The major mortgage agencies like HUD, the parent of the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac look at thousands of data points to create new loan programs available to homebuyers (and current owners looking for a refinance transaction). One of the main data points they have looked at lately is, who are buying homes?
Freddie Mac Green Choice Mortgages For Millennial Homebuyers During Today’s Booming Housing Market
Currently, millennials make up approximately 37% of homebuyers and over 50% of all newly originated mortgages, when you include refinance transactions. Many experts split millennials into two separate categories, younger millennials, and older millennials. A younger millennial is someone born between 1990 and 1998, and an older millennial is somebody born between 1980 and 1989. As of today, older millennials are purchasing more homes than younger millennials by a near 2 to 1 ratio.
Gen X and Baby Boomer Homebuyers
After millennials, Gen X, followed by baby boomers are buying the majority of homes in the United States. The data makes sense as many Gen Z individuals are new to the working force and more than likely do not have enough money saved to purchase a home at this time. These data points are very important when it comes to creating new mortgage programs. Mortgage programs geared towards younger millennials as well as Gen Z’ers are set up around home energy efficiency.
What Is Freddie Mac Green Choice Mortgages
In fact, Freddie Mac has recently come out with a Green choice mortgage program that we will get into more detail about later. For most homebuyers, a low-down payment option is very important. And with the historic low-interest rates that we have seen over the past two years, this has allowed many first-time homebuyers to enter into the home buying process.
Reason Why Millennials and Generation Z’ers Are Hesitant In Buying A Home
Why are some younger millennials and Gen Z’ers hesitant about buying a home? Many of the younger Americans are scared of home ownership. Part of the reason is many of them tend to gravitate towards larger cities and have been stuck renting. The younger generations are used to this process and are conditioned to think this is the better option. When you are a renter, and something goes wrong, the responsibility falls on your landlord, and not your pocketbook. Also, purchasing a home in a major city can cost quite a bit of money, which is a giant obstacle.
Obstacles With Buying A Condominium in a Condo Complex
With many housing projects being condominium buildings, low down payment financing through agencies such as FHA and VA may not be available. It depends on the specific requirements of the condominium building. The complex as a whole must be approved with VA or FHA (FHA does allow single-unit approvals, but the complex must be up to agency standards). While many older millennials and Gen X individuals enjoy living outside of the city, this opens up more single-family home opportunities.
The importance of Saving Money For Millennials
Younger millennials are considered to be highly frugal. This is a good trait for some aspects of life but also can make it too daunting to purchase something that costs multiple hundreds of thousands of dollars. The younger generations may not understand the importance of appreciation as well as paying the principal balance on something you own. When you are a renter, every monthly housing payment you make pays down the principal balance for somebody else (your landlord). When you own a home, as your home appreciates in value, you also pay down the principal balance on what you owe creating equity. This equity can be used later in life for many different purposes.
The Mentality of Homeownership As A Great Investment
Many of your parents may have been able to take advantage of the rapid appreciation of homes in the early 2000s creating high amounts of wealth. But they may have also been stuck in the bubble losing all of that equity plus more. The hesitancy in the Federal government has created doubt in the housing market for many Gen Z’ers as well as younger millennials. However, we still feel that buying a home is a great asset for long-term wealth. And even in the crazy housing market, we are currently in, this is a great time to buy a home.
About Freddie Mac Green Choice Conventional Loans
Freddie Mac GREEN choice mortgage program (http://sf.freddiemac.com/working-with-us/origination-underwriting/mortgage-products/greenchoice-mortgages ) – This new conventional mortgage program offered by Freddie Mac helps homeowners reduce home utility costs and will then place you in a better financial situation while helping to preserve our planet. Through the green choice mortgage, Freddie Mac is committed to the financing of energy-efficient home improvements as well as energy-efficient homes. Keeping utility costs down can help stabilize your monthly finances in the long term. This program allows fixed-rate financing for up to 30 years for borrowers who are looking to finance the cost of energy efficiency improvements into their mortgage loans.
Freddie Mac Green Choice: What Is Defined As Energy-Efficiency Improvements
What does Freddie Mac consider to be energy-efficient improvements? These can be basic water and/ or energy efficiency improvements which could include the following.
