Mortgage lenders must teach millennials about loan options: Ellie Mae
As interest rates rise, mortgage originators need to teach millennial homebuyers about the product options outside of conventional loans, Ellie Mae said.
In September, 68% of closed loans made to this age group were for conventional mortgages, with 27% getting a Federal Housing Administration loan and 2% a Veterans Affairs loan, according to Ellie Mae's monthly Millennial Tracker. There were 3% of closed mortgages where the loan type was not specified.
The conventional share declined by one percentage point when compared with August, which was the highest for this category since February 2015. Last September, conventional mortgages had a 65% share, while FHA loans had a 31% share.
Purchase loans made up 89% of originations, up from 85% one year prior.
"Despite rising interest rates, millennials are still looking to buy homes," Joe Tyrrell, Ellie Mae's executive vice president of corporate strategy, said in a press release. "We're still seeing the majority of millennial loans fall into the conventional loan category, and with interest rates increasing, there is an even greater opportunity for the industry to educate these buyers on all of the options that they have available to them, including some of the higher loan-to-value products and FHA loan programs."
The percentage of VA loans used for refinances was elevated compared with conventional mortgages. VA refis totaled 28%, up from 21% in August, but down from 30% last September.
Conventional refis were at 11%, up by one percentage point compared with August, but down from 17% in September 2017.
Ginnie Mae is concerned about high prepayment speeds among VA cash-out refinancings of mortgages originated seven months ago, Michael Bright, its acting president, said recently.
The average loan amount in September was $189,611, down from $195,651 in August.
The average loan-to-value ratio was 86% and the average note rate was 4.896%, with an average credit score of 722.