Down payment has yet to be toppled from its position as the no. 1 hurdle to homeownership, this time among first-time homebuyers. This is based on Genworth Mortgage Insurance’s survey of mortgage professionals at the recently concluded Mortgage Bankers Association convention in Denver.
The Genworth survey covered a number of mortgage topics and issues, including homeownership issues facing first-time homebuyers and upcoming mortgage trends that could open the credit box to more consumers.
Survey Reveals Hurdles to Homeownership
“Despite their emergence as today’s fastest-growing homebuying demographic, first-time homebuyers still face many headwinds. While some of these, such as shortages in affordable inventory, are environment-driven, others can be addressed via improved awareness on the various low-down-payment solutions available in today’s market,” Rohit Gupta, president and CEO of Genworth Mortgage Insurance, said in a public statement.
As gathered from 200 mortgage professionals at the MBA Annual Convention and Expo in October, here are what they identified as top hurdles facing today’s first-time homebuyers:
- Saving for a sufficient down payment – 46%
- Lack of affordable housing inventory – 35%
- Student debt – 14%
- Ability to qualify for a mortgage – 5%
Despite these hurdles, the surveyed mortgage professionals expect a growth in the first-time homebuyer market in 2018.
More than half of the respondents expect that this first-time homebuyer market growth will outpace that of the overall housing market.
Some 31% think that both the first-time homebuyer and overall housing markets will grow at the same pace. While the remaining 12% believe that this first-time homebuyer growth will slow down in 2018.
A substantial number of FHA loans, which are known for serving first-time homebuyers, endorsed during FY 2017 were made to first-time homebuyers at 82.2%.
What Could Expand Homeownership?
“Ensuring that the right tools from both a product and educational standpoint are in place is imperative to supporting the continued positive trajectory for these buyers,” Mr. Gupta said.
Relatedly, mortgage industry professionals shared their perspectives on mortgage trends that could help expand mortgage credit availability for all, first-time homebuyers included.
First off, at least two-thirds of the interviewed people from the mortgage industry expect the demand for 97-LTV loans to increase next year. For consumers struggling to save for a down payment, this reduces money, time and effort needed to come up with one on a home.
Mortgage professionals then shared what they think will be key to credit expansion next year. For 45% of the surveyed professionals, it is high-LTV loans, i.e. those with above 80% LTVs. Next would be FICO scores below 700 as expected by 38%, followed by a debt-to-income ratio above 41% selected by 17% of the surveyed mortgage professionals.
The demand for non-qualified mortgages is also projected to rise, characterized by a “strong appetite among lenders for originating non-QM loans,” according to almost half of the surveyed mortgage professionals.
Nonqualified or non-QM loans are a classification of mortgages that don’t have certain characteristics set by the Consumer Financial Protection Bureau.
Forty-one percent (41%), however, think that the demand for non-QM loans will be average because of the steady housing recovery while a lone 1% thinks this demand does not exist.