June 28, 2016 | By RGR Marketing Blog

Millennials and Mortgages: What Is There to Know?

As the oldest of the Millennial generation begins to enter the age where homeownership tends to traditionally follow other major life changes like getting married and starting a family, some interesting trends are developing. Millennials are apparently eager to buy, and some studies are showing that they are willing to relocate to where they can afford to buy.

In other words, they’re willing to move from the city center out to the suburbs. Unfortunately, policies enacted in the wake of the housing crisis have made it more difficult than ever for some young people to get the loan they need to purchase that first home.

A very high percentage of Millennials affirms that homeownership is in their plans when surveyed, and with nearly ninety million Millennials approaching the age when homeownership becomes both possible and attractive, the mortgage industry will need to find ways to serve them.

Some within the industry have suggested that a policy shift needs to happen within the federal government to either roll back lending regulations, or to ease loan requirements for federally guaranteed loans as homeownership nears record lows. But for the many Millennials who are ready to buy, understanding the issues facing them can be the key to bringing in their mortgage business.

The Barriers That Millennials Face With Mortgages

The Millennial generation is now considered to be the largest generation in U.S. history. And with Millennials now making a reported one in three of all home purchases, why then is homeownership nearing an all-time low? Aside from the oft-reported “failure to launch” syndrome, there are some hard economic reasons why Millennials aren’t embracing homeownership at rates in keeping with their expressed interest.

Millennials carry higher debt, mostly in the form of student loans, than any generation before them in U.S. history. Millennials also face a housing market and economy in which home prices are rising faster than wages. Lastly, mortgage accessibility and affordability are considered to be challenging Millennials’ desire to enter the housing market.

As rents in the inner cities that Millennials have until now called home have risen faster than wages, this generation has found it very difficult to put away anything approaching a reasonable down payment.

FHA to the Rescue?

With some estimates putting FHA loans at more than 1/3 of all home loans made to the Millennial generation in the last two years, it may seem like the only way out of the current, potential ownership crisis is to turn to federally insured loans. After all, the FHA’s three and a half percent down payment is very attractive to buyers in this generation.

But with high mortgage insurance premiums attached to the payments on these loans, federal backing is hardly a complete solution. Until Millennials’ earnings catch up to rising home prices or policy shifts happen that loosen lending requirements, it will be up to lenders to understand the challenges that this largest-ever generation brings to the mortgage equation.

If you're in the mortgage business and you're in need of fresh new leads to bring in more business from the Millennial generation, get in touch with RGR Marketing today. We've got the highest quality mortgage leads in the industry, and we're ready to help your sales team succeed.

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