JUNE 2017 ESSENT MILLENNIAL HOME purchasing STUDY...homebuying - one that specifically lays out the process step-by-step and specifically explains closing costs, mortgage terms and

ESSENT MILLENNIAL Home purchasing study

ESSENT MILLENNIAL HOME purchasing STUDY

JUNE 2017

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®

Mortgage Insurance provided by Essent Guaranty, Inc.© 2017 Essent Guaranty, Inc., All rights reserved. | Two Radnor Corporate Center, 100 Matsonford Road, Radnor, PA 19087 | essent.us

EGI-6008.166 (06/17)


Research objectives

2

PurposeUnderstand how financial institutions can help educate millennials about the homebuying process

FocusThe study examined:

• Millennials’ current knowledge of the homebuying process

• Millennials’ understanding of how to financially prepare for the homebuying process

• The emotional drivers and barriers that influence millennials’ desire to purchase a home

• How financial institutions might educate millennials about financially preparing for a home purchase


Total Respondents N=2,000±2.19% at the 95%

confidence level

20-minute online survey

Survey fielded from October 14-28, 2016

Owners(adults 18-36 who currently own a home or have owned

in the past)

N=500 ±4.59% at the 95%

confidence level

Potential Buyers(adults 18-36 who are

seriously considering or have seriously considered

buying a home)

N=750 ±4.02% at the 95%

confidence level

Non-buyers(adults 18-36 who have not

seriously considered buying a home)

N=750 ±3.58% at the 95%

confidence level

AUDIENCE Margin of Error Method

METHODOLOGY

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Edelman Intelligence fielded an online survey to a total of 2,000 millennials* across the United States

Sample SIZE Timing

*For the purposes of this study, millennials are defined as those born between 1980 and 1998. According to the 2016 census estimate, millennials currently represent more than 84 million people or 26% of the U.S. population.


KEY findings

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Key Findings

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Millennials have misconceptions about down payment requirements, which may be inhibiting their willingness to purchase a home.

Over 70% of potential buyers and non-buyers believe they need to put more than 5% down in order to purchase a home, and 53% of potential buyers say they haven’t purchased yet because they don’t have enough money for a down payment.

2

Millennials believe that buying a home is a good, but not always necessary, investment.

While 71% believe that buying a home is a good financial investment, only 64% believe it is always better to own than rent and even fewer feel that buying a home is as important as people claim it is.

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Key Findings

6

Non buyers want more stability in their careers before purchasing a home.When asked when they would be ready to purchase a home, the majority of non-buyers (53%) say they will be ready when they have more stability in their job/career and not necessarily as soon as they have enough money for a down payment (29%).

4

Non-buyers appear less comfortable with debt, which could be impacting their willingness to consider a home purchase.

Non-buyers have fewer forms of debt than current owners and potential buyers but are more likely to want to pay off this debt completely before purchasing a home. Non-buyers also want to have significantly more (30% want $10,000+) left in savings after a home purchase.

3


Key Findings

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There is a relationship between millennials’ confidence in investing and their likelihood to own or consider purchasing a home.

Current owners (54%) feel more confident in their knowledge of investing than potential buyers (39%) and non-buyers (20%), and are also more likely to take risks when investing for the chance of a higher return.

6

Millennials have a limited understanding of how credit scores work.Most millennials have a good understanding of how high credit card balances and collections impact their credit scores. Outside of this, most millennials aren’t sure how bankruptcies, account closures, student loans, etc. truly impact credit.

5


Key Findings

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Millennials know little about financially preparing to buy a home and would welcome a step-by-step guide to the home buying process.

Only 13% of potential buyers and 5% of non-buyers feel “extremely knowledgeable” about financially preparing to buy a home, and over 50% say that a step-by-step guide to the home buying process would be “extremely helpful.” They would like the guide to include a home affordability calculator, list of necessary documentation and information about the total cost of ownership in their area.

7

Most millennials have never heard of PMI and 59% of both potential buyers and non-buyers falsely believe it would protect them in the event of a foreclosure.

While current owners are slightly more knowledgeable about PMI, 23% still don’t know if their own mortgage includes PMI.

8


Key Findings

9

Age and life stage play a key role in millennials’ motivation to purchase home.

