Millennial Borrowers Step Back–Slightly–From FHA Loans

The youngest generation to hit the homebuying market in force is taking out fewer FHA-backed mortgage loans, reported Ellie Mae, Pleasanton, Calif.

The Ellie Mae Millennial Tracker said 63 percent of all closed loans made to Millennial borrowers were conventional loans compared to 32 percent FHA loans. Conventional loans averaged $205,066 while FHA loans averaged $173,381, Ellie Mae said.

“Conventional and FHA loans make up the vast majority of loan types among Millennials, and tend to track in cycles,” said Ellie Mae Executive Vice President of Corporate Strategy Joe Tyrrell.

Tyrrell noted that after a one-year high of 36 percent of all closed loans in February and March FHA loans have steadily decreased for the past four months.

“Conventional loans are rising, from 60 percent in March to June’s 63 percent, indicating that–at least at the moment–Millennials are slightly more able to afford a house without government guarantees,” Tyrrell said. “Alternatively, this also demonstrates a potential opportunity for greater borrower education on FHA and other loan options available.”

Ellie Mae said the San Jose-Sunnyvale-Santa Clara region of California’s Bay Area topped the list of most expensive metros with an average loan amount exceeding $598,000. By comparison, the average loan amount for California as a whole was $315,967.

Average loan amounts for other major metro areas include:
–San Francisco-Oakland-Hayward, Calif. – $543,851
–Los Angeles-Long Beach-Anaheim, Calif. – $436,967
–Boston-Cambridge-Newton, Mass./N.H. – $364,767
–Washington, D.C.-Arlington-Alexandria, Va. – $342,722

The June Ellie Mae Millennial Tracker also reported 90 percent of all loans closed by Millennials were for purchases while just 10 percent were refinances. Among FHA loans, 96 percent were for purchases and 4 percent were for refinances; for conventional loans, 87 percent were for purchases and 12 percent were for refinances.