Like other consumers, millennial homebuyers have to take out larger loans to purchase homes these days, according to Ellie Mae’s latest Millennial Tracker.
In November, 26 percent of all closed loans to millennials were for FHA loans, with an average loan size of $186,454, up from $178,862 in November 2017 and $170,167 in November 2016, the tracker found. Additionally, Ellie Mae said conventional loans accounted for 69 percent of closed loans made to millennials borrowers during November, with an average loan amount of $211,268.
“November data from the Millennial Tracker shows that millennial borrowers are taking out larger FHA mortgages and spending more on a home than in the past,” Ellie Mae Executive Vice President of Corporate Strategy Joe Tyrrell said in a release. “For example, the average home appraisal value based on closed FHA loans for November 2018 in the San Francisco region was $562,479 compared to $523,192 a year ago at this same time, and up from $438,694 in 2016.
“We are seeing that as inventory remains relatively slim, borrowers are not waiting to buy an affordable home and are instead increasing their loan amount to purchase what is available on the market,” Tyrrell said.
Ellie Mae said FHA loans were more likely to be used by borrowers to purchase a home (95 percent), with just 5 percent of these types of loans going toward a refinance. Among conventional loans, 88 percent were for purchases and 11 percent were for refinances.
During November, it took an average of 43 days to close both FHA and conventional loans across the country, compared to the average of 42 days for all loans, the tracker found. Ellie Mae said interest rates on all loans rose to 5.1 percent, the highest percentage point since Ellie Mae started tracking this data in 2016, up from 4.96 percent in October, and up from 4.17 percent a year ago.