Millennials need help understanding their profiles as mortgage borrowers
Millennials make up the largest cohort of homebuyers, but they may not be living up to their potential, which could be an opportunity for mortgage lenders to help them enter the housing market.
Mortgage companies continue pushing digital mortgage tools and offerings to attract younger customers, and while that's important, they could be grazing past other concepts like providing more opportunities for education.
Before even reaching the house hunting process, millennials don't seem to have a firm grasp on their profiles as mortgage borrowers. A quarter of millennials don't even know their credit score, according to a TD Bank study. And whether they do or not, half of these younger consumers use between 31% and 90% of their credit limit, with 32% not paying off their credit cards on a monthly basis.
Despite being greater in size, the growth rate for millennial homeowners is being outpaced by that of their smaller — but more experienced — counterparts, the baby boomers, according to an analysis of Census Bureau data by rental listing website Rentcafe.
With affordability already being a hurdle for homebuyers, it would behoove lenders to educate millennials on healthy credit habits to avoid other obstacles preventing them from homeownership. While the generation least likely to carry cash may have the opportunities to build and maintain good credit, it may not be so sure how to do it.
"The data is a bit concerning — it shows that a significant knowledge gap exists for millennials when it comes to credit, especially compared to prior generations," Mike Kinane, head of US Bankcard at TD Bank, said in a press release.
And when they're actually buying a house, most don't realize they're not required to provide a 20% down payment in order to make a purchase, with 63% planning to put between 20% and 90% down compared to only one in five who will offer less than 20%, according to real estate marketing company Clever Real Estate.