Current owners and potential buyers list “it feels/felt like the right next step at my age” as their number one reason why they purchased/ are purchasing a home. In addition, over 50% of all millennials believe that an individual should own his/her own home by 30.

9

Once they are in the home purchase funnel, millennials’ fears about purchasing a home turn into excitement and happiness.

Non-buyers primarily associate home buying with stress and feeling of being overwhelmed. However, home purchasing makes potential buyers (and current owners, at the time of their purchase) feel excited, happy and anxious but in a good way. Once individuals decide to take that step towards homeownership, their negative emotions and concerns appear to diminish considerably.

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Key Findings

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Millennials trust and rely on their parents for advice about financing a home.

Over 70% of millennials trust their parents for advice about financing a home and over 63% of current owners and potential buyers relied on/are relying on their parents for advice about home financing.

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What it means

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Financial institutions need to clear up misconceptions about down payment requirements and credit scores

Developing a step-by-step guide to home buying will help millennials feel more confident in taking the next step towards homeownership

By creating confident investors, financial institutions may also encourage homeownership

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Millennials who feel more comfortable with investing overall are more likely to purchase homes than those who don’t. By helping millennials feel more confident in all aspects of investing and showing how a home contributes to creating wealth, financial institutions may help ease millennials’ fears about buying. If financial institutions begin early enough, it’s possible they could drive millennials into the home purchase funnel sooner.

Financial institutions and real estate agents should consider creating a detailed guide to homebuying - one that specifically lays out the process step-by-step and specifically explains closing costs, mortgage terms and the documentation millennials will need to begin the mortgage process.

Millennials aren’t clear about down payment requirements and how credit scores work. By educating millennials about both subjects, financial institutions can help this demographic better financially prepare for homeownership and potentially encourage millennials to purchase sooner rather than later.


What it means

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Educating parents about home financing may be as important as educating millennials

Financial institutions may want to explore products that help millennials prepare to purchase a home by 30

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For many millennials, 30 is the magic number. Financial institutions may benefit by creating products that can help millennials save and financially prepare to purchase a home by this seminal year in their lives. By doing so, financial institutions may also be more likely to secure mortgages with those millennials at the time of purchase.

Millennials trust and rely on their parents more than any other source for information about home financing. If these parents were hurt during the housing crisis, the advice they are providing could be what’s preventing millennials from taking the leap into homeownership sooner. Given how the buying landscape has changed since 2008, financial institutions may want to focus on educating parents as much as millennials about home buying.


KEYtakeaways

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ESSENT MILLENNIAL Home purchasing study 14

EmotionalDrivers


Key takeaway Age and perceived life

stage play a key role in many millennials’ desire to purchase a home.


Many current owners and potential buyers are/were prompted to look for a home because “it felt like the right next step at [their] age”

Top Reasons for considering a home purchase

(Shown: % that selected answer choice)

POTENTIALN=750

OWNERSN=500

Q1: (Owners) You mentioned that you are currently considering or have considered purchasing a home. What prompted you to begin seriously looking for a home to purchase? Q11: (Potential Buyers) You mentioned that you are currently considering or have considered purchasing a home. What prompted you to begin seriously looking for a home to purchase?

This was a more popular reason than wanting to invest in equity or stop paying rent

42%

35%

35%

26%

25%

It felt like the right next step atmy age

I wanted to invest my money andbuild equity, rather than pay

rent

I realized that I could actuallyafford to purchase a home

I realized monthly mortgagepayments would be less expensive

than renting

I got married and wanted to buya home with my spouse/partner

OWNERS

51%

42%

34%

32%

25%

It feels like the right next step atmy age

I want to invest my money andbuild equity, rather than pay

rent


than renting

As a renter, I am upset that I am paying someone else’s mortgage

(rather than my own)

I am frustrated dealing withlandlords or management

companies

Potential Buyers

16


POTENTIALN=750

CURRENTN=500

AGE at which a person should own their home

Q30: By what age do you believe a person should own his/her own home? *Percentages do not include those who selected 36 or older.

