Interest rates on FHA loans hit new lows in October, which is driving millennials to pursue homeownership with the helped of government-backed financing.
Ellie Mae’s latest Millennial Tracker report shows that FHA loans made up 16% of all home loans borrowed by millennials in October. Millennials clearly made a point of taking advantage of the 2.99% interest rates reported in October, the lowest rates Ellie Mae has recorded since 2016 when it started tracking this kind of data.
Ellie Mae also reports that 93% of the FHA loans that millennials closed in October were purchase loans. This is a slight 1% decrease from the FHA purchase loans millennials closed the month before. About 7% of the FHA loans millennials borrowed in October were for refinances.
While FHA loans have grown in popularity for millennials in general, Ellie Mae’s data shows that one age group had an especially high preference for the government-backed home loans. Nearly 25% of younger millennials under the age of 30 chose FHA loans as their financing option.
Joe Tyrrell, president of ICE Mortgage Technology, a division of Intercontinental Exchange, Inc., stated in a press release that the popularity among younger millennials may be due in part “because of the more flexible qualification criteria.”
Ellie Mae’s Millennial Tracker categories “older millennials” as those between the ages of 30 and 40, and “younger millennials” as those between the ages of 21 and 29. According to Ellie Mae, 85% of older millennials opted for conventional loans, compared to 73% of younger millennials.
Overall, purchase loans and refinance loans of all types that were borrowed by millennials remained steady month-over-month from September to October. Purchase loans made up 56% and refinances stayed around 43%.
Days-to-close for all loan types also remained at 49 days from September to October. FHA loans also took about 49 days to close, only one day longer than it took in September. Days-to-close for Conventional loans and VA loans also increased slightly month-over-month by one day (from 49 to 50 days) and five days (from 55 to 60 days), respectively.