TheMReport

TH E M R EP O RT | 37 O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST ORIGINATION Extra Expenses Hold Millennial Buyers Back Added daily costs, like takeout or coffee, may play a role in the millennial generation's inability to enter the housing market. A recent report pub- lished by Bankrate suggests that younger millennials aged 18 to 26 spend more on daily, habitual expenses, such as eating out, coffee, and alcohol, than any other generation, which can limit their long-term ability to save for a down payment on their mortgage. According to the data, 54 percent of the people in the mil - lennial age group say they have a meal away from home at least three times per week, compared to the 33 percent of Gen-Xers. Thirty percent say they buy coffee at least three times a week, while 51 per - cent of younger millennials aged 21 to 26 (for legal reasons) said they go a bar at least once a week. Millennials also have another problem that previous generations didn't face: soaring student debt. Cumulative student loan debt has reached $1.3 trillion dollars in the U.S., and college tuition continues to rise each year. Coupled with a trip to the neighborhood watering hole, a week's worth of morn - ing coffee, and lunch out on the town, where will millennials find the time—and the money—to save for a down payment? One option, aside from com- pletely cutting off vice spending and tightening the belt, is the rise in popularity of low-down payment mortgages, which are now offered by major banks such as Bank of America, Wells Fargo, and Fifth-Third. Veterans and active-duty service members can get a private loan guaranteed by the Department of Veterans Affairs, and the Navy Federal Credit Union is one of many outlets where one can get a zero- down mortgage option amongst VA lenders. Millennials that aren't in the military but have impeccable credit can qualify for low down payment mortgages with mortgage insurance, either through a private firm or the FHA. The Chicago Tribune has reported that nearly 35 percent of millennials that opt - ed to go the route of homeowner- ship did so using FHA mortgages, which is 14 percent higher than the overall market share, which sits at 21 percent. What's a HELOC? Data shows first-time homebuyers lack knowledge of HELOCs and their uses. A new study recently released by Bank of America has found that most first-time homebuyers are unaware of the potential uses of a home equity line of credit (HELOC). According to the data, more than 36 percent of first-time home - buyers wouldn't open a HELOC because of a lack of understand- ing as to how it works. Of those that would, the disparity on what they would use it for is evident between experienced homebuyers and first-time homebuyers. Home improvements were the most popular use of HELOCs, with 58 percent of all home - owners using their line of credit toward them. Thirty-five percent said they used a HELOC to consolidate their debt, and only 11 percent said they would use it for emergency funds. Of those questioned for the survey, 10 percent of homeowners have yet to tap into their home equity line of credit. Between experienced buyers and first-time buyers, 92 percent of experienced homebuyers said home improvements were their goal, compared to 81 percent of first-time buyers, respectively. Eighty-one percent of experienced buyers said they would use their HELOC to consolidate debt, while only 62 percent of first-time buyers would take out credit on their home to do the same. Only 61 percent of first-time homebuyers would use a HELOC for emergen - cy funds, as opposed to 77 percent of experienced homeowners. Using a HELOC for education expenses amounted to 74 percent for experi- enced buyers and only 56 percent of first-time homebuyers. When considering what type of home to buy, first-time homebuy - ers were more willing to consider a home that they could fix up themselves. Seventeen percent of first-time homebuyers said they wanted a home they could make major renovations to, as opposed to 10 percent of people who had already owned at least one home. Thirty-nine percent of first-time homebuyers said they wanted a house that they could make small cosmetic changes to. Experienced homebuyers were almost equally as willing to settle for a house with small changes, at 31 percent. According to the data, more than 36 percent of first-time homebuyers wouldn't open a HELOC because of a lack of understanding of how it works.

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