64%

16%3%

17%

55%

20%

7%

18%

39%

20%

9%

32%

53%

20%

6%

21%

Should own by 30 Should own by 35 Should own by 36 orolder

There is no right age

OWNERS POTENTIAL BUYERS NON-BUYERS Total

NON-BUYERSN=750

OWNERSN=500The majority of owners and potential buyers feel that a person should

own his/her own home by the age of 30

This is significantly different from the views on non-buyers, only 39% of whom believe a person should own by 30

17


OWNERSN=500

POTENTIALN=750

Q7: (Owners) What made you excited to purchase your first home? Q18: (Potential Buyers) What makes you excited to purchase a home? Q9 (Owners)/Q20 (Potential Buyers): Why did/do those make you the MOST excited to purchase a home?

50% of owners in our survey purchased their first home by the age of 25

% who were/are excited to buy a home because it was/is an

accomplishment or measure of success

OWNERS Potential Buyers

45% 39%

“I bought a home when I was 21 so I bought before most other friends and family at my age. It made me feel accomplished.”

– Owner

Owners and potential buyers see homeownership as a measure of personal success

“I felt like it was a logical next step as a young adult. I wanted to have something I could be proud of.”

– Owner

“Owning a home shows that you have worked and still work hard to provide for yourself and your family.”

– Potential Buyer

“I'm not getting any younger and [buying a home] would be the most successful thing that I would do in my adult life.”

– Potential Buyer

18


Key takeaway

Millennials are most excited to purchase a home to have a place they can customize to their taste.


47%

35%

45% 45%

32%28% 28% 27%

19%

55%

45%39%

36% 36% 36%31% 30%

27%

50%53%

34%31%

28%25%

15%

Want a place tocustomize

Want to build afamily home

Is anaccomplishment

Makes me anadult

Want a space tohost people

Want to buildwealth

Want more spacefor children

Want to buildequity (vs. rent)

A home is a goodinvestment

Done dealingwith landlords

Want to putdown roots

It's just whatpeople do

OWNERS POTENTIAL BUYERS NON-BUYERS

Millennials across segments are most excited about home buying because they want a space to customize to their taste

OWNERSN=500

POTENTIALN=750

Q7: (Owners) What made you excited to purchase your first home? Q18: (Potential Buyers) What makes you excited to purchase a home? Q24: (Non-Buyers) Why do you think you might like to own a home in the future? *Asked of those who showed interest in future homeownership in Q23.

Most exciting benefits to buying a home (Shown: % that selected answer choice. Some choices only asked of Owners/Potential Buyers, and some only asked of Non-Buyers.)

NON-BUYERSN=620*

This is more exciting than the potential investment implications

20


Potential buyers and non-buyers are more likely than owners to list “wanting a place for my family to grow” as one of biggest reasons why they are excited to purchase a home

OWNERSN=500

POTENTIALN=750

Q7: (Owners) What made you excited to purchase your first home? Q18: (Potential Buyers) What makes you excited to purchase a home? Q24: (Non -Buyers) Why do you think you might like to own a home in the future? *Asked of those who showed interest in future homeownership in Q23. *Depending on the audience, some answer choices were worded

slightly differently in the survey questionnaire.

% excited about owning a home to raise a family in

35%

45%

53%

"I would like to own a home to raise a family in; a place where myfamily and I can live, grow, and build memories together"*


NON-BUYERSN=620

“Growing up I lived in a rented apartment and just having the space for my children and having a place where my children can grow up and say that's their home is very important to me.”

– Potential Buyer

“When you and your spouse get together you are starting a legacy. So to buy a home and have it in your family for generations is probably what makes me most excited.”

– Potential Buyer

“I want somewhere where I can mark the height of my children as the years go by.”

– Potential Buyer

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Key takeaway Millennials view home

buying as a smart, but not always necessary, investment.


71%

20%

9%

75%

18%

7%

58%29%

13%

Seventy-one percent (71%) of the millennials surveyed believe that owning a home is a good financial investmentThis is even higher for current owners (81%) and potential buyers (75%), while non-buyers (58%) fall well below the average.

Q29: How strongly do you agree or disagree with each of the following statements?

