TheMReport

TH E M R EP O RT | 39 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 ORIGINATION THE LATEST Super-low Down Payment Programs Ideal for Younger Buyers Many lenders are offering reduced down payment programs to help millennials get their foot in the door. A lthough DownPay- ment Resource reports in its Down Payment Report for June that the homeownership rate is struggling—currently at 63.9 percent of the population and falling—newer super-low down payment loans are start - ing to become more popular with millennials, allowing them to get their foot in the prover- bial homeownership door. The standard 20 percent down payment is becoming less pos- sible for first-time homebuyers. DownPayment Resource estimates that, on average, it takes nearly a decade to save for a traditional down payment. In some places, such as Los Angeles and San Jose, California, it can take up to 24 years to save for a down payment. Young people aren't interested in waiting that long. There are a number of"super- low down payment loans that allow buyers to own a home at a fraction of the cost. Quicken Loans, Guild Mortgage, Guaranteed Rate, LoanDepot, United Wholesale Mortgage, Chicago Infrastructure Trust, Movement Mortgage, Fifth Third Mortgage, and Bancorp South all offer some variation of a 3 percent equity mortgage. In most instances, the buyer is responsible for only 1 percent of the down payment. The remaining 2 percent is acquired in the form of a grant from the lender, which usually does not have to be repaid. The remaining 97 percent of the loan amount is taken in the form of a 30-year conventional loan. In other cases, such as Movement Mortgage's zero-down loan for first-time homebuyers— someone who has not owned a home in at least three years—the buyer would be supplied the entire 3 percent equity through a grant that would not have to be paid back. Fifth Third Mortgage and Bancorp South also have a zero-down loan program. Mary Ann McGarry, President and CEO of Guild Mortgage, spoke on the reasoning for creating their 1 percent down purchase loan. "We wanted to make home - buying more attainable for more people, including millennials who are entering the housing market in increasing numbers," she said. "[W]e were able to create this breakthrough national program because we are a direct lender with many decades of strong in - vestor relationships and first-time homebuyer expertise." Five Barriers Keep Buyers out of the Market Many potential buyers fear a repeat of the foreclosure crisis. U .S. homeownership rates have been at a 50-year low despite improving local job markets and historically low mortgage rates. Research commis - sioned by the National Associa- tion of Realtors (NAR) said there are five main barriers preventing a large number of individuals from purchasing a home, includ- ing "post-foreclosure stress dis- order," mortgage availability, the growing burden of student loan debt, single-family housing afford- ability, and single-family housing supply shortages. Nine million homeowners experienced foreclosure, and 8.7 million lost their jobs dur - ing the 2008 crisis. According to NAR, programs and workshops aimed at those with long-lasting psychological changes in financial decision-making could help those still gun shy about home buying. NAR also recommends restoring lending requirements in order to normalize credit standards for borrowers with good-to-excellent credit scores. Currently, those borrowers are not getting ap - proved for the same rates they were in 2003, despite their credit score. For households repaying student loan debt, it is extremely difficult to save for a down pay - ment, qualify for a mortgage, and afford a mortgage payment—es- pecially in areas with high rent and home prices. NAR found in a survey released last year that student loan debt is delaying purchases from millennials and over half expect to be delayed by at least five years. NAR believes policy changes need to be enacted that address soaring tuition costs and make repayment less burden - some. In regards to low affordabil- ity, NAR explained that policies need to be enacted to ensure creditworthy young households and minority groups have the op- portunity to own a home. "Single-family home construc- tion plummeted after the reces- sion and is still failing to keep up with demand as cities see in- creased migration and population as the result of faster job growth," said Ken Rosen, Chairman of the Berkley Hass Real Estate Group. "The insufficient level of home - building has created a cumulative deficit of nearly 3.7 million new homes over the last eight years." Due to higher prices and lack of property lots, difficulty finding skilled labor, and higher construc - tion costs, housing starts are not increasing to meet the growing demand. "Low mortgage rates and a healthy job market for college- educated adults should have translated to more home sales and upward movement in the home - ownership rate in recent years," said NAR Chief Economist Lawrence Yun. "Sadly, this has not been the case. Obtaining a mortgage has been tough for those with good credit, savings for a down payment are instead going towards steeper rents and student loans, and first-time buyers are finding that listings in their price range are severely inadequate." The standard 20 percent down payment is becoming less possible for first-time homebuyers.

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