Fewer Millennials Taking Out FHA-Backed Loans
Millennials are taking out fewer FHA-backed mortgage loans, according to the Ellie Mae Millennial Tracker. While 63% of all closed loans were made to Millennial borrowers, only 32% of FHA-backed loans were made to Millennials.
“Conventional and FHA loans make up the vast majority of loan types among Millennials, and tend to track in cycles. The numbers for June show us that, after a one-year high at 36 percent of all closed loans in February and March, FHA loans have been steadily decreasing for the past four months,” said Joe Tyrrell, executive vice president of corporate strategy for Ellie Mae. “Conventional loans are rising, from 60 percent in March to June’s 63 percent, indicating that, at least at the moment, Millennials are slightly more able to afford a house without government guarantees. Alternatively, this also demonstrates a potential opportunity for greater borrower education on FHA and other loan options available.”
Other key findings of Ellie Mae’s study include:
- 90% of loans taken out by Millennials were for home purchases and 10% were for refinances.
- Among all borrowers, 96% of FHA loans were for purchases and 4% were for refinances. For conventional loans, 87% were for purchases and 12% were for refinances.
- Nationwide, single men borrowed an average or $181,433, and single women borrowed $166,996.
- Millennials are mostly purchasing homes in the affordable Midwest. Topping the list are Muscatine, IA (the average loan is $143,988), Watertown, SD ($138,492), Frankfort, IN ($125,069), Oshkosh-Neenah, WI ($150,751) and Quincy, IL/MO ($107,589).
- The most expensive region in the country is California’s Bay Area, where the average loan was $598,606. The average home price in California was $315,967.
- The time needed to close an FHA-backed refinancing loan dropped from 55 days in May to 45 days in June.
Ellie Mae defined Millennials as mortgage applicants born between 1980 and 1999.