% who agree: “buying a home is a good financial investment”(Shown: % agree (5-7 on a 1-7 scale), not sure (4), disagree (1-3))

81%

14%

5%

OWNERS Potential buyers Non-buyerstotal

71%agree

Agree Not Sure Disagree

58%agree

75%agree

81%agree

23

POTENTIALN=750

CURRENTN=500

NON-BUYERSN=750

OWNERSN=500


64%

21%

15%

51%

27%

22%

66%

20%

14%

Agree Not Sure Disagree

72%

18%

10%

Despite the general perception that buying a home is a good investment, not all millennials feel that it is always better to own than rent


% who agree: “It is always better to own a home than it is to rent” (Shown: % agree (5-7), not sure (4), disagree (1-3))

OWNERS Potential buyers Non-buyerstotal

64%agree

51%agree

66%agree

72%agree

24

POTENTIALN=750

CURRENTN=500

NON-BUYERSN=750

OWNERSN=500


Almost 60% agree with or are neutral toward the statement: “Buying a home isn’t as important as people say it is”

In addition, 54% agree with or are neutral towards the statement: “Buying a home was a good investment for previous generations, but it isn’t today.”


“Buying a home a was a good investment for previous generations, but it isn’t today”

(Shown: % agree (5-7), not sure (4), disagree (1-3))

41%47% 42% 39%

25%19% 27% 29%

34% 34% 31% 32%

TOTAL OWNERS POTENTIALBUYERS

NON-BUYERS

DISAGREE NEUTRAL AGREE

46% 48% 50%40%

20% 19% 20%

22%

34% 33% 30%39%


NON-BUYERS


“Buying a home isn’t as important as some people say it is”(Shown: % agree (5-7), not sure (4), disagree (1-3))

25

POTENTIALN=750

CURRENTN=500

NON-BUYERSN=750

OWNERSN=500


Millennials are mixed in their views about homeownership and the American Dream


“Buying a home is an essential part of the American Dream”(Shown: % agree (5-7), not sure (4), disagree (1-3))

16% 11% 15%22%

17%

13%17%

21%

67%76%

68%57%


NON-BUYERS


15%9% 13%

21%

21%

18%20%

26%

64%73%

67%

53%


NON-BUYERS


“It is important for families with children to own their own home”(Shown: % agree (5-7), not sure (4), disagree (1-3))

Less than 70% feel that homeownership is an essential part of the American Dream or that homeownership is important for families with children.

26

POTENTIALN=750

CURRENTN=500

NON-BUYERSN=750

OWNERSN=500


Key takeaway

Millennials’ concerns about home buying dramatically decrease once they are considering a home purchase.


Non-buyers strongly associate home buying with financial stress and negative emotions

28

Q22: (Non-Buyers) You mentioned that you have not seriously considered purchasing a home. What immediately comes to mind when you think of buying a home? Q28: (Non-Buyers): Which of the following words/phrases best describe how you feel about the idea of purchasing a home?

11%

13%

13%

14%

16%

17%

18%

25%

32%

32%

Eager

Happy

Anxious - in a bad way

Insecure

Scared

Anxious - in a good way

Excited

Hopeful

Nervous

Overwhelmed

Emotions that best describe the home buying process(Shown: % that selected answer choice)

NON-BUYERSN=750

“[When I think of buying a home, I think of] being trapped into a contract, a lot of

work and responsibility.” – Non-Buyer

“Buying a home would be a lot of stress.” – Non-Buyer

“[When I think of buying a home, I think of] financial risk. I'm scared of ever

buying a home because I'm afraid of not being able to pay my mortgage and

losing it.” – Non-Buyer


Non-buyers also have numerous concerns about home buying, specifically down payments and affordability

29

Non-buyer Concerns about FUTURE homeownership(Shown: % that selected answer choice)

Q25: (Non-Buyers) What concerns do you have about purchasing a home in the future? *Asked of those who showed interest in future homeownership in Q23.

