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Over the past three years, the first-time homebuyer market has increased 40% or 588,000 loans. Now, that’s a lotta loans!
In 2017, first-time buyers bought 2.07 million new or existing homes, an increase of 129,000, or 7%, from 2016. During that same period, the number of first-time buyers using PMI increased by 93,000 loans.
In the fourth quarter of 2017 alone, single-family homes purchased by first-time homebuyers increased 4% year-over-year to 505,000 homes. The segment accounted for 39% of all single-family homes sold and 55% of all purchase mortgages originated. Seems these first-timers are an important segment of the home buying population.
According to a recent Market Report issued by MI provider, Genworth, the most popular loan for first-time buyers remains an FHA loan. However, the Fannie/Freddie 3% down product, coupled with private mortgage insurance, is quickly gaining ground.
In the fourth quarter of 2017, PMI companies insured more than 155,000 loans. Making this the best fourth quarter for such insurers since way back in 1994. Loans with PMI were the fastest growing mortgage products in the quarter.
With about 2.5 million first time home buyers still out there, it seems that PMI loans will continue to grow, taking share from the FHA insured loan program. This takes pressure off the FHA Insurance fund minimizing taxpayer risks.
I believe that is how the system was intended to work. FHA should be there to supplement the private sector to provide needed financing to borrowers needing their program.
It’s now up to lenders to use these low down-payment, conventional loan programs properly to ensure their continued success. It’s important that borrowers using these programs, as well as all loan programs for that matter, be carefully analyzed and qualified.
First-time buyers need to be educated on the loan process and on their new responsibilities as homeowners.
They are no longer renting. There is no landlord to fix the problems. They are responsible for the monthly payments and the required upkeep of their new home.
You might find it hard to believe, but there were numerous occasions, when I was starting out as a collector, that borrowers told me they weren’t making payments because they were waiting on their Realtor to make a repair, like fix the toilet or a roof leak. I had to educate them otherwise, after the fact.
Qualification, education, and understanding are all part of ensuring a quality first time home buyer loan and experience. Otherwise, we may be laying the groundwork for future defaults. Something no one wants to do or see.
First-time homebuyers are an important link in the homeownership chain. Their numbers are growing. Don’t make them the weak link.
Are you prepared to fully service their needs? Do you care or are they just another deal?
Be good to these first-time buyers as they represent the buyers of the future. Without them and their continued success, the whole system crumbles.
