Despite being the nation’s largest population by generation, the oldest millennials have not consistently achieved what previous generations have by their mid-30s — homeownership. The challenges of buying a home are only compounded by a mortgage process that is currently going through a digital transformation.
Buying a home has become more difficult for consumers, who face unprecedented challenges such as dwindling supply and high demand for homes. This is especially true for those looking to take advantage of historically low rates that are beginning to rise. For many homebuyers, the mortgage process adds to this stress.
Millennials and Generation Z will have increasing influence over the housing market due to their sheer sizes, but as the first digitally native generations of homebuyers, their expectations will be vastly different from generations before. To succeed, mortgage lenders and originators need to consider the mindsets of digital natives — the population raised during the rise of digital technology. (Millennials range in age from 25 to 40 while Gen Zers include younger adults.)
Digital natives value instant gratification, rely on their smartphones and have already integrated fintech into their daily lives. A recent survey from Finicity shows that the mortgage process still requires improvement. This survey of 1,000 people uncovered how the mortgage process needs to change to meet the expectations of digital natives. Mortgage originators will want to pay close attention to these shortfalls and consider what needs to improve to connect with these generations.
Millennials alone have a collective buying power in the trillions of dollars, according to the 2020 Consumer Culture Report from 5W Public Relations. That’s a lot of power in their hands that they are eager to use.
With such a large market share, digital natives are positioned to change the mortgage process altogether. The majority of individuals who applied for a mortgage within the past year are digital natives. In fact, data from Rocket Homes revealed that about 86% of Gen Zers already have set their sights on homeownership.
The opportunity that digital natives represent in the mortgage market has created a need for a digital-first approach to lending. This type of approach can help to modernize a seemingly antiquated process in the eyes of digital natives by reducing friction in the paper chase, meeting expectations and increasing lender credibility.
Finicity’s survey revealed that digital natives represent the largest share of loan applicants who experience a closing time of 60 to 90 days. Digital verifications of assets, income and employment can shave up to eight days off the origination process and can lower costs, according to Fannie Mae. Lenders typically save money when implementing a digital process by reducing the workforce and time needed to process verification data, creating customized loan agreements and reducing the possibility for human error.
Moving toward a digital mortgage process isn’t just the smart, financially savvy thing to do. It’s also about meeting the expectations of the marketplace. Digital natives value instant satisfaction in all areas of their lives and prefer a digital verification process over a manual one.
Finicity survey data found that 83% of respondents using digital verifications said that their loan processing time was shorter than expected or met their expectations. Meeting the expectations of digital natives is the first step toward gaining their trust, which is an essential component of business success for lenders.
Digital natives don’t mind taking an entirely digital approach when it comes to buying a home. In fact, they trust a digital process more than a manual one. Finicity found that 88% of respondents feel comfortable giving consumer-permissioned data to their lender. From start to finish, digital natives are content to share their financial data with a lender to simplify the process of securing a mortgage.
Using a paper-based process (including uploading and downloading documents, emailing, etc.) to apply for a mortgage just doesn’t meet the expectations of digital natives. Nearly three in four respondents to Finicity’s survey indicated surprise that manual processing still takes place at so many stages of the mortgage process. As the world evolves toward digital payments and fintech solutions, many consumers are shocked to find that buying a home hasn’t shifted toward a more secure and more immediate method.
By implementing a fully digital mortgage process, lenders and the originators who work with them can become essential in a mortgage market with a large opportunity for loans to digital natives. The mortgage industry not only needs to evolve to survive, but it also needs to create an environment that is conducive to growth and caters to the needs of digital natives who are imperative to building the future. ●