The mortgage industry is currently facing a number of pressing issues, ranging from rising interest rates to the ongoing affordability crisis. Since the 2008 financial crisis, lenders have become more cautious about who they lend money to, and credit standards have been raised accordingly. It’s harder to meet the minimum standard to buy a home in the first place, and the costs are fundamentally higher. For the modern borrower, finding a mortgage loan seems prohibitively expensive.

Challenges Faced by Modern Borrowers

Modern borrowers face numerous challenges before participating in a more cautious mortgage industry. A housing shortage in the United States has caused the cost of a home and a mortgage to rise. This has had a major impact on those looking to buy a home, particularly first-time home buyers. 

Furthermore, modern borrowers struggle to find multiple income streams when necessary, and a generational gap has changed the game for financial literacy. It’s hard to learn from parents or grandparents who could afford a house because it costs them less.

Emerging Trends in Mortgages

Recently, many home buyers have moved away from the traditional 30-year mortgage in favor of a 40-year mortgage. The extended amount of time results in lower costs for each payment, but the interest is spread out over an additional 10 years. It might mean savings in the short term, but buyers relying on this new mortgage strategy will end up paying more for their homes in the long term.

AI and Education: Promising Policies from Mortgage Lenders

Fortunately, many mortgage lenders have seen the issues modern buyers face and implemented new policies and products to meet these challenges. Several prominent mortgage lenders intend to combat the gap in generational financial literacy by providing education tools better suited to the actual state of the market. These efforts would ensure buyers stay informed with modern approaches rather than relying on gaps in generational understanding.

“We see borrowers who make plenty of money and have the ability to pay a mortgage, but are stuck between outdated guidelines and the current realities of employment,” Michael Pearson of A&D Mortgage said. “Lenders who are more nimble can address this gap.”

Some mortgage lenders even rely on artificial intelligence (AI)–powered chatbots to guide modern buyers to the right agent while answering simple questions and providing educational resources. AI has become a powerful tool in many industries, handling mundane tasks so employees can focus on more important issues. This technology will likely find a home in the mortgage industry moving forward to ensure clients have their questions answered promptly and accurately whenever they arise.

Smaller Lenders and Adaptability

Smaller mortgage lenders are also becoming more popular due to their ability to adapt rapidly to a changing market. People also prefer the personal touch smaller mortgage lenders offer, something that is not always found with larger lenders. A larger mortgage lender might have more resources but is also more distant from the local markets and tends to standardize its lending practices—even for areas and buyers to whom it might not apply. Some mortgage lenders even permit alternative income mortgages, where eligible borrowers use bank statements or assets to verify income rather than a W-2 or a tax return.

A Promising and Uncertain Future

The future of the mortgage industry is promising and uncertain for both modern buyers and lenders. Buyers are looking for alternative solutions, and lenders are working to provide the right solution. Though many lenders are predicting an upcoming resurgence in the industry, it remains to be seen what the results will be for buyers and the eventual solution.