The National Association of Realtors is forecasting another strong demand year in 2017 for purchase transactions. They are also saying that they hope first time home buyers re-enter the market next year as opposed to staying on the home ownership sidelines like they did in 2016. Homeownership is at a 50 year low and the one way to significantly improve that number is to increase first time home buyers. Who are these first time home buyers and what can the industry do to get them into the purchase market?
2017 is poised to be a revolutionary year for first time home buyers. Over 50% of new home purchases will be first time buyer transactions. Most of these first time buyers will be Millennials – families or individuals between 21 and 34. Millennials have been changing the technology landscape for years, why would the mortgage industry be any different?
Many Millennials use their smartphones as the first point of shopping. 89 percent use their phone to connect to the internet versus 75 percent using a laptop. In order to reach this audience, the mortgage industry needs to be mobile friendly.
So, how does the mortgage industry utilize mobile technology? The loan process is complex and can be intimidating to first time buyers. There are several companies that have developed mobile apps to educate the buyers and get them started in the loan process, such as, myFICO and Credit Karma, which track FICO scores. Realtor.com developed Real Estate App, which, in addition to a five years’ of home value, also provides five years’ worth of property taxes. For the actual application process, Bankrate’s Mortgage Calculator and Zillow Mortgages mobile apps, give good estimates into mortgage payments. These mobile apps are a great start, but the industry can do better – much better.
Imagine a mobile app that takes the mortgage applicant from the initial FICO score query through to the close date and perhaps beyond. Having a mobile that would track where a mortgage loan is in the process with updated close dates or needed information is a time saver for both the consumer and the mortgage industry.
For example, Mr. and Mrs. Smith applied for a loan and it is in the underwriting process, however, the underwriter needs an updated W-4 form for Mrs. Smith. The underwriter checks a box indicating an updated form is needed, which sends a notification to Mr. and Mrs. Smith’s mobile phone. The Smith’s know within seconds of the needed form and can respond quickly. As a result, the underwriting process is shortened and the loan can close a few days earlier.
Mortgage professionals such as Clear Mountain Bank, are beginning to use mobile technology that makes it easier for first time buyers to apply, know where their loan is in the process, and understand what is happening and why. Mobile apps like these will revolutionize the mortgage process.
Forecasters are expecting rates to move up in 2017. Increased rates mean a good portion of the re-finance business may be gone. Taking a holistic view of the mortgage process and developing the tools that customers will use should be a focus in the upcoming year – benefiting the largest generation as they enter the home buyer market.