Conventional Loans to Millennials at Three-Year High

MBA NewsLink Staff

October 05, 2018

Ellie Mae, Pleasanton, Calif., said conventional loans taken out by Millennials in August reached their highest level in three years.

The company's monthly Millennial Tracker reported 69 percent of all loans taken out by Millennials in August were conventional loans, the highest percentage since February 2015 and a 5 percent increase from a year ago. The increase came despite "fierce" competition for affordable homes in many markets this spring and summer.

The report said FHA loans represented 27 percent of all closed loans, down from 32 percent the year prior. VA loans remained flat year-over-year at 2 percent. Three percent were undisclosed.

Ellie Mae reported 89 percent of closed conventional loans to Millennial borrowers went for purchases, compared to 84 percent a year ago. Overall, purchases represented 90 percent of closed loans to Millennials in August, compared to 87 percent a year ago.

"As the industry continues to understand Millennials and the new paradigms that a gig economy brings, we are seeing conventional loan products that are able to meet the needs of this important homebuying generation," said Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae.

Other report findings;

--Men (single and married) were listed as the primary borrower on 61 percent of closed loans this August compared to 32 percent for women; the remainder did not specify a gender.

--Days-to-close all loans dropped to 41, one day shorter than in July, and three days faster than a year ago.

--The average Millennial FICO score was 722, down from 723 in July and 724 in August 2017.

--Nine percent of all home loans to Millennial borrowers were for refinances, while 10 percent of conventional loans were for refinances, both up one percentage point from the month prior.

--The average age of all Millennial borrowers held steady at 29.8, and essentially flat from a year ago (29.4).

In a separate report, ValueInsured, Dallas, said those Millennial numbers could be so much higher, but for the state of the housing market.

With rising home prices and mortgage rates, Millennial homeowners are staying longer in their starter homes, many against their wishes to upgrade, according to the latest ValueInsured Modern Homebuyer Survey. The survey, conducted in the third quarter, found 85 percent of all Millennial starter-home owners wish to sell and upgrade to another home, but 78 percent are hesitant and have not made the move as they worry they could be buying high.

"This creates a housing bottleneck, severely limiting supply of more affordable starter homes historically made available when a generation of first-time homeowners upgrade and make room for the next generation," said ValueInsured Founder and CEO Joe Melendez. "This bottleneck is a key catalyst of today's housing affordability crisis."

The survey reported among Millennials who say they wish to sell and upgrade:

--38 percent say they can't afford to do so due to today's high home prices;

--23 percent say they fear they can't afford a new mortgage at today's higher rates;

--15 percent believe they likely won't net a profit after paying realtors' commissions, closing costs, taxes and moving costs associated with selling and upgrading; and

--21 percent are more pessimistic and fear they would lose money or owe their lender money after selling, so they need to stay put even when they are ready to move on and up.

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