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MORTGAGE KNOWLEDGE CENTER

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CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

  1. Home
  2. Mortgage Knowledge Center
  3. Homebuying Trends — Millennial Homebuyers

MORTGAGE

Homebuying Trends — Millennial Homebuyers

EXPECTED READ TIME: 4 MINUTES

July 9, 2021

Millennials were born between 1981 and 1998. So, in 2021 they'd be 23 to 40. The mid-20s to 40s are prime time for many to start a family and buy their first home. Although there are years of difference between millennials and baby boomers, it's surprising how some trends stay the same. Read on to discover what this newest home buying group is looking for.

Big City Condos & Town Homes

Young tech professionals live in cities like Austin, Dallas, San Jose, San Francisco, Seattle, Raleigh, Arlington, Boston, San Diego, Washington, and Atlanta. Many prefer condos or townhomes. They're looking to live in a walkable community close to everything. Since they work hard and often long hours, they want convenience. Young professionals want to be able to come home and walk somewhere close to meet their friends for a beer.

For example, in San Jose, new single-family homes are unaffordable except for the very top income earners. Instead, these young tech professionals prefer new condos that are low maintenance and centrally located. Condo communities close to shopping, dining, and convenient freeways are their top choice.

But now that many can work remotely, they may choose less expensive areas outside of the city. A software engineer may move from the San Jose Bay area and buy a home in the suburbs of Portland for a fraction of the price.

Although many single professionals prefer condos and townhomes, those with kids want a single-family home and are willing to relocate if they need to.

Suburban Single-Family

Look back over the last 75+ years since WWII. Families had the dream of homeownership. And that was the original purpose of the FHA. To loan money to returning veterans and their families at an affordable rate. Today many first-time homebuyers are taking advantage of the FHA mortgage with its low-down payment and more lenient guidelines. FHA and VA loans are two of the most popular millennial home lending products.

What remains constant is that the single-family home in the burbs is on the top of the list. Young professionals formerly living in the big city are heading for small towns. They long for more space and peace and quiet. Like many other home shoppers, they're looking for a three-bedroom, two-bath home.

Sometimes the search for an affordable home that's big enough means a move to a small town in another state. There are small towns across the country with homes under the U.S. median value of $340,000. Homebuyers are checking out towns in New England, Colorado, Northern California, and South Carolina.

Small Starters

Millennial homeownership can be challenging. And just getting your foot in the door can sometimes be overwhelming. That's why millennials are interested in buying fixer-uppers. Sometimes they've looked for months before they consider a fixer. Other times, they're starting out looking for a fixer because they're willing to put in some elbow grease and are hoping they'll find more properties in their price range. Those lucky enough to have family and friends around are able to get help in their renovations.

On the other hand, die-hard city dwellers are buying condos and townhomes. Even if they're a small, one bedroom and one bath unit — they consider buying better than renting. In walkable cities like Philly, Newark, Miami, and Chicago, there are starter condos and townhomes close to everything millennials need, including grocery stores, shopping, dining, coffee shops, pubs, and entertainment.

So, a small starter isn't always a single-family home. It's whatever the borrower can afford. With remote work becoming more the norm, many living in high-cost cities have decided to relocate to more affordable big cities.

Some millennials are opting for tiny homes, often on the property their family already owns. Living small has its advantages, and that includes affordability.

Million Dollar Starters

What about successful young entrepreneurs and highly paid tech professionals? Often, they skip the starter home and go for the million-dollar mansion. Or if they live in high-cost areas like Silicon Valley, they'll get a smaller single-family home that still costs a million dollars. In high-tech cities, some builders cater to the tech professional with custom-built millennial homes with the latest in smart home features.

Millionaire millennials often want what their parents had — a nice home in a good area that they can raise their kids in. Yes, it might be more luxurious, but the purpose is the same. Raise a family in a nice neighborhood.

No matter where millennials are buying homes, some things never change. They still have the dream of homeownership, just like their parents and grandparents before them.

For more information about PenFed Mortgages:
 

PenFed Mortgage: 

800-970-7766

Get Started

SIMILAR ARTICLES

Conventional Loan Down Payment

How much down payment do you need for a conventional loan? Get the answer to that and learn more about conventional loans.
down payment money

Benefits of an FHA Mortgage

FHA loan benefits include low down payments, great interest rates, easier credit rules, and financing for 1-4 units. Read on to see if an FHA is for you.
couple moving into home with fha loan

4 Credit Mistakes to Avoid When Buying a Home

Discover how to prepare your credit score for homebuying, plus the biggest credit mistakes to avoid.
checking credit score

What to Look for When Buying a House

Learn tips for buying a house and what to look for when buying a house. From roofs and foundations to windows and doors. Read on to learn what questions to ask.
couple looking at buying house
image

CONVENTIONAL LOANS

Rates starting at % (APR %)¹

 

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Home Buying Steps

  • Getting Started
  • Finding a Home
  • Getting a Mortgage
  • Home Ownership

Mortgage Topics

  • VA Loans
  • Conventional Loans
  • First Time Homebuyer
  • Home Equity
  • Homebuying 101
  • Checklists
  • Adjustable Rate Mortgages
  • PenFed Top 10
  • Refinance
  • Jumbo Loans
  • FHA
  • Videos

Mortgage Products

  • Mortgage Center
  • Refinancing
  • Home Equity

PenFed HELOC

Rates as Low as % APR* with flexible use of funds

Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5

Disclosures

1Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on discount point, which equals percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.

