Gen Z is the youngest swath of homebuyers on the scene. Born between 1997 and 2012,[i] these young NextGens are quickly becoming a prominent part of the lending market. After all, 71.5% of Gen Zs intend to purchase a home within six years, while 37.2% may do so in as little as one to three years.[ii]
Mortgage lenders who take the time to understand Gen Z’s experience and expectations will have a better shot at earning their business. So, what should mortgage lenders know about this up-and-coming generation of homebuyers?
In this article, we’ll discuss some important trends seen within the Gen Z demographic. We’ll also review nine ways to win their business through strategic borrower education.
What Should Mortgage Lenders Know About Gen Z?
According to a Zippia report, the average loan officer is 44 years old.[iii] As such, many loan officers aren’t tapped into the Gen X experience, leading them to rely solely on speculation. Rather than speculating, it’s important to get to know Gen Zs directly so you can better meet their needs.
Ally Carty, Active Comply’s Gen Z guru, conducted weekly Instagram surveys with Gen Zs about homeownership. Here’s a summary of her findings:
- Many Gen Zs are scared of the home-buying process – Buying a home is the most substantial financial decision most people will ever make. For this reason, it can be an intimidating endeavor, especially for young borrowers who don’t know exactly what the process entails.
- Gen Zs may be hesitant to ask questions – Having grown up with access to the internet, many Gen Zs pride themselves on researching topics ahead of time. However, the mortgage world is chock full of confusing acronyms and ever-changing regulations. When these young applicants aren’t familiar with certain mortgage terminology, they may avoid asking for clarification from their loan officer out of embarrassment.
- Gen Z is facing challenging economic conditions – Housing unaffordability has been on the rise for many decades. That’s because wages haven’t kept pace with the cost of real estate.[iv] Today’s high interest rates aren’t helping the situation. Due to these affordability barriers, some Gen Zs have an uncertain outlook about their home-buying prospects.
How to Attract and Engage Gen Z Borrowers
With these characteristics in mind, here are nine effective methods for capturing the business of Gen Zs when they’re ready to enter the housing market:
#1 Break Down the Basics
According to Carty, 41% of Gen Zs said that their biggest obstacle to buying a home is education and knowing where to start. You can resolve this obstacle by producing educational content with Gen Z borrowers in mind.
Create content for someone who doesn’t know anything about the home-buying process. For instance, you can explain some of the industries’ most common acronyms (DTI, FHFA, LTV, etc.), discuss the core components of creditworthiness, and map out the factors that can impact mortgage eligibility.
By covering the basics, you can bring Gen Z borrowers up to speed and help them proceed confidently with the home-buying process. You can share this First-Time Homebuyer Guide with them to kickstart the process.
#2 Dispel Common Credit Myths
Another helpful topic to touch on in your borrower education is myths about buying a home. Here are just a few credit myths that many Gen Z’s may have fallen prey to:
- You need a down payment of at least 20% to get a mortgage
- You need an excellent score to qualify for a mortgage
- Renting a home is always cheaper than buying one
Myths like these may be keeping many Gen Z borrowers from pursuing homeownership at this time. Dispelling them can encourage these would-be homebuyers to start exploring their options sooner than later.
#3 Don’t Sleep on Social Media
It’s no secret that Gen Z lives online. In addition to socializing and seeking entertainment, Gen Zs use social platforms to conduct research. Youtube, Instagram, and TikTok are currently the platforms where Gen Z spends the most time scrolling.[v] By sharing your educational content prominently on these platforms, you can satisfy Gen Z’s search queries and get on their radar.
Don’t worry—you don’t need a ton of fancy lighting or editing to attract an audience. You just need to share helpful information. If you get your social strategy right, you may be surprised at the influx of inbound leads that come your way.
#4 Crunch the Numbers On Their Behalf
Many Gen Zs assume that renting is cheaper than buying. However, this isn’t necessarily the case. Many factors play into the cost-effectiveness of purchasing a home, from location to future home appreciation potential.
You can help Gen Zs make the savviest financial decision for themselves by breaking down the numbers on their behalf. For instance, you can show them:
- Rent prices vs. potential mortgage payments in their neighborhood
- Historic and projected housing appreciation in the area
- Average costs involved in homeownership (beyond mortgage payments)
- The opportunity cost of pushing off homeownership until later on
#5 Create Content Romanticizing Homeownership
While some Gen Zs may be convinced by the numbers, others may be motivated to buy a home for more emotional reasons, such as security, a greater sense of community, or the ability to customize their home to their heart’s content.
