How Millennials Obtain Mortgages: Buying a Home with Help

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According to the Statesman Journal, Oregon continues to more new residents. The current influx of people are millennials with a long-range outlook. That said, they will want to buy a home. So how do these millennials obtain a mortgage when so many lenders want to see more history than they can provide? They buy their homes with help. Below is a list of ways this younger generation can buy homes, secure a mortgage, and begin to make Oregon even more vibrant.

It is often remarked among financial circles that if institutions like Freddie Mac and Fannie Mae didn’t exist, the whole economy of the U.S. would collapse. This is true in many ways. But it is the FHA, the Federal Housing Administration, an agency within the U.S. Department of Housing and Urban Development that guarantees those loans made by the two mortgage giants. And because this is such an important economic function, acting like an insurance, the guidelines are strict. But not nearly as prohibitive as you might imagine. Here’s what you need to know.

Knowing your credit is important for any number of reasons. It impacts the type of job you might get, insurance rates, and even your renter’s application. But what would be a deal killer for some financial entities, is not necessarily so when it comes to qualifying for an FHA loan. A credit score of 580 or above will allow you to put just 3.5% down on a house. Between 500 and 579 will get you a loan with 10% down. So, the first step should be to spend some time and get that score repaired.

These loans do have a limited availability but that shouldn’t stop you from applying. You can use your money from savings, or borrow from your retirement accounts (penalties will be assessed if you simply withdraw the money). These loans will also allow gifts from family members and even some state assistance through grants.

Your closing costs might also be paid in some situations. The FHA allows some sellers to pay the closing costs and some builders will use this incentive to attract millennial buyers.

You must use an FHA-approved lender. Here’s a list.

Because you are obtaining a mortgage for below the normal requirements, you will need to pay for mortgage insurance (in case things don’t work out). It is largely determined by several things: how much the loan is and for how long and lastly, the LTV, or loan-to-value ratio. Here’s an idea of what those premiums might be so you can estimate your monthly costs a little more accurately.

Annual premiums for FHA loans

15-year loan, down payment (or equity) of less than 10%: 0.7%

15-year loan, down payment (or equity) of 10% or more: 0.45%

30-year loan, down payment (or equity) of less than 5%: 0.85%

30-year loan, down payment (or equity) of 5% or more: 0.8%

One other feature, one I hope you never need, involves financial hardship. It happens to the best of us and if you are a new homeowner, it can be devastating. While an FHA insured loan doesn’t offer a way out, it does allow the lender some leeway to give the borrower some leeway during difficult times. Sometimes a little forbearance, if only for a couple of months, is all that is needed.

Nola,

On behalf of The Jones Group @ Sunriver Realty

Nola Horton-Jones, Principal Broker/Realtor | ABR, C-RIS, e-PRO, GREEN, RSPS, CCIM Candidate

Bryce Jones, Broker/Realtor | ABR, CRS, e-PRO, GREEN, GRI, RSPS, SFR

Karen Marcy, Broker/Realtor

The Jones Group @ Sunriver Realty | 57057 Beaver Drive | Sunriver, OR 97707

Mobile: 541-420-3725 | Mobile: 541-420-4018 | Mobile: 503-327-9611 | Fax: 541-593-5123

Email: TheJonesGroup@SunriverRealty.com

Web: Bend-SunriverHomes.com|SunriverRealty.com

Licensed in Oregon