*Prime Rate is % as of . The APR for this Home Equity Line of Credit (HELOC) is based on prime plus a margin and can change monthly. Fixed Rate Advances will be amortized over the Fixed Rate Advance Term, with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin, and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes.

  • Annual Fee: Notwithstanding the foregoing, an annual fee of $99 will be assessed on each account anniversary.
  • Home equity lines of credit (HELOC) are variable rate loans and the interest rate is subject to increase after consummation of the loan on monthly basis. Closing costs range between $500 and $8,500 for credit lines of $500,000. Contact a representative for additional details.

Appraisals: PenFed will attempt to establish value via an independent method. If that method is unsuccessful, or the value is not sufficient for the amount requested, an appraisal will be required regardless of CLTV. An appraisal is always required in the following circumstances:

For all loans with a loan amount greater than $400,000.

If an appraisal is required, it must be ordered by PenFed. You will be contacted for authorization and payment prior to ordering. Appraisal fees average $550 to $850 (some run higher).

  • Closing Cost Credit: PenFed will pay most closing costs associated with a home equity line of credit (HELOC), which includes credit report, flood certification, settlement/closing, property ownership and encumbrances search, recording, property search, and quick close. Member is responsible for any city, county, and/or state taxes if the subject property is located in FL, LA, MD, MN, NY, TN, or VA. If an appraisal is required, the member, who is responsible for the fee whether or not the loan closes, will pay the cost.

Interest may be tax deductible, consult a tax advisor for further information regarding the tax deductibility of interest and charges.

Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Draw Period. During your Draw Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.

Fixed Rate Advances will be amortized over the Fixed Rate Advance Term with the payment consisting of principal and interest. Your Annual Percentage Rate for a Fixed Rate Advance will be calculated by adding your Prime Rate, your Margin and the Additional Fixed Rate Lock-In Margin. Your Annual Percentage Rate for a Fixed Rate Advance shall not exceed 18% and shall be equal to or greater than % for primary residences and second homes and 4.75% for investment properties.

Property Insurance: Property insurance is required.

Multiple PenFed Loans: Multiple PenFed Equity loans and HELOCs are available as long as the member and collateral qualify (except Texas). For Equity loans and HELOCs the total indebtedness cannot exceed $500,000 for all PenFed Equity and HELOCs combined.

PenFed does not lend on:

  • Mobile homes
  • Co-ops or time-shares
  • Properties that are currently listed on the market for sale
  • Commercial property or property used for commercial purposes, even if a residence is part of the property
  • Undeveloped property (land only)
  • Properties with more than 4 units

Properties that are currently under major construction/renovations: Property must be fully livable, with no safety issues. (Examples: no missing rails from stairs/decks, no open walls with wires showing, missing kitchen appliances/counters, missing bath fixtures or unfinished pool).

  • Additional limitations may apply

Home Equity Line of Credit:

  • This Account has a Draw Period of 10 years, followed by a repayment period of 20 years.
  • If only minimum payments are made during the draw period, the loan balance will not decrease.
  • In Texas, the maximum CLTV available is 80% on owner occupied properties. Additional restrictions apply in Texas, so please ask a representative for details.
  • In all other states, the maximum CLTV is 85% on owner occupied properties and second homes. Additional restrictions or requirements may apply based on application characteristics.
  • Property type of Condo has a maximum CLTV of 80%.
  • The maximum CLTV available is dependent on credit qualification.
  • Rates vary depending on owner occupancy and CLTV and other loan criteria.

Minimum Loan Amount Requirements in all States:

  • For an owner occupied property or second home the minimum loan amount is $25,000 and the maximum amount is $500,000 with a CLTV of 85% or less of the fair market value.

Other terms and conditions apply; call 844-918-4307 to speak with a representative for details. All rates and offers are subject to change without notice. To receive advertised product, you must become a member of PenFed.

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This credit union is federally insured by the National Credit Union Administration. Rates are current as of September 2023 unless otherwise noted and are subject to change.

APY = Annual Percentage Yield
APR = Annual Percentage Rate


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The content you are about to view is produced by a third party unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Realty, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Realty, LLC, see the Affiliate Business Arrangement Disclosure.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party Website.


The content you are about to view is produced by a third party website that is unaffiliated to Pentagon Federal Credit Union. PenFed takes no responsibility for the content of the page.


IMPORTANT NOTICE

You are leaving PenFed.org and entering a third party site. PenFed Title, LLC is wholly owned by PenFed and this referral may provide PenFed a financial or other benefit.


For more information about the relationship between PenFed and PenFed Title, LLC, see the Affiliate Business Arrangement Disclosure.


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