Ellie Mae: FHA-backed loans increase as more Millennials start buying homes
Attracted to lower down payments and FICO requirements
The mortgage market will begin to see more FHA loans as Millennials increasingly enter into homeownership, according to the latest Millennial Tracker report from Ellie Mae.
Millennials continue to utilize FHA loans, which represent 35% of all loans closed in January, up slightly from 34% in December. Comparatively, Ellie Mae’s January Origination Insight Report showed that FHA loans represented only 21% of closed loans for the month.
And FICO scores continued to slip in January, perhaps showing a loosening of credit standards as the average FICO score for all loan types for Millennials fell to 724. This is down from the peak of 726 from August through October. For purchases, the average FICO score was 748 a conventional loan, 690 for an FHA loan and 734 for a VA loan.
“As the purchase market heats up, we will continue to watch the FHA purchase trend amongst Millennials,” said Joe Tyrrell, Ellie Mae executive vice president of corporate strategy.
“It is not surprising to see millennial borrowers leverage FHA loans because they typically offer lower down payments and lower average FICO score requirements than conventional loans,” Tyrrell said. “As more millennials enter the market, we expect to see the popularity of FHA loans continue to increase.”
Time to close ticked up one day across all loan types to 49 days in January, up from 48 days in November and December. While purchases took an average of 46 days, refinances moved slower at 58 days.
Last month’s Millennial Tracker report showed that single women are the most popular users of FHA loans within the Millennial population.