More Americans are turning to their families for help buying their first home.
More than one-quarter of mortgage borrowers who turned to the Federal Housing Administration (FHA) for loans asked relatives for help making a down payment, according to FHA data– as first reported by The Wall Street Journal. That compares with 22 percent in 2011.
While more than 37 percent of FHA purchase mortgages involved down payment assistance, family funding was the biggest source in the 12 months that ended in September, according to the FHA report.
In 2018, the FHA said it insured more than 1 million mortgages for single-family homes – nearly 83 percent of which were for first-time buyers. Lower-income people tend to turn to the FHA for assistance because it offers as little as 3.5 percent down for those with a credit score of as little as 580 – lenders for a traditional mortgage prefer a score in the 700 range.
Meanwhile, the average FHA-borrower’s credit score continued to decline in 2018, to 670 – the lowest level since 2008 and has been on a downward trend since fiscal 2011.
The housing market, constrained by an inventory crunch, has been tough for first-time buyers. Home price appreciation has slowed, but is still on an upward trajectory.
In November, U.S. home prices rose 5.1 percent compared with the same period last year, CoreLogic reported this week, with expectations they will rise another 4.8 percent throughout the coming year.
In addition to rising home prices, rising interest rates have also made it more expensive for customers to borrow.
Despite challenging conditions, more millennials are becoming first-time home buyers as they approach their late-20s and mid-30s. In fact, 21 percent of people between the ages of 18 and 34 said they planned to purchase a home in 2019, according to Trulia, compared with 14 percent last year.
Also targeting first-time buyers and those with low-to-moderate incomes? Fannie Mae and Freddie Mac, which announced products to compete with low-down-payment options offered by the FHA last year.