57%54%

49%

39%37% 36%

27% 26%

20%

Having enoughmoney for a

down payment

Finding a homein my price

range

Being able toafford monthly

mortgagepayment

Finding a homein the right

neighborhood

Qualifying fora mortgage

Finding a homethat is worth

the asking price

Overpaying fora home and

losing money ina market crash

Not sure I'll bementally ready

for such alarge purchase

Not sure I'll bementally ready

to commit toone location

NON-BUYERSN=750


36%

27%30%

25%23%

17%22%

16%

38%

31% 30% 29%25%

22% 22% 21%

MAINTENANCE ON THE

HOME MIGHT BE MORE

MONEY THAN I

ANTICIPATED

I WOULDN’T BE ABLE TO

AFFORD THE MONTHLY

PAYMENTS

I WAS MAKING A

COMMITMENT I

COULDN’T EASILY BACK

OUT OF IF MY

CIRCUMSTANCES

CHANGED

I WASN’T BUYING THE

RIGHT HOME

I WAS USING TOO MUCH

OF MY SAVINGS FOR

THE DOWN PAYMENT

AND CLOSING COSTS

I WASN’T BUYING IN THE

RIGHT NEIGHBORHOOD

THE HOUSING MARKET

COULD CRASH AGAIN

AND I WOULD LOSE THE

MONEY I INVESTED IN

THE HOUSE

BUYING MIGHT NOT BE

THE RIGHT THING TO DO

FOR MY FINANCES

OVERALL

OWNERS POTENTIAL BUYERS

Once they are in the market, potential buyers’ concerns decrease and the unknown cost of maintenance is what worries them most

Q4: (Owners) What concerns did you have when purchasing your first home? Q15: (Potential Buyers) What concerns do you have about purchasing your first home? Q17: (Potential Buyers) Why are those your GREATEST concerns? *Depending on the audience, some answer choices were worded slightly differently in the survey questionnaire.

Concerns about purchasing a first home(Shown: % that selected answer choice*)

“All you need is for the inspection to miss a foundation problem, or for the hot water heater to die, and then that's a huge expense you weren't planning on.” – Potential Buyer

30

POTENTIALN=750

CURRENTN=500

OWNERSN=500


Potential buyers and owners (prior to purchase) also begin to associate home buying with excitement and happiness

31

Q10: (Owners) Which of the following words/phrases best describe how you felt during the home buying process? Q21: (Potential Buyers) Which of the following words/phrases best describe how you’ve felt as you consider/considered home buying?

41%

29% 26%22% 21% 19%

15%11% 11% 10% 9% 8% 7% 7% 5% 5% 4% 4%

3% 3% 2% 1% 1%

32%

23%17%

32%27%

25%16%

9% 7% 5% 5%

12% 8%5%

13%

1%

8%4%

8% 7% 3% 1%1%

OWNERS POTENTIAL BUYERS

Emotions that best describe the homebuying process(Shown: % that selected answer choice)

POTENTIALN=750

CURRENTN=500

NON BUYERSN=750

OWNERSN=500


Non-buyers

Potential

Owners

This indicates that millennials may be primarily afraid of what they don’t know about home buying – once they enter the purchase funnel their concerns diminish

32

Q4: (Owners) What concerns did you have when purchasing your first home? Q15: (Potential Home Owners) What concerns do you have about purchasing your first home? Q25: (Non-Buyers) What concerns do you have about purchasing a home in the future? *Asked of those who showed interest in future homeownership in Q23.

2 concerns over 30%

Top 3 emotions:

ExcitedNervousHopeful

6 concerns over 30%

Top 3 emotions:

NervousOverwhelmed

Hopeful

1 concern over 30%

Top 3 emotions:

ExcitedAnxious – in a good way

Happy

NON BUYERSN=750

NON BUYERSN=620*

POTENTIALN=750

CURRENTN=500

NON-BUYERSN=750

OWNERSN=500


Key takeaway

Non-buyers want more stability in their lives before they purchase a home.


Most non-buyers want to purchase a home at some point in the future

34

NON-BUYERSN=750

Non-buyer Attitudes toward homeownership

Q23: (Non-Byers) Which of the following best describes your attitudes toward homeownership?

21%

56%

6%9% 8%

I would like to own a home inthe near future

I would like to own a home atsome point in the future, but I

don't know when

I have not thought aboutwhether or not I'd like toown a home in the future

I have thought about buyinga home eventually, but am

not sure if it would be rightfor me

I definitely do not want toown a home in the future

77%


53%

36%33% 32%

29%

3%

When I feel morestable in my job or

career

When I am ready tosettle down and

commit to staying inone place

When I am married orin a relationship thatwill lead to marriage

As soon as I find ahome that I want and

can afford

As soon as I haveenough money for a

down payment

If renting the home Iwant to live in

becomes tooexpensive for me

However, the majority believe they will be ready to purchase when they are more stable in their careers, not necessarily when they have enough money for a down payment

35

NON-BUYERSN=620*

Eventual readiness to purchase a home (Non-buyers)

Q26: (Non-Buyers) When do you believe that you would be ready to purchase a home? *Asked of those who showed interest in future homeownership in Q23.

