How to make home-buying less painful

It’s not easy for homebuyers. Some might argue that it’s heartbreaking. A recent Zillow survey found that 50% of homebuyers felt they were in tears during the home-buying process. Millennial and Gen Z buyers reported this higher than their older counterparts (61% millennials; more over 65% Gen Z).
The housing market was a tough one last year. Record-low inventory, unpredictable rates and homes selling for twice, three, four, and more than the asking price are just a few of the factors that led to record-low inventory. These are just a few of many stress-inducing factors for first-time buyers, especially when it comes to asking price.
Over 20 years of experience in the real estate and origination product and service space has allowed me to weather the highs and lows. My colleagues and friends in the mortgage lending industry have a lot of experience and are able to draw on that knowledge. We are familiar with the ebbs, flows and can recall difficult rate environments. We can’t expect Gen Z and millennials to approach the market with the same levelheadedness, as they are among the fastest-growing buyers.
Many young buyers put a pause on their home search as rates rose month after month in 2022. The 30-year fixed rate mortgage rate ended at 6.42% per Freddie Mac’s Primary Mortgage Market Survey.
To make matters worse, first-timers still face challenges in a market where inventory is low and prices are rising. This makes it difficult for them to compete with all-cash buyers as well as older generations who may not be so rate sensitive. Referring to their competition, 55-74-year-old homebuyers topped the list for the largest group of homebuyers in 2022. According to the 2022 Profile of Homebuyers & Sellers of the National Association of Realtors (NAR), this is not surprising since millennials were the previous leaders in 2020 and 2021.
Many young buyers aren’t leaving the real estate market despite all the odds against them. The following are some ways that lenders can help young homebuyers feel supported and make the home buying process less stressful.
Being a source of education and anticipating their needs
Find out how you can, as a lender partner to your young buyers, anticipate their needs. Many of them may be starting the home-buying process for the first and second time. How can you help them to feel more satisfied and gain their trust?
Particularly first-time buyers may not be aware what documentation and information they will need when applying for a loan. To make the process smoother, educate them on the information they will need, from tax returns to W-2s. Also explain the different loan options and help them decide which loan type is best for them.
This demographic is known for doing almost everything online so make sure your website’s up-to date, user-friendly, and full of sound advice.
Transparency is key
Transparency in homebuying is key to consumer satisfaction. Self-service options are a great way to increase transparency. External partners can be a great partner for lenders who can facilitate self-service options at key points in the home buying process.
To increase transparency and speed up the process, borrowers can book their appraisals online. You can also earn the trust of your borrower by giving them more information about rates and offering special offers to first-time buyers. This is a crucial step in helping them make one of the most important financial decisions of their lives.
Tech options for them
The youngest homebuyers today have high expectations regarding the buying process. Technology impacts every aspect of their lives, whether they’re ordering food online, using a ride-share app for travel to the airport, or placing a grocery order via mobile. Their home-buying experience is no exception.
My company’s 2022 State of Homebuying Report, (SOHBR) revealed that Gen Z and millennial homebuyers cited convenience/ease-of-use (66%), time savings (60%), and the ability to move at their own pace (53%) as the top benefits of using technology during the home-buying process. They expect seamless transactions and that the home-buying process will go as smoothly as possible. If they need multichannel communication, don’t forget to offer them the option of speaking to someone over the phone.
Stress reduction
Millennial and Gen Z buyers want convenience. According to the same survey report, Gen Z and Millennial buyers want to have less paperwork (40%), and not have to submit the same documentation multiple times (28%). To reduce stress and speed up the buyer’s process, consider which parts of the origination process can be automated.
During key milestones of the home-buying process, check in with them
Young borrowers may be open to a self-serve approach but they don’t want to do it all alone. They still rely on trusted friends, family, and their realtor to guide them through the process. According to the survey, 26% of respondents from Generation Y and Millennials leaned on their lender to provide advice when they began the home-buying process. This shows that lenders can still be a source of education for young buyers (2022 SOHB).
It is a good idea to check in with them at key points in the process. This can help to reduce stress and confusion. It is important that the borrower knows that a representative of another company will contact them when they engage a third party to provide valuation services.
With fraud cases arising during the origination process, borrowers are becoming more cautious than ever. You must ensure that your third-party providers are compliant with all regulations and that they take customer privacy and security as seriously as you.
Matt Woodhouse is the managing director, Valuations at ServiceLink, which is the nation’s leading provider of digital mortgage services for the mortgage and finance sectors.