Gustan Cho The Mortgage Expert,
Publish On: September 29, 2022
In this guide on millennials and mortgages, we will cover tips for millennial home buyers going from renting to becoming a homeowner. Many millennials are realizing the skyrocketing home prices and high rates. If they do not act on buying a home now, they will lose their chance of ever becoming a homeowner. We have never seen so many millennial home buyers as we have in 2022. The number of millennial home buyers is increasing like the rate of inflation in 2022.
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Mortgage Loan Options For Millennial Home Buyers For 2022
The good news is there are a lot of mortgage loan programs for millennial home buyers. Many millennials are remote workers in the technology and social media industry. They are high-paid wage earners but with the skyrocketing price of homes, high inflation rate, and increasing mortgage rates, many millennial home buyers are acting on leaving mom and dad’s house to get qualified for a mortgage to purchase their very first home. In the following sections of this guide. we will be covering tips for millennial home buyers.
Who Are Millennials?
Millennials are the generation born between 1981-1996. They are classified as Millenials as they were aging into adulthood around the millennium. Unfortunately, millennials are often classified as self-centered and obsessed with social media. In reality, these people are computer and tech-savvy and work well with others.
Who Are Defined As Millennials
Millennials are savvy technologically and up to date with all types of social media platforms. Most millennials are open-minded and transparent. Most are college graduates and have advanced degrees. The general consensus of millennials is they care about national and global social concerns and the environment instead of just their own individual concerns and needs.
Millennials are more concerned about civic matters and social concerns than the previous generation. They are seen as proactive and confident in the workplace. However, over the past 40 years, fewer Americans are making more than their parents made financially at their age.
Common Characteristics of The Millennial Generation
Millennials have significantly more student loan debt. Even with more education, which equals more debt, they are not seeing an increase in income compared to the generations before them. Most millennials have given up on owning their own home, as they are just trying to make their bills on time. Why don’t more millennials own their own home? As with many things, the issue comes down to money.
Selling Homes To Millennial Home Buyers
Sellers must realize that people are not buying because they are worried about their finances. In today’s world, Millennials are so concerned about their debt and the impact a home mortgage would make on their finances and their futures. Sellers must break through these fears by ensuring millennial home buyers understand their options. All generations should have homeownership and security!
Market prices were rising too quickly!
In the past few years, real estate values have risen substantially and income has not! Financial advisors suggest that home buyers should not allocate more than a quarter of their monthly income to their mortgage- this makes it nearly impossible for people to mind this tip, much less feel like they should even bother trying.
Home Values change from region to region. In California, the average home value is over $800,000! This is less than the new homeowners’ budget! If people try to move to another area to cut costs, the market value in those states becomes overvalued. Most people do not want to relocate due to family and friends, and moving and having only a temporary solution is not optimal.
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The Changing Job Market For Millennials
Earning a good salary can help. But what is a good salary? And for what area? What is a good job? There isn’t a clear answer. Costs have risen dramatically in the past couple of years, not to mention before that. The same $400.00 will no longer buy gas and groceries each week. People really feel inflation and wages have not increased.
Millennials have changed the way people view employment. Many refuse to work jobs with poor management or for lower pay, which results in leaving jobs quicker and trying something else. They also tend to value purpose and fulfillment over monetary compensation, which could be because they do not want to work for less money or an awful job. Going with this theory, millennials are giving up on purchasing homes. They are moving to the larger cities where condos or apartments are more the standard. il they won’t need to anymore.
Buying Could Mean More Debt For Millennial Home Buyers
Because of rising education costs, people are entering the workforce already in debt. It has been found that new homeowners with no debt whatsoever often saved for more than seven years to afford their first payment on a house. It can take more than a decade for those struggling to pay off college loans. This is problematic because other hone buyers easily price the younger competitors out of homes due to higher income, and millennials are just opting out of home buying altogether out of fear that they’ll bury themselves deeper in debt.
The average student has over $40,000 in debt. This is overwhelming, and they do not want to worsen the situation. Millennials do not want to take the risk of buying a house so they are moving to the cities and living in condos or apartments.
Do Millennial Home Buyers Qualify For Mortgages?
Millennials tend to be less trusting of traditional institutions, specifically large banks. They want a quick and reliable process. When considering applying for a mortgage, they run into issues with the down payments being saved or having cash reserves. They have enormous student loan debt, and their jobs are not producing large incomes. Additionally, these people really want homes! They resent paying massive rent amounts each month when the property isn’t theirs.
Types of Mortgage Loan Options For Millennial Home Buyers
A loan officer can assist a millennial in deciding what option will best fit their needs. There are numerous options available and it just takes some research to determine how to get the best one.
Fixed-Rate Mortgage Option For Millennial Home Buyers
lA mortgage with a fixed interest rate that does not change throughout a loan is a fixed-rate mortgage. This might be attractive as it is one interest rate, easy to plan for, and stable.
Adjustable-Rate Mortgage Option For Millennial Home Buyers
An adjustable-rate mortgage, or ARM, is a type of mortgage that has an interest rate that can change over time. Adjustable Rate Mortgages start with a lower interest rate than fixed-rate mortgages. This can make them desirable for millennials who are looking to save money in the short term and also allows for the possibility that their salaries and pay will increase throughout the loan, which will make eventual higher rates more attainable.
FHA Loans For Millennial Home Buyers
A Federal Housing Administration (FHA) loan is a type of mortgage that the FHA insures. These loans are not given by the FHA but by the banks that work with the FHA. Loans from lenders who use the FHA to insure them are easier to qualify for. Loans are offered for those will lower credit scores, and this might be helpful to Millenials who have struggled financially. FHA Loans also require smaller down payments, and millennials may be able to financially cover these easier than a traditional loan down payment.
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VA Loans For Millennial Home Buyers
Veterans Association loans are a type of mortgage that is available to eligible veterans and active duty military members. Included in this are qualifying spouses. These loans are backed by the US Department of Veterans Affairs and offer several benefits, including no down payment, no private mortgage insurance, and low-interest rates. If you are a veteran or on active duty, reach out to see if you qualify. VA loans are some of the best out there designed to help our military!
NON-QM Loans For Millennial Home Buyers
A Non-QM (Non-Qualifying) loan is a loan that allows a buyer to qualify based on alternative methods, not just traditional income verifications such as paystubs or W2s. These can appeal to a millennial because they don’t come with such vigorous checks into your finances. A non-QM loan doesn’t have to adhere to the Consumer Financial Protection Bureau’s strict guidelines, so there are flexibility in the requirements, sometimes lower credit scores, and lower down payments!
Millennials have dreams of owning their own homes, just like the rest of the population. With the various loan options available to them, a great lender, and support, home ownership is possible.
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