Refinance rates jump the most on VA loans
With rates at three-year lows, Millennials are finally hopping on the refinance bandwagon. In fact, refis accounted for 14 percent of all Millennial loans in June. The rate is even higher for Millennials with VA and conventional loans.
The rising move to refinance
According to the latest Ellie Mae Millennial Tracker, Millennial refinances saw a stark jump in June, rising from 8 percent of all loans to 14 percent.
On VA loans specifically, refinances accounted for 27 percent of all mortgages closed by Millennials — up from 18 percent last year. Conventional loan refis jumped from 9 percent to 17 percent.
According to Joe Tyrrell, Ellie Mae’s chief operating officer, the recent Federal Reserve rate cut may cause refis to surge even more.
“Savvy millennials looking to lock in lower interest rates on their mortgages have helped drive a surge in refinance activity,” Tyrrell said. “While the Federal Reserve’s rate cut doesn’t necessarily mean that rates on mortgages will continue to drop, we’ll be keeping a close eye on its impact on both the refinance and overall mortgage market as we do anticipate that it will affect consumer behavior, including millennials who look to lower their payments.”
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FHAs lose popularity
Though refinances on Millennial FHA loans are also up — rising from 4 percent to 6 percent over the year — FHA use in general is on the decline.
FHA loans accounted for 27 percent of all Millennial loans last June, but just 24 percent this June. According to Tyrrell, this decrease highlights the need for education on FHA loans in the Millennial community.
“There is and has been a massive opportunity for lenders to educate potential homeowners on the loan options available to them,” Tyrrell said. “For example, borrowers with lower FICO scores can take advantage of FHA loans to make homeownership a reality, but the overall awareness that this loan type exists needs to increase.”
First-time homebuyer’s guide: What is an FHA loan?
More Millennial loan details
Refi surge aside, there are also some other trends that emerge from the recent Ellie Mae Millennial Tracker. According to the data, the cohort is largely gravitating to smaller cities.
Dumas, Texas, claimed the highest share of Millennial mortgages for the month. A full 70 percent of the city’s loans were closed by Millennials. Other cities with large shares of Millennial loans were Casper, Wyoming; Mason City, Iowa; Williston, North Dakota; Emporia, Kansas; and Hobbs, New Mexico.
The average Millennial buyer took out a loan of $195,924 and had an average 724 FICO score. Conventional loans were the most popular choice, with 72 percent of Millennials choosing them.
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