Popular culture and mass media have spent so many years discussing millennials as if they’re frozen in time as teenagers that it's easy to forget, by most definitions, even the youngest members of the generation have graduated college. Millennials now represent the largest segment of new homeowners and, according to a new survey from the National Association of Realtors, feel confident about qualifying for the mortgages they need to afford those homes, especially when compared to older Americans. But is this confidence rooted in reality?
Who feels good about qualifying for a mortgage?
The data from the NAR reveals only 21% of respondents who don't currently own a home and are 34 years old or younger feel qualifying for a mortgage will be "very difficult." That's a smaller share than any other age cohort in the survey. In addition, more millennials feel qualifying for a mortgage will be "not very difficult" or "not at all difficult" compared to other age groups, with the sole exception of those aged 35 to 44.
|Age||34 or under||35 to 44||45 to 54||55 to 64||65 or over|
|Not Very Difficult||28%||18%||10%||7%||13%|
|Not At All Difficult||18%||30%||20%||15%||24%|
Some other interesting takeaways from the survey include people living in the South feel much more anxious about qualifying for a mortgage (35% feel it would be very difficult, six percentage points greater than is closest competitor, the Midwest) and urban dwellers feel the most confident about their mortgage loan prospects (46% of them feel it would be "not very difficult" or "not difficult at all").
The path toward qualifying for a mortgage
The secret behind the millennial swagger when it comes to qualifying for a mortgage remains a mystery, but there's a few tips and truisms house hunters of all ages should keep in mind when preparing to sit down with a mortgage lender.
Take an interest in the APR. Applying for a mortgage involves understanding a lot more numbers than most of us would like, but one figure you shouldn't ignore at any cost is the APR (or annual percentage rate if you aren't into the whole brevity thing). This number combines the fees associated with the mortgage and the interest you pay, giving you a quick way to eliminate mortgages you can't afford.
Shop local. Sure, national mortgage lenders command a lot of name recognition thanks to millions spent on marketing campaigns, but if you're willing to put in the research local banks and credit unions can give you a great bargain on your mortgage. This is especially true if you have questionable (or just less than perfect) credit, as local institutions can give you more leeway when it comes to underwriting mortgages.
Lock it down for the long term. If you're ready to finance the purchase for your dream home—the one you see as the home for your family for decades to come—get the longest-term mortgage available and lock in a good rate. Adjustable rate mortgages cost more upfront than fixed rate mortgages, and may make sense if you only plan on staying in the house for a few years. But the stability of knowing your monthly mortgage payments may simply outweigh the possible benefit of sometimes having a lower rate and putting more of your financial future than necessary in the hands of chance.