The following is a print feature that first appeared in MReport's January 2015 issue, available now.
In a market cycle where the purchase loan is king and prospects are few, lenders must tailor their marketing strategies toward tech-savvy homebuyers who'd prefer to work through the process themselves. The old adage "fish where the fish are" has never been truer. But now the fish—so to speak—have gone digital.
The current generation of first-time homebuyers has grown up with a computer in their homes and a cell phone in their hands. The level of service they expect is far, far different than that of any previous generation. To survive, lenders have no choice but to meet those expectations head-on. Just consider the numbers.
It should come as no surprise that nearly 60 percent of the country's adults have a smart-phone, according to the Pew Research Internet Project. Narrow that down to 35, the average age of first-time homebuyers, and the figure shoots up to 74 percent. Nor should it come as a shock that the National Association of Realtors (NAR) finds that 92 percent of homebuyers start their search online. When they do, they'll stumble upon seemingly countless websites offering online applications for pre-approval—catnip to digital do-it-yourselfers.
These are your first-time and move-up buyers, those who will be on radar for the next decade. These prospects think they know all the answers before engaging any mortgage professional in the process. If they could, some would probably try to edge them out altogether.
Be ready.
To stay in the game, you'll need to provide the right information at the right moment and be available at all times to direct—and, if necessary, to correct—their homebuying experience. To do that, lenders not only need to know prospects better, they must learn how to work harder and smarter.
For example, Fannie Mae's research on borrowers shows that those with higher incomes are using technology to shop for mortgages twice as often as borrowers with lower incomes. That same study also indicates that all borrowers anticipate using technology significantly more in the future to shop for a mortgage.
There are a number of strategies that lenders—especially smaller operations with limited resources—can immediately employ to be relevant to the first-time, digitally minded borrower. Here are few.
Respond quickly.
The Web is all about instant gratification. That makes for very impatient buyers. So again, loan officers need to be there, in person, when a consumer reaches out to them.
Based on a study by the Massachusetts Institute of Technology, online marketers who respond to prospects within five minutes have a 79-percent lead conversion ratio. In contrast, for those responding in 30 minutes, that conversion time drops to 34 percent. MIT data also shows that if a consumer chooses to pick up the phone these days, which they are doing less and less, and don't reach a real person, they'll hang up and presumably try somewhere else.
Embrace your smartphone.
It's a powerful tool; know how to use it. If your prospects are on their smartphones, your loan officers need to be as well. Young buyers don't talk on the phone; they read texts. Loan originators need to become savvy about texting, chatting, video conferencing, etc. Emailing is no longer a preference. Texting is—and it requires clarity and brevity. Smartphones also provide access to images, which you can save, use, and forward. They also allow users to embed links. Make sure loan officers' data plans enable them to do this anywhere, anytime.
Have an app.
Borrowers expect lenders to push relevant information to them. Develop a downloadable mobile app for them. It should provide appropriate security when transferring information, but also offer borrowers automatic status updates. A PwC Experience Radar reports that three out of five borrowers want their lender to offer a mobile app. They will help you as much as anyone else. The right sort of app can minimize the time spent updating borrowers, offering improved service to referral partners while leaving additional time for loan offers to prospect for new clients.
Vet your website.
Take your cue from successful retail sites. They feature fewer words and more images, videos, checklists, calculators, click-to-chat, and data-capture features. An online application should be just one click from the home page. It bears repeating: Digitally minded consumers have short attention spans and free, easy online access to other sources of information. If your site doesn't deliver what they need, they will go elsewhere.
Use your website to teach, as well as to sell. Be accurate. Offer engaging facts. Demonstrate processes using graphics and icons. Provide robust calculators that deliver what potential borrowers need to know. For instance, a monthly payment calculator should include escrow information, or at least make it an un-click option. It should provide average HOI and property tax rate tables for the municipalities where you're licensed to give a true picture of monthly mortgage costs. Above all, ensure your website reflects responsive design, is programmed to effectively translate to mobile, is easy to view, and can be used on smartphones and tablets.
Always think digitally.
Test new digital ways to reach borrowers. Apply those methods when it comes to putting information where borrowers can access it. Look at open-house fliers with a different mindset. Consider putting a QR code on the for sale sign that links to those fliers. This makes house information, along with loan information and comparisons, portable and always accessible. Then use the same QR code on property postcards, etc. Digital advertising is another way to reach prospects. Lender quick-link contact information appearing at the bottom of local realty apps or listings can put shoppers in touch quickly.
Surviving and growing market share during a purchase market is always hard work. The truth about this new purchase market is that borrower tools and behaviors changed dramatically while lenders were buried in the refinance boom.
A recent report from the Harvard Joint Center for Housing Studies predicts that millennials will drive the next purchase boom. Lenders need to get to know those buyers now to capitalize on their future home-financing needs.
It's time to get acquainted with new digitally minded borrowers who do their own research instead of simply trusting lenders to do it for them. Lenders not only need to deploy new tools, but the also need to invest in training loan officers to be comfortable and responsive in this new digital DIY environment.
Kristi Kovalak is the director of marketing at Lenders One and has more than 20 years of experience in marketing and communications. She is responsible for the marketing strategies at Lenders One, developing marketing programs for Lenders One members and managing the member marketing services team.