NextGen homebuyers, made up of Millennials and Generation Z, are an up-and-coming consumer group in the mortgage market. Currently aged 12 to 43, these young generations make up 20% of the population. Here are some more statistics that showcase their growing prominence:
- 43% of younger Millennials who don’t have a mortgage yet could qualify for one.
- 87% of surveyed Gen Z said they want to own a home in the future.
- By 2026, an estimated 29 million Gen Z members will be shopping for homes.
As time goes on, NextGens will only become an increasingly important demographic. Thus, mortgage lenders should put strategies in place now to attract, educate, and win over these future homebuyers’ business.
Below, we’ll review some challenges and trends that characterize this growing swath of homebuyers. We’ll also offer some practical tips for supporting NextGens during their home-buying journeys.
Help your first-time homebuyers navigate their journey to homeownership with ease! Download and share our first-time homebuyer guide with your borrower.
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First-Time and NextGen Homebuyers’ Greatest Challenges in 2024
As mortgage lenders know all too well, buying a home in recent years has come with many hurdles—record-breaking mortgage rates, high home prices, and limited housing inventory made 2023 the hardest year to buy a home in the past three decades.
While these issues have affected all homebuyers, NextGens have been at a particular disadvantage due to the following factors:
- Inflation – The rise in mortgage rates is primarily attributed to the surge in inflation seen in the wake of the COVID-19 pandemic. In addition to making mortgages more expensive, this inflation has elevated the prices of everything from groceries to gas, leaving little room in Gen Z’s entry-level salaries to put aside for home-buying.
- Growing debt – Consumer debt has also been growing for several years, reaching $17.06 trillion in 2023. Many consumers, including NextGens, have relied on their credit cards to fill in inflation-induced gaps in their budgets. If these consumers don’t pay down their debts efficiently, it may hinder their mortgage eligibility.
- Student loans – Consumer debt isn’t the only type of debt on the rise. The cost of a college degree has more than tripled since the 1960s. Studies show that NextGens who are saddled with student debt have put off many major life moves, including buying a home, due to its impact on their debt-to-income (DTI) ratios.
- Down payment confusion – Speaking of savings, young NextGens haven’t had as much time in the workforce to save up money for down payments. What’s more, many of them believe common myths about down payments, such as the 20% requirement, leading them to put off home-buying longer than necessary.
Notable NextGen Trends
Despite these challenges, the majority of NextGens still want to achieve the American Dream, and owning a home is a cornerstone of that aspiration.
In pursuit of this goal, an estimated 450,000 young Next Gens moved home with their parents during the peak of the COVID-19 pandemic. While the majority have since moved out, 83% claimed this time at home enabled them to expedite their savings, and 59% said they plan to put these savings toward a down payment. Likewise, 20% of Gen Z said the pandemic made them more eager to purchase a home.
Younger NextGens are also better at money management than mortgage lenders may assume. Gen Z, in particular, has made establishing credit history a top priority, while 53% have taken up side hustles to pad their savings. Meanwhile, young millennials are more willing to buy older, smaller homes than their elder millennial counterparts.
How Mortgage Lenders Can Support NextGens and First-Time HomeBuyers in 2024
Mortgage lenders who want to win over NextGens’ business must adjust their marketing tactics and modernize their loan origination processes accordingly. With that in mind, here are three steps you can take to best serve NextGen first-time homebuyers:
#1 Digitize Key Aspects of Your Loan Origination Process
Did you know that 70% of Gen Z would prefer to go without their wallet than their phone? As digital natives, these aspiring homebuyers are accustomed to constant internet access, online shopping, and instant gratification.
To appeal to this tech-savvy generation, you should focus on:
- Enhancing your online presence – From your customer-facing website to social media profiles, you want to make sure your online presence is both engaging and professional.
- Exciting online advertisements – NextGen’s attention spans range from 8 to 12 seconds, so your marketing campaigns must be attention-grabbing and resonate with their priorities right away.
- Employing convenient tech stools – While NextGens still value the human touch, they also appreciate a streamlined lending process. Online applications, e-signatures, and e-closings can help you make your loan origination more convenient and NextGen-friendly.
