Recently, my wife and I were driving to the beach for dinner … or somewhere to enjoy being “Empty Nesters,” when we received a call from my oldest daughter, who just turned 30. After we hung up, Lori reached up and gave me a “High-Five” with excitement, remarking “Look at us! We raised an intelligent and financially-savvy child!”
Now, she was not surprised that we had raised an intelligent child; both of our daughters are intelligent, amazing young women. However, our daughter, for most of her early years, did not have an interest in finance, homeownership or mortgage rates. In fact, she’s battled cancer twice and is now married and has two daughters of her own. Don’t get me started on my three grandbabies, but do connect with me on Facebook if you want to be inundated with proud Papa pics … LOL!
I digress. The conversation went like this: “Dad, I just got off the phone with John and we discussed the possibility of reducing our rate to enhance our cash flow, accelerate our principal reduction, and consider some minor debt consolidation.”
Wow! I’ve been in mortgage lending for more than 30 years. Like most of us, I believe that homeownership and real estate is foundational to sound net worth. I also believe that owning a home not only provides shelter, but it creates life memories. And, a home allows people to express themselves creatively as a physical asset that can be re-modeled and enhance lifestyle. Just look at Pinterest traffic on interior design. The benefit for most families is endless.
But there are many discussions in our industry about whether Millennials will engage in ownership, delay buying or become long-term tenants.
This story shares the importance that mortgage originators own in helping develop the financial well-being of Millennials, and being coaches and financial advisors as well.
My daughter and son-in-law recently purchased their home. They had known John, their loan officer, for many years as he and I have worked closely together and have a strong friendship. John was unbelievably educational for them when they purchased their home. He gave them guidance on loan products, taught them how to understand documentation and real estate contracts, and even worked with them to learn about solar panels as part of the purchase contract. They both become highly engaged in the process and inquisitive about all aspects of the transaction.
Within a year, interest rates had fallen more than expected. John and I discussed the current environment and he reached out to them to discuss refinancing their mortgage. That’s when we received the call I described above. As they reviewed their options, our daughter and son-in-law determined that they had already accumulated $30k in equity after John had the appraisal completed and they reviewed their transaction. The appreciation was simply an added benefit because the refinance still met the objective that they had discussed with John.
In my view, this story is a perfect illustration of the importance that a loan originator provides to young families. I’ve outlined several points below from the perspective of an industry leader that define my belief relative to the importance of loan originators in our country.
Here are the main points ...
1. Loan officers are MIFAs, the Most Important Financial Advisors, that young people have in developing net worth. Many of us have used this phrase for years to describe the impact that loan officers provide for their clients. As an industry leader, and more importantly a parent, this phrase has never been more essential. Buying a home loan today is a complicated process. There are multiple origination channels and omni-channel methods of communication. Clients can be confused about online availability and whether to trust the sources of mortgages available to them. Clearly, consumers are becoming more comfortable online and our industry is moving quickly relative to secure methods of validation for assets and income. A MIFA is critical, not only to the financial advice required to make a homebuying decision, but also the channel to provide personal documentation and digital transfer of information. We are in a high-trust industry and strong loan originators embrace the responsibility.
2. Real estate remains the most sound investment most people will make in their lifetime. Loan officers teach young people how to think about growing net worth and the importance of managing debt. Remember, our educational system does not teach finance related to homeownership as a main course of study. And yet, it has the strongest impact on net worth that most families achieve in their lifetimes.
3. Owning real estate can create opportunity for future investment properties. First homes today can become future investment properties. Currently, there is high rental demand and an influx of buyers from overseas bolstering demand. In many situations, young families move up to a larger home within five to seven years and maintain their first home as a rental property. This can provide a future cash flow stream and teaches the art of managing investment property and importance of financial diversification. Clearly, there are multiple factors that require education: property maintenance, managing tenants and RE contracts, costs associated with repairs and labor. But an educated loan officer can be a tremendous source of support for helping young families expand their investment resources and be knowledgeable about economic conditions.
4. Markets are cyclical, however there are important opportunities in all cycles that can help create future wealth. Loan originators can help people understand that buying real estate is not all about the value of the property today or the interest rate. Managing principal reduction is critical to establishing equity aside from property appreciation. Prices are cyclical. Many times, buying at any time in the market cycle can be a wise decision based on family needs, interest rates, income levels, and a variety of factors.
5. The prime working years to build wealth in real estate occurs between the ages of 30 to 60. Since mortgage terms typically align with this period, loan officers can be transformative in helping young people think about how their real estate investments align with their primary working years and the importance of owning real estate and managing their debt reduction.
6. Building a sound business for mortgage originators often begins with nurturing a database of Customers for life. It all starts with 1st time homebuyers or the children of clients you’ve nurtured for many years.
While the industry is providing omni-channel opportunities to help consumers manufacture loans, the consultation necessary for first-time homebuyers and most consumers, quite honestly, remains extremely important. The strongest originators I’ve known are attentive to their businesses in several ways:
►The development of strong referral partners
►Being consultative to customers and “directing” them on how the process will work
►Utilizing the tools available including digital processes to heighten efficiency
►Nurturing your database
►Strong networking focus. Everyone is a potential homebuyer or refinance customer.
►Engaging support departments to communicate directly with customers and illustrate a team approach. Delegating tasks effectively.
►Being the CEO of your business. Focus more on the points above and allowing the business to function.
I’ve experienced tremendous success in our industry, and I’m grateful for the career I’ve chosen and all the incredible people in our industry. But, as a parent, I’m even more appreciative of the consultation and guidance that John provided to my daughter and the impact that all loan officers have on the lives of young people throughout our country who are buying their first home.
I hope that loan officers who consider themselves ‘CEOs’ of their own companies consider themselves as MIFA’s to their Millennial clients to build future annuities in their personal business. They provide tremendous value to these young borrowers.
As a parent, and industry leader … thank you!
Ed Adams serves as senior vice president, retail production for Mountain West Financial Inc. Ed most recently served as the director of retail mortgage for BOK Financial, a financial institution with more than $40 billion in assets. He brings 32 years of retail mortgage lending experience to his position at Mountain West Financial.