“Many of these people retire with very healthy IRA accounts. Know what the guidelines say about cash in the bank and ‘compensating factors.'”
Seventy-six million baby boomers were born between the years 1946 and 1964. In fact, it is reported that someone turns 50-years old every seven seconds. In Harry Dent’s latest book, The Roaring 2000’s, he predicts that the greatest economic boom in history will occur during the next eight to 10 years. It’s all due to the baby boomers reaching their peak spending years.
Think about it. Those people born in 1946 are 54-years old now. Those born in 1964 are 36-years old. For the next 14 years, there will be a huge number of people turning 50—which means that the economic boom has just started. Those who want to specialize in marketing to the over-50 group will have a major opportunity to make a good income and to establish a niche market before others realize the potential.
The boomers are expected to live longer than any generation in history, but they are planning on retiring earlier than their parents did. However, you can’t put all seniors into one group. When marketing mortgages to them, you need to know the definition of the four categories of the over-50 group.
The first group has children who are in college (or have moved out of the home). They are alone for the first time in their lives. They will continue to work but will go on more vacations and get more involved in social activities such as golf, clubs, or volunteer work. They do not need as much space to live in, but it’s important to them to maintain their home.
Then there are those who retire. They have worked for a company all of their lives, and they have a good pension and retirement program. They want a maintenance-free home because they want to play and not work. They will also try to relocate to areas of the country where other retired people congregate and will be buying homes, town homes, and villas in resort areas. Other people retire, but then start a business in the home. The entrepreneurs will work even after they formally retire from their regular jobs.
The multigenerational households are the people thinking about retiring. But children, parents, or grandchildren have moved in with them and they have to change their plans and lifestyle.
All of these groups will require a change in housing needs. This means buying down; buying up; home improvement; or buying townhomes, condos, and villas. With this in mind, you have the opportunity to be viewed as the financial expert by this large consumer group.
Before you decide to tackle this niche market, consider the additional education that will be helpful. Know your Fannie and Freddie underwriting guidelines regarding social security and pension income needed to qualify for a loan. For instance, the guidelines allow you to “gross up” the income (to qualify) if it is considered non-taxable income. Many of these people retire with very healthy IRA accounts. Know what the guidelines say about cash in the bank and “compensating factors.” In working with seniors, not only will you be a loan originator, you will also need to be seen as a financial advisor. It may mean taking some educational courses or teaming up with a financial planner. Expand your knowledge of home improvement lending and reverse mortgages. The issues facing the over-50 crowd are different than those concerning a young couple.
In marketing to this audience, you need to appeal to their changing household and changing financial circumstances. Where do you find these people to market to in the first place? Word-of-mouth advertising and referrals are very important. If you treat a senior well (and have a good customer-for-life program), the news will travel quickly through their social circles. They are very well established social circles—they have known their friends for a long time.
In addition, you can offer seminars on buying and selling their homes, with an emphasis on long-term financial planning. When holding these seminars, be sure to include a financial planner who is experienced in working with seniors. Also, you should include a real estate agent. There is a new National Association of Realtors (NAR) designation called a Senior Real Estate Specialist (SRES).
Advertise to the children of these seniors. The older parents often rely on the advice of their children when it comes to buying and selling a home. When advising them about mortgages, be prepared to counsel both the seniors and their children.
Advertise your mortgage services in resort area real estate magazines that highlight lake properties, mountain cabins, town homes, condos, and beach properties. When seniors are planning for retirement, they already have an idea where they want to live.
Advertise your second home mortgage programs to this market. They are buying their second homes now (in their peak earning years), so they build equity in the home upon retirement.
The stock market section of your newspaper is a good place to advertise. Many of these people have their retirement funds invested in the stock market and mutual funds.
Health and finances are the two main concerns of most people over the age of 50. A common dilemma is whether they will outlive their funds. People are living longer, and they worry that social security and pension income will not be enough. They will be living on a fixed income, so they may need to sell their home and buy another one so they can balance their budget. However, the senior market is not afraid of debt so they understand how leveraging their cash—taking out a mortgage—will help them live on their fixed income.
When developing your marketing pieces, provide something extra. Offer to include a financial planner at your mortgage application appointment. Recommend the services of a real estate agent who specializes in the senior market. Establish a one-stop shopping experience and market it that way. And don’t forget to use larger print in your ads and marketing pieces. The 50 plus prospects don’t like to (and sometimes can’t) read the fine print.
by Karen Deis