For generations, homeownership has been synonymous with the American Dream. That is still true to this day but sentiment towards buying a home has shifted, especially for younger generations such as millennials. There are several variables that play into it, cost, of course, being the biggest. For many younger American adults, buying a home is out of reach. So how can a credit union act as a catalyst in changing this narrative? It goes far beyond mortgage rates and inventory.
Millennials (age 23 to 41) take up the lion’s share of generations in the U.S. According to the U.S. Census Bureau, there were just north of 72 million millennials in the U.S. as of 2019. So, it’s not surprising that millennials represent 43% of homebuyers—the most of any generation. The National Association of Realtors (NAR) found in its 2022 Home Buyers and Sellers Generational Trends report three areas of concern from millennials when it comes to the home-buying process: finding the right property, understanding the process, and saving for the down payment, respectively.
Speaking as a millennial myself, the part about saving for a down payment and other costs rings true. A Bankrate survey found that over half of older millennials (ages 32 to 41) who had dreams of buying a home were unable to afford the downpayment and closing costs more than any other age group. As a credit union, part of the mission is to help your members achieve their financial aspirations, including homeownership. So, you must ask yourself this: “How can our credit union shepherd younger generations toward buying a home?”
Resources and relationships
Credit unions were built on the foundation of “people helping people.” With that in mind, a credit union can be so much more than just a mortgage broker for young or prospective homebuyers. First and foremost, it’s important to build relationships with your members and help set them up for success.
For example, let’s say you have a member who is 26 years old and wants to purchase a home but the costs (down payment, closing fees, etc.) make it unfeasible due to paltry savings, among other factors. This is a great opportunity for a credit union to build a relationship by identifying services (saving accounts, CDs, etc.) to help this young member reach the finish line. Consult with the member and create a path that will unlock financial well-being.
This will not only allow your credit union to build a stronger relationship, but it also opens the opportunity to offer a mortgage to this young member in the future. Buying a home should never be rushed. It takes time, and, in many cases, it takes teamwork.
It goes a long way to be upfront about everything during the homebuying process. It’s not just interest rates or down payments, but closing costs, taxes, and insurance.
Put yourselves in the shoes of a young, potential homebuyer: wouldn’t you want to know about all costs and fees upfront? Of course you would, there’s nothing worse than an unexpected cost that can derail your entire plan.
The point is to help your member get across the finish line and being transparent about the process can pay dividends for both the lender and borrower.
Finding younger homebuyers
Your credit union likely has marketing campaigns when it comes to mortgages and home loans. These tools are vital to the bottom line, but they should not be considered a “one size fits all” approach.
- Technology: Like it or not, we live in a digital age. People, especially younger generations, want everything in the palm of their hand. For a credit union, that means having a website that plays nicely with mobile devices such as phones or tablets. Your credit union’s website should look good and operate smoothly on both desktop and mobile devices. A responsive design and exceptional customer relationship management (CRM) platform will take you a long way.
- Testimonials: Let’s say your credit union just helped Steve and Sally, both 32 years old, get into their first home. Don’t just wave them out the door and wish them the best of luck. Ask them how they felt about the home-buying process with your credit union and what they liked most. You could even use an incentive such as a gift card to get their testimonial. Use this information, with consent, and put it somewhere on your website. This builds credibility and trust—something that is very important for younger members who may be on the fence about buying a home.
- Time: Whether it’s building a retirement portfolio or buying a home, the biggest advantage that younger generations have is time. When consulting a younger potential homebuyer, remind them that time is on their side and that they should take the time to find the right home, not just any home.
There is always the concern of high mortgage rates. It’s fair to say that the chance of rates dipping to the level we saw in 2020 is slim to none. Since then, I have spent a lot of time focusing on where rates are and if now is the time to buy.
I was given a piece of advice from an industry expert recently, and it has changed my outlook on homebuying: marry the home, date the rate. Simple advice that can make a difference. Rates change but refinancing can always be an option. It all boils down to this question: do you want the right home or the right rate? When consulting a young homebuyer, consider this idiom.
Achieve the dream together
Buying your first home is a daunting milestone to reach for many. The reality is that many younger Americans likely believe that buying a home is out of reach, but it does not need to be that way. That’s where your credit union can step in—not just as a lender, but as a source of knowledge and resources that can help younger members and homebuyers achieve the “American Dream.” Remember the three T’s that were outlined in this article: Technology, Testimonials, and Time.