Millennials are now the largest living generation in America. Every year more and more millennials are becoming home owners, and loan officers and realtors need to adjust accordingly. It’s time to learn how to talk about home buying and mortgage interest rates to millennials. Here are 5 ways to get the point across to a generation unlike any one that’s come before.
Understand where they are coming from
Just like the concept of record players is foreign to millennials, most have never known a market with more than a 5% interest rate. As a real estate professional, it’s your task to forget your assumptions and advise your millennial homebuyers in a way they could understand. Help them see that yes a 4.5% interest rate may seem high, but show them what it was a decade ago. Explaining the why behind the fact can reassure and comfort your millennial buyers.
Millennials are living with their parents, but most don’t want to.
In a recent MGIC Connects study, it was shown that 90% of millennials living at home would prefer to live in their own home. However, only 15% of millennials have more than $10,000-$20,000 saved. The gap comes when a millennial is under the impression that they can only buy a house if they have 20% saved for a down payment. Down Payment Resource shows that 71% of first time home buyers in 2016 actually payed 5% or less in down payments. By allowing your millennial buyers the option of a lower down payment, you’ll see more serious interest in buying.
Translate percentages into payments
Instead of talking in a metaphorical matter, bring out the hard numbers as examples. For example, let’s say your millennial home buyer is one of the 15% that has saved $10,000. For ease of math, this means that they can afford a $200,000 with PMI, paying 5% down. With interest rates hovering at 4%, this means their monthly is $1,312. If they wait to buy and the interest rate bumps up to 5%, this means their monthly will bump up over $110 each month to $1,425. This way they can actually visualize what they would need to pay if they bought today vs. if they waited to buy.
Educate your millennial buyer on equity
When a millennial’s monthly rent bill is higher than their proposed new mortgage, it’s easier for them to visualize why it’s good to buy. “Less money per month for something I get to own” is likely what they’re thinking. But the decision is more difficult when the mortgage would be more than what they’re paying now for rent. This is where you need to stress the advantages of home ownership and the importance of equity. Do an analysis of how fast home values are growing in your area. Show your potential millennial buyer how much they would have gained in equity if they bought a house in the area 5 years ago and what they could sell it for today.
The security of now vs. the uncertainty of later
“The right time to buy was always 5 years ago.” This saying has a point. So why wait? If your millennial home buyers are waiting years to save 20% down for their home investment, make sure they are aware that the interest rate could drastically lift in the time it takes to save 20% down, not to mention uncertainty of home availability and prices. Unfortunately, it could turn into a short line never catching up to the longer line, the short line being the saving years, and the longer line being home prices/interest rates/home availability over time. Having the flexibility to buy now allows your millennial buyers to gain equity right away and enjoy the benefits of home ownership.
The Fornerette Team at Guild Tacoma Branch is committed to providing their clients with the highest level of service. Our mission and passion is to work with home buyers to fulfill the dream of home ownership. We build lasting relationships that create value and stand the test of time.
Guild Mortgage Company is an Equal Housing Lender; CO NMLS 3274. Branch NMLS 273749. Michael Fornerette NMLS 121193. The information provided herein has been prepared by a third party and has been distributed for education purposes only. The positions, strategies or opinions of the author do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.