Millennial homebuyers decided to take out conventional loans when buying homes in the U.S., as this type of mortgage represented around 63% of closed loans in June.
Conventional loans are defined as mortgages not guaranteed by government agencies, such as the Federal Housing Administration (FHA). The average amount of closed conventional mortgages in June reached $205,066.
More Spending Power
The increase in the number of millennials who acquired conventional mortgages meant they were able to afford higher installments for now. In March, millennial buyers who acquired conventional mortgages accounted for 60% of all loans.
On the contrary, FHA loans only accounted for an estimated 32% of all closed loans for an average of $ 173,381. The percentage reflected a decline when compared to a 36% share in February and March. While fewer millennials sought FHA loans in the last four months, that doesn’t mean they prefer other loan options. Lack of awareness on other alternatives seems to be the reason they choose conventional loans.
Primary Residential Mortgage, Inc. notes that the FHA not only provides loans for personal property transactions; it also offers several choices for real estate investors. An FHA 203k loan, for instance, lets you acquire a house and use a portion of the proceeds for property improvement.
Investors will find this type of loan useful, as it allows them to invest in multifamily properties such as duplexes. However, applicants should be patient, as the process normally takes longer to process than usual mortgages. Part of the reason for the slower process involves the requirement of two appraisals. It will normally require up to 90 days before a closing takes place.
Millennials are increasingly becoming aware of the importance of owning a house. However, buyers from this group should take the time to consider other available options to get the best value for money.