MortgageReal Estate

Understanding the homeownership gap, and filling the void with education

Millennials still cite down payment as barrier to homeownership

There has been much written lately on the rate of homeownership, how low it is compared to past decades and explanations for its lag. The fact that Millennials-expected to create 2 million households a year over the next decade-are dealing with unwieldy student loans, weak housing inventories and high prices goes some way to explaining why the rate of homeownership in the U.S. is at its lowest level since 1965.

But it’s important to remember that many of those same people want to own a home of their own; it’s just that it does not seem within their reach. Equipped with the proper information and support, the possibility of responsible and sustainable homeownership is not as remote as it may seem.

Fear of risk, fear of debt

At least part of the trepidation on the part of Millennials who might otherwise be entering the homeownership market is an aversion to debt. For a generation that came of age during the Great Recession, the prospect of taking on a mortgage payment can be daunting. Many are already wrestling with student debt.

According to the Federal Reserve Bank of New York, 43.3 million Americans have student loan debt totaling $1.26 trillion. With an average monthly student loan payment of $350 for borrowers aged 20 to 30, it’s no wonder many Millennials are putting off homeownership.Viewpoint 2

Sadly, America’s slow recovery out of the Great Recession holds no shortage of cruel irony for Millennials. In addition to contributing to a downward trend in wages at exactly the time of life we’d expect them to invest in a home, the slow recovery has kept housing inventories depressed and housing prices, by consequence, high.

By another name, Millennials are the Renter Generation, for whom just saving for a mortgage down payment seems out of reach: data gathered by TD Bank last year shows that for 74% of Millennials, saving for a down payment is the biggest obstacle to homeownership. 

But another factor discouraging many Millennials is a simple lack of knowledge about the mortgage application process built on an underlying fear that it’s too complicated and an assumption that conservative lending practices mean they probably wouldn’t be approved for a mortgage anyway.

Educating a cost-conscious consumer

At Radian, while we applaud Millennials for their caution and their responsible approach to buying a home, as an industry that serves to support the housing market, it is also incumbent on us to work to increase their awareness of the options that are available to them as they embark on their home-buying process.

For example, we still hear that some first-time homebuyers are not aware that they have the ability to own a home with down payments as low as 3% rather than the 20% they may have heard. We’re also concerned that the fast-growing minority groups within our society may suffer from a similar lack of knowledge.

Filling the void

Taking our concern one step further, Radian has embarked on several education-focused initiatives. For the broad spectrum of potential new homebuyers, we recently relaunched our soup-to-nuts home-buying web guide, www.achievethedream.com, which educates consumers on a wide spectrum of facts and information to help them achieve responsible homeownership.  For example, the website walks consumers through the criteria involved in low down payment mortgage options as well as the potential costs involved in closing. In addition to these invaluable tools and resources, visitors to the website can also get a free credit score and credit consultation through iQual’s ApprovalGuard program.

To support minorities and help them understand the home-buying process, Radian has built relationships with a range of housing advocacy groups and formed exclusive educational partnerships with minority real estate trade organizations, including the National Association of Real Estate Brokers (NAREB), the National Association of Hispanic Real Estate Professionals (NAHREP), and the Asian Real Estate Association of America.

Also, recognizing that perhaps more than ever, Millennials’ approach to investing in a new home is influenced by fear, in 2015 Radian introduced the first of its kind job loss insurance program called Radian MortgageAssure. Designed to provide homeowners peace of mind after an involuntary job loss, this program effectively reduces the risk of job loss-related late or missed mortgage payments, while offering lenders further protection against default.

The confluence of events and conditions that created a challenging housing market for many potential first-time homebuyers happened over several years. With targeted outreach and education, the aim should be to help this portion of the market much faster.

3d rendering of a row of luxury townhouses along a street

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