Only 29% say they will be ready to buy when they have enough for a down payment.


42%

38%

31%

26%

23%21%

14%

I don't believe I'llever be able to

afford a home thatI'd want

I don't want to betied to a home in

case mycircumstances

change

I don't want to bebothered with themaintenance and

upkeep a homerequires

The homes where Iwould want to liveare too expensive

I don't see a need toown a home when Iam happy renting

I am scared aboutoverpaying for ahome and losing

money if the housingmarket crashes

I don't believe thatbuying a home is agood investment

Of the 17% who say homeownership may not be for them, over 40% believe they simply will never be able to afford a home

36

NON-BUYERSN=130*

Non-buyers’ Reasons not to own a home(n=130)

Q27: (Non-Buyers) Why don’t you believe that owning a home is right for you? *Asked of those who did not show interest in future homeownership in Q23.


Financially Preparing to Buy


Key takeaway Millennials want to feel

knowledgeable about the homebuyingprocess before they purchase.


Few potential buyers and non-buyers feel that they are very knowledgeable about financially preparing to buy a home

OWNERSN=500

25%

13%

5%

46%48%

24%21%

30%33%

7%9%

39%


EXTREMELY KNOWLEDGEABLE SOMEWHAT KNOWLEDGEABLE NOT VERY KNOWLEDGEABLE NOT KNOWLEDGEABLE AT ALL

POTENTIALN=750

Q32: (Owners) When you first started to consider purchasing a home, how knowledgeable were you about financially preparing to buy a home?Q50: (Potential Buyers) How knowledgeable do you feel about financially preparing to buy a home? Q62:(Non -Buyers) How knowledgeable do you feel about financially preparing to buy a home?

Knowledge about financially preparing

NON-BUYERSN=750

In contrast, 25% of owners say they were “extremely knowledgeable” about financially preparing before purchasing their first home.

39


The majority of potential buyers and non buyers agree that having a step-by-step guide to the home buying process would be “extremely helpful”

OWNERSN=500

POTENTIALN=750

Q48: (Owners) When you were planning to buy your home, how helpful would it have been to have a step-by-step guide to financially preparing for your home purchase? Q60: (Potential Buyers) How helpful would it be to have a step-by-step guide to financially preparing for a home purchase? Q71: (Non-Buyers) How helpful would it be to have a step-by-step guide to financially preparing for a home purchase?

NON-BUYERSN=750

Even many current owners wish they’d had this guide before buying.

Helpfulness of step-by-step planning guide

46%

56%

52%

45%

37% 37%

6% 5% 5%3% 2%

6%

Current Home Owners Potential Home Owners Non-Buyers

Extremely helpful Somewhat helpful not very helpful not helpful at all

91%

93%59%

40


24%

29%

31%

43%

45%

46%

46%

54%

55%

57%

Broker recommendations

Lender recommendations

Financial advisor recommendations

Credit requirements

Key terms

Home buying timeline

Mortgage options

Down payment/closing costs

Documentation needed

Home affordability calculator

Non-buyers and potential buyers are looking for insight into closing costs, affordability and the documentation needed for buying a house

Q49: (Owners) What essential pieces of information would you include in a step-by-step guide…? Q61/Q72: (Potential Buyers/Non-Buyers) What essential pieces of information would you want to see included…?

Owners agree that this is the most essential information to provide.

What Potential buyers and Non buyers want in a guide


What current Owners Recommend in a guide


32%

38%

45%

58%

55%

57%

55%

63%

62%

64%

27%

34%

36%

51%

52%

54%

56%

58%

61%

63%

Broker recommendations

Lender recommendations

Financial advisor recommendations

Mortgage options

Key terms

Home buying timeline

Credit requirements

Documentation needed

Home affordability calculator

Down payment/closing costs

Potential Buyers

Non-Buyers

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750

41


In addition, non-buyers and potential buyers want more information about the total cost of homeownership in their area

Q61a/72a: (Potential Buyers/Non-Buyers) What other types of information/resources would help you feel more confident that you’re ready to purchase a home?