You can conjure up these emotions by romanticizing homeownership in your online content. With this marketing strategy, simply show videos of you or your past clients documenting the exciting parts of their homeownership journeys. For instance, you can showcase clients getting the keys to their new homes, hanging up their family photographs, applying their favorite wallpaper, and hosting cozy BBQs with their friends and family.
Displaying the rewards of owning a home may get more Gen Zs interested in the idea. In these videos, you can also market yourself as the go-to person to reach out to for all home-buying inquiries.
#6 Create Home-Buying Road Maps
Once a Gen Z borrower has decided to pursue homeownership, a whole new set of questions can arise: How do I find out if I’m eligible for a mortgage? Should I boost my credit score first? How long does the application process take? Should I start the home search now or choose a lender first?
You can create roadmaps or checklists for each of these parts of the home-buying process:
- Evaluating one’s mortgage readiness
- Shopping for the right lender
- Navigating the home search
- Applying for prequalification
- Applying for pre-approval
- Applying formally for a mortgage
- Getting through escrow
- Closing on a home
- Paying off a mortgage
- Refinancing when rates change
In your roadmaps, inform Gen Z how they should prepare for each stage, how to tell if they’re ready, what they’ll need, and what the subsequent process looks like. You can then share this content in video, infographic, article, and podcast form to maximize its reach.
#7 Be Supportive, But Not Pushy
NextGens can smell inauthenticity a mile away, so you want to make sure that your lending approach is supportive and sincere. In part, this means holding back from pulling credit prematurely.
Before you jump the gun, make sure an applicant is truly ready for that step and verify that they’re a good fit for your mortgage lending company. If they’re not, help them get ready or send them to a lender that’s better suited to their needs.
When Gen Zs feel like you’re truly in their corner, rather than pushing a sale, they’ll be much more likely to choose you as their lender when they’re ready to buy. They’ll also be more likely to gush about you to their peers.
#8 Play the Long Game
Gen Zs may be more hesitant to dive into the real estate market than older generations—but don’t make the mistake of dismissing them altogether. Nurturing relationships with Gen Zs who aren’t yet ready to buy can secure you a steady trickle of loan applicants over time.
You can build trust with Gen Zs before they’re ready to buy a home by:
- Finding out why they want to buy a home in the future
- Reviewing their financial situations
- Coaching them on their credit
- Clarifying their home-buying budget
- Establishing positive rapport
For instance, let’s say a Gen Z applicant is eager to buy a home for the appreciation potential. Unfortunately, their credit score is too low to qualify with you right now. You provide this borrower with personalized credit score improvement tips so they can fix their credit. After following your advice, they finally reach a place where they can qualify for their dream home.
Here at Certified Credit, we offer several credit score improvement tools you can use to facilitate this process.
#9 Provide Post-Purchase Recommendations
If you want your Gen Z clients’ repeat business and referrals, you need to nurture your relationships even after you’ve closed on their loans. One way to do this is to provide helpful recommendations for local plumbers, electricians, and general contractors.
Gen Zs who have only ever rented before may not have a Rolodex of these handyman services at their disposal. Thus, your suggestions can make their transition a whole lot easier. If you can offer any discounts, even better!
Capture More Gen Z Borrowers By Partnering With Certified Credit
By applying these nine strategies, you’ll be well on your way to attracting more Gen Z applicants in the coming years. Once they enter your lending pipeline, the next step is delighting them with digitized lending processes and dedicated customer service.
- Automated lead generation and borrower retention tools
- Automated prequalification
- Automated verification of income and employment
- Automated undisclosed debt monitoring
- Flood zone determinations
- Fraud and risk support
- Settlement services
Want more Gen Z insights? Check out our recent discussion with Active Comply’s Ally Carty in this episode of our Talk Data to Me podcast.
[i] Encyclopedia of Britannica. Generation Z.
[ii]Rocket Mortgage. 2022. 72% Of Gen Zers Plan To Buy A Home In Under 6 Years, But How Are They Preparing?
[iii] Zippia. Loan Officer Demographics and Statistics in the US. https://www.zippia.com/loan-officer-jobs/demographics/
[iv] Forbes. Millennials And Housing, Part 3: How Wage Stagnation Has Flipped The Housing Equation.
[v] Later. Where Does Gen Z Spend the Majority of Their Time Online?