- Programmable thermostats
- Caulking or weatherstripping
- Adding insulation to the floor – ceiling or wall
- Air conditioning/heating replacement to high energy-efficient units
- Solar water heaters
- Low flow water fixtures
- High-efficiency appliances such as refrigerators/freezers
- Water heaters
- LED light bulbs.
- Replacement of windows and doors.
What Is The H.E.R.S. Index?
You may have heard the term H.E.R.S. Index. The term acronym H.E.R.S. means home energy rating system index. This is an industry standard to determine your property’s overall energy efficiency. A H.E.R.S. rating can tell you a lot about your home. It can tell you how efficient your home is as well as where you can make great improvements to save on energy costs.
How The H.E.R.S. Index Score Affect Home Values
When you are buying or selling a home, a H.E.R.S. index score can greatly change the value of a property. For instance, a home with solar panels in areas with high sun exposure can dramatically increase the value of a property. A home with high energy efficiency will be valued higher than a home without modern energy-efficient upgrades. Many first-time homebuyers are looking for energy-efficient homes that are going to be sustainable in the near future. The younger generations are more focused on lowering efficiency costs, which is a good sign.
Key Features of Freddie Mac Green Choice Mortgage Program
Some other key features of the Green choice mortgage program from Freddie Mac. If you are to use this new program, you will need a home energy assessment. This energy assessment will look at your home's energy uses and will recommend energy-saving home improvements and will also provide an estimated cost/cost savings analysis for each improvement. The cost of these improvements can be financed through this Freddie Mac program. How much does the
assessment cost? This is a great question and one that does not have a straightforward answer.
Utility Companies Evaluate Potential Energy Savings For Homeowners
Many utility companies will come to perform this assessment at a nominal fee and some states even offer a residence-free home assessment analysis. These assessments are becoming more popular with younger homebuyers and are often part of a home inspection these days. Utilizing energy-efficient improvements can increase the value of your house approximately 15% (more in some areas). The Green choice mortgage program gives you the ability to finance the cost of energy and water efficiency improvements up to 15% of the completed property value (value AFTER the energy efficient upgrades). We understand these terms may be confusing so we recommend you reach out to our team for more specifics on this program. Our Green choice expert, Mike Gracz, can be reached at (800) 900-8569. You may also email questions on this program to mike@gustancho.com.
E-Closings: Fully Electronic Home Closings
E closings (fully electronic closings) – While we are on the topic of energy efficiency and helping our environment, many lenders are changing to a full remote closing or electronic closing process. Why is this energy efficient? A full remote closing allows you to close in your home loan from any location and will not force you to travel to a title company. But this also goes one step further. Many borrowers are currently purchasing a home that is out of state. The remote and fully electronic closing will minimize any travel a borrower may need to endure to close on this home. Having the ability to close remotely will also allow clients who are out of the country to close on their mortgage loans. This technology may have sparked from the pandemic but is becoming more and more popular. This is a very popular option with the younger generations and seems to be here to stay.
Home Renovation Mortgages Offered at Gustan Cho Associates
Besides the Green choice mortgage program that is geared towards energy efficient upgrades, there are still renovation mortgage programs available to all homebuyers. These renovation programs can be used to increase the value of a property in a short period of time. For instance, if you bought a house that is run down and utilize a renovation mortgage such as an FHA 203K loan, you can instantly increase the value of the property. Upgrading bathrooms and kitchens are
the fastest way to increase the value of a property according to experts. Fannie Mae and Freddie Mac also allow renovation mortgage lending for all primary, secondary, and investment properties.
Start Qualifying and Getting Approved With The Freddie Mac GreenChoice Conventional Mortgage Loan Program
As you can see from this article, Gustan Cho Associates are experts in all aspects of renovation mortgage lending. Our team of highly skilled loan officers are here to assist you with your energy efficiency needs. Preparing your home for the future is a great idea. Many Americans now drive electric vehicles and can charge those for free utilizing solar energy in their home. Technology has come a long way in the past 20 years or so. Saving money on your outdated appliances can help steady your monthly budget. For any mortgage-related questions, please reach out to our team of experts. We are available seven days a week and even in the evenings. For a general mortgage question please reach out to Mike Gracz. You can call or text (800) 900-8569. Our team is here to help you and your family!