Other Desirable home buying Resources for Potential buyers and Non-buyers

69%

44% 43%

34%

67%

42%45%

35%

Information about the true costof home ownership in my area

A tool that shows how a homepurchase can benefit my plans for

retirement

Stories about people in a similarfinancial position who purchased

a home

Stories about how people similarto myself have used their homes

to generate income

POTENTIAL BUYERS NON-BUYERS

POTENTIALN=750

NON-BUYERSN=750

42


Key takeaway

Many millennials do not feel financially ready to buy a home.


2%7%

20%

71%

10%

35%34%

21%

33%

Only 10% of potential buyers and 2% of non-buyers feel extremely financially ready to purchase a home

Q39: (Owners) How financially ready did you feel when you purchased a home? Q55: (Potential Buyers) How financially ready do you feel to purchase a home? Q67: (Non-Buyers) How financially ready do you feel to purchase a home at this point in time?

This is compared to 33% of current owners who felt extremely ready at the time of their first home purchase.

10% 2%

OWNERS Non-buyers

33%

55%

9%3%

Felt extremely ready

EXTREMELY READY SOMEWHAT READY NOT VERY READY NOT READY AT ALL

Pre-purchase Financial preparedness

Feel extremely ready Feel extremely ready

Potential Buyers

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750

44


Outside of managing debt, many potential buyers are actively saving money and trying to improve their credit scores to prepare

Q53: (Potential Buyers) Other than managing your debt, what else are you doing to financially prepare to purchase a home?

6%

18%

25%

25%

27%

32%

43%

44%

46%

Reducing my retirement fund conrtibutions

Seeking the advice of a financial professional

Taking on an extra job/work

Investigating the total cost of homeownership

Using an online tool/calculator

Seeking the advice of a parent/family member

Putting myself on a strict budget

Saving money using extra income each month

Actively trying to improve credit score

Actions taken to financially prepare for home purchase(Shown: % that selected answer choice)

POTENTIALN=750

45


Non-buyers feel that they need to save, improve their credit, investigate the cost of homeownership and more before buying a home

Q65:(Non-Buyers) Other than managing your debt, what else do you believe you would need to do to financially prepare to purchase a home?

NON-BUYERSN=750

5%

27%

30%

34%

38%

42%

45%

47%

52%

Reducing my retirement fund contributions

Using an online tool/calculator

Taking on an extra job/work

Seeking the advice of a financial professional

Seeking the advice of a parent/family member

Investigating the total cost of homeownership

Putting myself on a strict budget

Actively trying to improve credit score

Saving money using extra income each month

Actions taken to financially prepare for home purchase(Shown: % that selected answer choice)

46


48% 30% 26% 23% 21%

I needed to move and

figured it was the right time to buy

My family circumstances made

buying a house a necessity

I was sick of dealing with

landlords and management

companies

I was concerned that if I didn’t

buy soon, I would be priced

out of the market

I found the house I wanted to buy

47


Reasons for purchasing home when not financially ready (Owners)

Q40: (Owners) Why did you purchase a home when you did not feel completely financially ready?

Of the owners who purchased before they were completely ready, most did so because a life situation prompted their need to buy

OWNERSN=500


Key takeaway Millennials are considering

multiple options to make homeownership more affordable.


Q41: (Owners) Which of the following, if any, did you consider doing to make buying a home more affordable? Q56: (Potential Buyers) Which of the following, if any, have you considered doing to make buying a home more affordable? Q68: (Non-Buyers) Which of the following, if any, would you consider doing to make buying a house more affordable?


Considerations to make buying more affordable

NON-BUYERSN=750

POTENTIALN=750

OWNERSN=500

Over 80% of non-buyers and potential buyers would consider buying a fixer upper, waiting until marriage or other options to make home buying more affordableAnd of the current owners surveyed, over 70% considered one of these options.