#2 Close Education Gaps With Online Content
Once you’ve spruced up your website and social profiles, you can use them to distribute educational content that’s designed to close NextGen’s knowledge gaps—39% of younger millennials and 60% of Gen Z claimed that they’re not confident in their understanding of the home-buying process, while 45% and 63% of these respective groups lack confidence in their knowledge about mortgage loans.
With these demographics’ short attention spans in mind, focus on shorter-form content, such as TikTok videos, YouTube shorts, and Instagram reels. Not only is this type of content relatively easy to make, it can spread like wildfire and help you build a growing audience of aspiring homebuyers.
Not sure what topics to start with? Here are a few suggestions:
- Myth busters – Considering that one in four Gen Z believe they need to put more than 20% down to buy a home, demystifying common mortgage myths is an excellent place to start. This content may help many first time understand that they’re more mortgage-ready than they realized.
- Practical tips – Next, you can never go wrong with sharing practical personal finance tips, from credit-building strategies to debt repayment methods. This information can help NextGens prepare their creditworthiness and save up for their down payments.
- Pet cameos – A noteworthy number of NextGens want to buy a home to give their pets a better life. In fact, many of these homebuyers cite their dogs above marriage or kids as a driving factor in their home-buying decision. You can capture these borrowers’ attention (and subsequent business) by showcasing adorable pets in your online content.
- Showcase client success stories – Oftentimes, seeing other people in the same age bracket achieve homeownership can inspire other NextGens to explore their housing options. With this in mind, find out if some of your young borrowers would be comfortable with you sharing their success stories on social media.
- Romanticize homeownership – Spending so much time online, NextGens love jumping on viral trends. The “Romanticizing Your Life” trend encourages content creators to highlight the simple pleasures of daily life. You can apply this trend to home-buying, showcasing snippets of your borrowers’ lives, from receiving their new home’s keys for the first time to embarking on a creative renovation project.
- Your authenticity – While you want to keep your social posts professional, don’t be afraid to inject a little bit of your personality. Gen Z values authenticity much more than older generations. By keeping your content authentic, you can instantly build more trust and increase the chances that NextGens select you as their lender.
Want an additional resource? Download and share our first-time homebuyer guide with your borrower.
#3 Leverage Automation to Empower Personalization
Today, there are more automated mortgage lending solutions available than ever before. At Certified Credit, our Cascade suite is just one example—we have savvy tools to automate your lead generation, borrower retention, verification of income and employment (VOE), undisclosed debt monitoring (UDM), and credit supplements.
As you automate repetitive tasks, you can spend more time providing more personalized customer service to your applicants. Here are some examples:
- Customized credit coaching – You can go above and beyond for your borrowers by suggesting personalized steps they can take to improve their credit scores. Not only can these suggestions help them achieve their desired score faster, but they can also earn you their loyalty along the way. At Certified Credit, our credit score improvement tools enable you to generate customized suggestions in a few clicks.
- Renting vs. buying comparisons – Another way to impress potential applicants is to analyze their renting vs. buying options. If buying is more affordable in their area, this insight may entice them to enter the market sooner rather than later, ideally with you as their lender. Along the same lines, you can help these aspiring homebuyers identify more affordable locations that meet their requirements, keeping in mind that 29% of surveyed NextGens would move out of state or buy a fixer-upper to get in the market.
- Down payment assistance (DPA) options – With so many NextGens assuming they need to make 20% down payments, it’s not surprising that even more of them are unaware of the DPA programs available to them. By presenting these programs to them upon prequalification, you can help aspiring homeowners with limited savings afford their down payments and closing costs.
Enhance Your NextGen Borrower Experience With Certified Credit
As you can see, NextGens present an immense opportunity for future-focused mortgage lenders. By tailoring your services to their goals and challenges, you can outperform your competitors and secure a larger share of their growing business.
If you want more hands-on support with your NextGen lending strategies, don’t hesitate to reach out to Certified Credit. In addition to our industry insights, we have a host of mortgage lending solutions that can help you skyrocket your success in 2024, including our:
- Affordable credit reports
- Automated lead generation tools
- Automated prequalification
- Automated VOE
- Automated UDM
- Automated credit supplements
- Property and valuation tools
- Fraud and risk support
- Underwriting compliance support
- Settlement services
Contact our team today to schedule a credit consultation.
