The youngest generation of homebuyers is depending less on loans from the Federal Housing Administration, according to the monthly Ellie Mae Millennial Tracker report.
Millennials, defined as the generation born from the early 1980s to mid 1990s, are entering the housing market as first time buyers, and the latest report from Ellie Mae shows their dependency on government-backed loans continues to shrink.
During June, 63% of all closed loans made to Millennial buyers were conventional loans at an average amount of $205,066, compared to 32% that were FHA loans with an average amount of $173,381.
“Conventional and FHA loans make up the vast majority of loan types among Millennials, and tend to track in cycles,” said Joe Tyrrell, Ellie Mae executive vice president of corporate strategy. “The numbers for June show us that, after a one-year high at 36% of all closed loans in February and March, FHA loans have been steadily decreasing for the past four months.”
“Conventional loans are rising, from 60% in March to June’s 63%, indicating that, at least at the moment, Millennials are slightly more able to afford a house without government guarantees,” Tyrrell said. “Alternatively, this also demonstrates a potential opportunity for greater borrower education on FHA and other loan options available.”
Most Millennials are barely entering the housing market, and 90% of mortgage originations were purchase originations, while only 10% were refinance originations.
Among FHA originations, even more were purchase originations at 96%, compared to 4% of refinance originations. Comparatively, for conventional loans, purchase originations made up 87% and refinances made up 12% of originations.
Single men took out higher mortgages than single women at an average $181,433 compared to $166,996. A recent study from LendingTree showed while Millennial women hold better credit scores than men, their homeownership rate is lower.
The time to close FHA loans dropped significantly in June to 45 days, down a full 10 days from 55 days in May.