The world continues to keep a fixed eye on Millennials - born between the early 1980s and as late as the early 2000s – as they have completely altered consumer behavior. This generation is defined as never having known life without digital technologies and expansive communication channels.
Now that millennials have reached a prime home buying age, both the mortgage and real estate industries are watching even more closely. And a June report by the Ellie Mae Millennial Tracker Report showed an interesting trend. According to this report, Millennials are becoming less dependent on loans from the Federal Housing Administration (FHA) and are turning more toward conventional loans.
For reference, an FHA loan is a mortgage that is insured by the Federal Housing Administration. These loans usually require a smaller down payment - with a qualifying credit score - than many other home loans. A conventional loan is not insured by the government, requires the borrower(s) to have a good credit score and typically demands the 20% down payment on a home.
For the month of June, Ellie Mae reported that 63% of millennial loans that closed were conventional, compared to 32% FHA loans. That’s a decline in FHA loans for four consecutive months.
Could it be that more millennials can actually cover a sizeable down payment on a house? Or is it simply that they don’t know other loans exist?
If it’s the latter, then loan originators, mortgage professionals and even real estate agents will need to get to work educating homebuyers about their many options.
If you have questions about buying a home and obtaining a mortgage, find a Motto Mortgage office near you.