It’s a shame that home buying isn’t like buying a TV. Go to the store, decide between a few brands, flash the cashier a coupon, and leave excited about your upgraded viewing experience with your new TV. Some aspects are similar, but for good reason, home buying is a weightier process that merits a more thorough review.
The weightiness of the homebuying process is most pronounced amongst first-time homebuyers. This is particularly true for Millennials, the generation who grew up through the largest US housing crisis in nearly a century. After watching parents, guardians, and friends emotionally struggle with their mortgage payments or losing homes, many of us developed an apprehension around taking out a mortgage. It’s no wonder that in the last decade homeownership rates have dropped 5%. Frankly, if I had grown up hearing from my parents that purchasing a TV hurt them financially, I would have anxiety about the future purchase (and would probably end up with a lot more free-time on my hands).
What can banks and credit unions do to help alleviate Millennial mortgage anxiety?
Part of the answer lies in guiding us toward better financial health. An analysis by NerdWallet found that 57% of Millennials said financial difficulties prevented them from buying a home. Many of these financial difficulties stem from the fact that we’re young and haven’t fully entered a steady career yet. But a lack of formal financial education isn’t helping. Many Millennials simply feel overwhelmed with finances and stick with renting. They don’t think they’re doing well financially. However, this could largely be debunked if Millennials knew where they stood with their finances. For instance, the same NerdWallet analysis found that 90% of those surveyed had ‘healthy levels’ of debt. If it was shown to them that they actually had a good relationship with their net worth, there would a decrease in the anxiety surrounding home buying.
Financial education starts with introducing tools that allow Millennials to know exactly where they stand with their finances and then appropriately make plans to increase their net worth. All of this is driven by accurate data that reflects the most current state of their finances.
Now more than ever these tools are in high demand, but unfortunately they are not always being supplied or are not sufficient or easy to use. As Mark Schwanhausser, director of Omnichannel Financial Services at Javelin Strategy & Research, said, "It really should be the banks that are winning in the personal financial app world. They have the best opportunity to safely and accurately present consumers their financial picture, but they've been slow to move in that direction."
Additionally, survey results from Novantas indicate that nearly half of Millennials who are looking to switch banks want their new institution to offer money management solutions. In fact, those who log in to their mobile banking app daily are 58% more likely to use money management tools than users who only log in once a week. These Millennials will deliver solid returns over the course of their lives.
The accessibility of these financial tools, driven by the user’s financial data, are what Millennials are keen to use to build and establish financial stability. Having aggregated and accurate data of their current financial picture helps build net wealth and stability requisite for the preapproval process with a mortgage lender — not to mention all the value it brings to the lender who can access this data and give poignant advice that puts the potential homebuyers on a track to success.
Is buying a home like buying a TV? No, not entirely. It really shouldn’t be, but that doesn’t mean that the process should generate endless anxiety. A data-driven money management tool offered by banks and credit unions helps Millennials view and manage their current financial situation simply and easily. It goes a long way to relieving any built up anxiety. It also provides any institution or lender a chance to be an advocate for the potential homebuyers as they navigate that process.