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“The New Face of the Market,”
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“The Housing Market Is in Transition,”
Dave Chung is co-founder and managing director of
CreditXpert Inc. Combining a background in engineering with
nearly 20 years of experience in the credit-software industry,
he oversees CreditXpert’s business fields and user experience.
More information about CreditXpert is available at
www.creditxpert.com. Reach Chung at firstname.lastname@example.org.
Catering to the New Market
Shifting demographics call for a shift in lending practices
By Dave Chung
With the current state of the housing market, loan officers are likely see- ing a surge in potential homebuyers coming through their doors. Homes
in the United States are selling at a faster pace than
ever before, fueled by a shortage of inventory and
To top it all off, home prices are skyrocketing. According to the National Association of Realtors, the
median existing-home sales price in the U.S. hit an all-time high of $263,800 this past June. Homebuyers
require the expertise and guidance of originators
more than ever to help overcome these challenges to
purchase their dream homes.
The makeup of potential homebuyers is changing,
however, because millennials are finally showing an
interest in entering the housing market. This large
consumer segment is expected to form more than
20 million new households between 2015 and 2025,
according to Harvard University’s Joint Center for
This shift in demographics will require changes to
standard mortgage industry practices. Catering to
millennials cannot be done with a one-size-fits-all
approach created for consumers born before the
internet age. To serve millennial borrowers, originators
must understand their unique needs.
Millennial purchase power has been shaking up various industries for years with everything from music to
taxis now being ordered online. The mortgage industry is just beginning to feel the effects of this shift
and mortgage companies need to keep up to stay
The first question loan originators must ask is: Why
have millennials delayed buying homes until recently?
According to U.S. census data, homeownership among
adults under 35 years old was 35. 3 percent in the
second quarter of 2017. In 1980, this number was at
43. 8 percent.
Many analysts have suggested a few reasons for this
drop. First, older millennials entered the workforce
during the Great Recession, which impacted their
financial stability. In addition, although millennials are
one of the best-educated generations in the history of
the United States, this often comes at the price of high
student loan debt from soaring college tuition bills.
Millennials also don’t appear to be as focused on
building their credit rating as were prior generations.
Some studies have stated that as many as two-thirds of
millennials don’t even have a credit card, while other
reports dispute this assertion, claiming that millennials
may actually be overusing credit cards.
In either case, the credit scores for many millennials
are not in tip-top shape. In fact, Experian reported that
the average VantageScore credit score for millennials
in 2015 was only 625. This number increased to
just 634 in 2016.
They may have gotten off to a rough start financially, but more and more millennials are finding their
financial bearings and attempting to enter the housing market. Unfortunately, the mortgage industry still
has room for improvement when adjusting to serving
a market segment characterized by high debt and
low credit scores.
Getting the job done
So, how can loan originators cater to and properly
serve this growing segment of millennial homebuyers?
First off, mortgage companies must be quick and good.
Millennials are accustomed to using services that
provide near-instantaneous results — such as ride-hailing smartphone apps and online ordering that
promises speedy delivery — and they will expect other
businesses to follow suit. As a result, this segment of
homebuyers may care less about getting financial-planning advice from experts than previous generations, favoring instead a more “get it done and move
Like any first-time homebuyers, however, it is not
uncommon for millennials to be unaware of the various mortgage options available to them. Originators,
therefore, should take the time to educate their millennial clients about the different products they qualify
for and help them make the best mortgage decision
for their situation.
Outside of understanding their options, however,
millennial homebuyers will tend to be more interested
in just making the loan happen and will value originators and mortgage companies that can help them get
it done as efficiently as possible.
Another point to consider is that most millennials are
digital natives and have grown up with technology empowering their lives. With the speed and convenience
of technology constantly impacting millennials in
their day-to-day lives, originators cannot be afraid to
embrace it as well.
Technology integration can take a variety of forms,
such as giving customers the convenience of submitting documents online and the ability to check on their
loan’s progress and find other information through a
virtual dashboard. Whether this portal is on the web or
through a mobile application, millennials have grown
accustomed to having a one-stop hub where they can
take care of business.
Technology cannot fix low credit ratings or high
debt-to-income ratios, however. To help make millennial homeownership dreams a reality, originators and
underwriters should not be afraid to get a little creative. It’s important to look at the whole applicant and
see where opportunities lie.
Consider more holistically evaluating secondary
jobs on top of primary jobs, for example, for borrowers that pull multiple shifts. All borrowers appreciate
originators who show they are willing to personalize
their services and truly understand the issues facing
applicants. Millennials are no different than any other
generation in this regard.
n n n
Whatever tactics you decide to use when catering to
millennial homebuyers, it is still vitally important to be
trustworthy, clear and responsive. There is no replacement for providing sound, superior service with expertise that your clients know they can depend on. When
you take the time to understand the unique needs of a
consumer segment, your services will be comprehensive and reliable. n