Executive Conversations is a HousingWire web series that profiles powerful people in the financial industry, highlighting the operations and the people that make this sector tick. In the latest installment, we sit down with Margaret Crowley, MGIC's vice president of marketing and customer experience, to find out how MGIC helps educate borrowers on how they can afford their first home.
Q. What are some common misconceptions first-time homebuyers have about purchasing a home?
A. By far, the biggest misunderstanding concerns the down payment. Simply put, many first-time homebuyers think they have to put 20% down to buy a home. Since it would typically take years for a first-time homebuyer to save that kind of down payment, many borrowers who would qualify for a loan do not even apply. So I think getting the word out to potential homebuyers about what it really takes to get a home loan today is important.
Another misconception many consumers have, as well as many people in our industry, is that first-time homebuyers are the FHA’s domain. While FHA plays a vital role in our market, it is often misconstrued as a “loan program,” when in fact it is government-provided mortgage insurance. In fact, for many borrowers, a loan insured with private mortgage insurance (MI) can be less costly than an FHA loan and, unlike FHA, borrowers will not need to apply part of their down payment funds towards payment of an upfront premium.
By saving borrowers money, a low-down-payment loan with private MI allows them to build up more equity over time. Private MI can also be cancelled when the loan reaches 80% of the original property value, whereas FHA mortgage insurance remains for the life of the loan unless the borrower puts at least 10% down.
Q. What makes the Millennial generation of first-time homebuyers different than generations past?
A. In many ways they are not much different. Now, the sheer size of the Millennial generation is staggering, so it is no wonder the industry is so focused on this demographic. In fact, we have developed several mortgage infographics to help our customers better understand this generation of buyers. Millennials now outnumber Baby Boomers and make up an entire quarter of America’s population. They are the largest demographic to ever enter the housing market.
Millennials have more access to information than past generations. They are tech-savvy, educated, research everything and weigh multiple points of view, from which smartphone to buy to what brand of running shoes is best. They may also be the first generation who values the opinions of their peers more than “expert” opinions. Because they are so engaged with different social media platforms, they are well connected to large networks of people. Above all, Millennials value relationships — they are eager to influence, and to be influenced.
However, this group believes in homeownership. When you examine the National Association of Realtor’s 2015 Home Buyer and Seller GenerationalTrends, we see that 66% of buyers ages 34 and under bought homes in suburbs or small towns compared to urban areas; 80% purchased single-family detached homes. So in these ways, they are very much like generations before them.
And like generations before, where they are struggling most is coming up with the down payment. Twenty-five percent of Millennials say they would move up their home-buying timeline if they had access to a down payment, which is why programs like Fannie Mae’s HomeReady, Freddie Mac’s Home Possible Advantage and MGIC Go! are so beneficial.They allow borrowers with credit scores of 620 or higher to purchase a home with as little as a 3% down payment, and 100% of that can be from gifted funds.
Q. What is MGIC doing to meet the needs of their customers and today’s first-time homebuyers?
A. Recently, we surveyed our customers and 74% responded that first-time homebuyers are a very important focus. It’s high priority for our customers to reach out to this market, so we have a lot of first-time homebuyer resources targeted to Millennials. We believe that borrowers who are educated about what it takes to be a homeowner have a higher degree of success, and our Homebuyer Education program breaks the home-buying process into easy-to-understand chunks of information using online tutorials. The program is available in both English and Spanish. After potential borrowers work through the tutorials, they can take a homebuyer education test and earn a certificate of achievement that fulfills Freddie Mac’s and some housing finance agencies’ education requirements.
We recently launched another website that contains tips and information for first-time homebuyers, homediggidy.com. HomeDiggidy’s content is a blend of personal experience and research, and our goal is to help potential borrowers make smart, informed decisions when it comes to buying a home.
We also educate and train our customers on how to work with, market to and reach first-time homebuyers. Every month we host training webinars and workshops, and we post recorded webinars and tutorials on mgic.com. Topics range from social media strategies for loan officers and how to market effectively to Millennials, to more technical topics like appraisal training and fraud detection. We have a First-Time Homebuyer Kit available to our customers free of charge — it’s a turnkey “seminar-in-a-box” that includes everything needed to offer a home-buying workshop to potential borrowers.
Q. How can private MI help today’s first-time homebuyers?
A. Private MI is a great option for first-time homebuyers because it allows them to purchase a home with a lower down payment and closing costs. With MI, borrowers can get into a home sooner, or they might even be able to buy up. They can get the house with the pool in the backyard or one in a better school district. Or, they could keep that extra cash and be able to purchase new furniture or appliances.