With mortgage rates climbing, locking in and closing on a home loan as fast as possible is the name of the game. Millennials are achieving that with the help of their willingness to use technology. That's according to Ellie Mae, Inc's (ELLI) Millennial Tracker, which found in March that it took millennials 39 days to close on a mortgage for a new home purchase, down from 41 days in February.
Ellie Mae pointed to digital mortgage services as shortening the time it takes from applying for a mortgage to closing on the deal. The current level marks the shortest time frame to closing since Ellie Mae started tracking it at the start of 2014. "As more millennials reach the prime homebuying age of 29 to 32 years old, they are finding a mortgage experience leveraging technology that is fast and engaging in ways that their parents couldn't imagine when they were buying their first home," said Joe Tyrell, executive vice president of corporate strategy at Ellie Mae, in a press release.
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In addition to closing faster than ever before, the age of the average millennial homebuyer ticked up in March, standing at 30.1, which compares with 29.5 a year ago. Males led the buying in March, listed as the primary borrower on 63% of the closed loans that went to millennials. Women represented 32%, while married millennials accounted for 52% of all closed loans. Conventional mortgages were the preferred choice of millennial borrowers, representing 85% of the closed loans in March. That's up from 80% in February, Ellie Mae noted.
The average FICO score for a millennial borrower was 721 in March, which is down from February's average score of 724. Males had a slightly better average FICO score at 723 compared with 722 for female borrowers. As for the average loan size, Ellie Mae found in March that the loan to value for millennials was 87, which is higher than the average for all borrowers, which stood at 79 as of March. The average debt-to-income ratio of millennials was 25/38 compared with 26/39 for overall borrowers. In terms of where they are buying new homes, the survey put Dyersburg, Tennessee, in first place, followed by Binghamton, New York; Fairmont, West Virginia; and Mount Sterling, Kentucky.
Following on the heels of the Great Recession, lots of banks exited the mortgage lending market, leaving fintechs to fill the void. These digitally focused startups have been making the process more efficient and thus reducing the time it takes to close a loan. According to a recent from the Federal Reserve Bank of New York and New York University issued by the National Bureau of Economic Research, these fintechs are able to process loans quicker, can better handle movements in demand and have fewer loans that end up defaulting.
They are also gaining on their traditional brethren, with the study finding that fintech lenders' market share jumped to 8% in 2016 from 2% in 2010. In 2010, the fintechs originated $34 billion in mortgages. That stood at $161 billion as of the end of 2016. A lot of the growth came from Federal Housing Administration loans. In terms of their ability to process mortgage loans, the research revealed that fintechs are doing so about 20% quicker than traditional lenders.