy is just good for business, especially in today’s changing market. Millennials may be less clear on the ins and outs of buying a home, but they’re quite adept at social marketing. Do right by them, and they’re sure to share their positive experience with friends.
[Photo Credit: Florida Help]
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