Many millennials are now wanting to purchase a property. The concern is rising interest rates and saving money for a down payment. Hence the popularity of borrower-friendly FHA home loans. The qualifying borrower simply has to put down 3%. It seems that millennials are taking out bigger FHA loans than in the past. This helps them compete in markets with limited housing supply.
What the study discovered
According to the Ellie Mae Millennial Tracker:
- Last November, 26% of the millennial loans completed were FHA loans.
- A typical FHA loan was $186,454. November 2017: $178,862, November 2016: $170,167
- Borrowers are taking out substantially bigger FHA loans than in prior years. Example: in November 2018, the average FHA loan amount was $505,871, up from $460,853 a year earlier in San Francisco, and $353,680 in Boston. $ 313 168 vs. $283 584 in D.C. And $194,630 in Chicago compared. $178,335.
- In 56% of FHA loans, males were the principal borrower. Women made up 35%. 9% were unspecified.
This information should be comprehended.
Joe Tyrrell, senior vice president of strategy and technology at Ellie Mae, is not surprised by these findings. Fairway Independent Mortgage Corporation’s Michael Mesa is a staff member. In his opinion, many millennials are saddled by student loan debt, which prevents them from setting money aside. Hence, the attractiveness of FHA mortgages Mesa recommends an FHA loan for those with a lot of debt or who have experienced credit troubles in the last 12 to 24 months. These numbers also suggest that Millennials are more likely to buy a home.
Advantages of an FHA-insured mortgage
Millennials and others are drawn to FHA loans for a variety of reasons. One benefit of FHA loans is that they are guaranteed by the United States government (the Federal Housing Administration). As an added bonus, Mesa offers a wide range of alternatives when it comes to DTI and credit score.
Want a 3.5 percent down FHA loan? FICO score of 580 or above and a DTI ratio of less than 43 percent are the only requirements. You must be working and have proof of income to apply. Additionally, you’ll be required to occupy the home you buy. It’s mandatory to pay for mortgage insurance if your down payment is less than 10 percent.
Get pre-approved for an FHA loan
Before applying for an FHA loan, make sure you’re ready to be a homeowner.
Pay off your student loans, as well as any other debts you may owe. “Tyrrell recommended that you start with the highest interest debts first,” Mesa recommends that consumers use no more than 35% of their available credit.
Improving one’s credit rating A reduced monthly mortgage payment is the result of a lower interest rate. Mesa recommended that you keep an eye on your credit report.
Make a spending plan. Make a budget for all of your expenses so that you know how much of a monthly mortgage payment you can realistically afford.
Look into the local real estate market. Tyrrell advises: “Find the cheapest regions,” he says. “Get a better understanding of the swings in the property market.”
Save money in other ways. “Consider the differences between urban and suburban living. Locate more affordable options in areas where there is a larger supply. Tyrrell recommends looking for ways to save money on a daily basis.
Try to save at least 3.5 percent of the purchase price in your chosen area.
Learn the home financing procedure. ”Learn what documents are required to apply for a loan and how to be approved,” adds Tyrrell.
Locate lenders who have been approved by the Federal Housing Administration (FHA). Tyrrell advises that you try out a variety of suppliers to find the best fit for your needs.
Make a loan application with the Federal Housing Administration. Gather any and all documentation that a lender may require. Prepare any financial explanation letters that a lender or underwriter may want.” A complete and clear loan application increases your chances of approval.” Letters of explanation can be written by a knowledgeable mortgage loan officer.