27% 28% 29%

9%

15%12%

9%

38%

31%

19%17% 16% 15%

10%

31%

45%

19% 18% 18% 18%

13%

Waiting untilmarriage/two-income

household

Buying a "fixer upper" Nothing Buying a home with afriend or family

Buying with a separateapartment for rental

income

Buying with multiplebedrooms for Airbnb

Buying with multiplebedrooms for

roommates

Current Home Owners Potential Home Owners Non-Buyers


5%16%

6%14% 13% 15%

14%

9%19%

18% 23% 22%

81%75% 74%

68% 64% 63%

waiting untilmarriage/two-income

household (n=232)

Separate apartmentfor rental income

(n=128)

Buying a "fixer upper"(n=282)

multiple bedroomsfor roommates (n=115)

buying with afriend/family member

(n=120)

multiple bedroomsfor airbnb (n=78*)

Unlikely Neutral Likely

50

Q57: (Potential Buyers) How likely or unlikely are you to do the following to make buying a home more affordable? *Please note the small sample size.

POTENTIALBUYERS

Potential buyers who are considering these affordability options say they are likely to follow through on them

(Shown: % likely (5-7 on a 1-7 scale), not sure (4), unlikely (1-3))

Likelihood to take action to make buying more affordable


Key takeaway

Millennials may be reluctant to buy because they have misconceptions about the amount of money required for a down payment.


Over 70% of both non-buyers and potential buyers believe they need to put down more than 5% in order to buy POTENTIAL

N=750

Q58: (Potential Buyers) What do you believe is the minimum amount of money you need to put down in order to secure a mortgage? Q69: (Non-Buyers) What do you believe is the minimum amount of money you need to put down in order to secure a mortgage?

NON-BUYERSN=750

Perceived minimum down payment needed to secure mortgage

9%10%

21%18%

28%

10%

4%

17%

12%

17%19%

23%

6%7%

There is nominimum down

paymentnecessary

Over 20%16% - 20%11% - 15%6% - 10%5%Less than 5%

POTENTIAL BUYERS NON-BUYERS

52


Fifty-three percent (53%) of potential buyers say they have not purchased a home simply because they don’t have enough for a down payment

POTENTIALN=750

Q14: (Potential Buyers) What has prevented you from purchasing a home to date?

Preventative factors for Potential Buyers(Shown: % that selected answer choice)

53%

35%

28%

24%

21%

20%

4%

I don’t have enough money for a down payment

I can’t find a home within my budget

I haven’t found the right home for my needs

I can’t find a home that I feel is a good value for my money

I haven’t felt mentally ready to put an offer in on a home

I can’t find a home in the neighborhood I want

I have put in an offer on a home but wasoutbid

53


Agree most strongly

with:

“It is more important to

have a good credit score

than it is to have a large

down payment”

54

Importance of Credit Score vs. Down Payment in securing a mortgage

NON-BUYERSN=750

POTENTIALN=750

OWNERSN=500

Q74: Which of the following statements do you agree with most strongly?

Over half of both potential buyers and non-buyers believe it is equally important to have a large down payment and a good credit score to secure a mortgage

Agree most strongly

with:

“It is more important to

have a large down payment

than it is to have a good

credit score”

Agree most strongly

with:

“It is equally important to

have both a good credit

score and a large down

payment”

29%23%

49%

29%

19%

52%

24%

14%

62%

Current Home Owners

Potential Buyers

Non-Buyers


16%

44%

22%

8%5% 6%

26%

38%

16%

5%3%

11%

2%9%

29%

18%

31%

10%

LESS THAN 6 MONTHS 6 MONTHS - 1.5 YEARS OVER 1.5 YEARS TO 3 YEARS

OVER 3 YEARS TO 5 YEARS

FIVE YEARS OR MORE I WOULDN'T HAVE TO FINANCIALLY PREPARE TO

PURCHASE A HOME


55

Time needed to financially prepare for home purchase

NON-BUYERSN=750

POTENTIALN=750

OWNERSN=500

Q38: (Owners) For how long did you financially prepare before purchasing a home? Q54: (Potential Buyers) For how long have you been financially preparing to purchase a home? Q66: (Non-Buyers) For how long do you believe you would have to financially prepare to purchase a home?

Over 30% of non-buyers believe it will take over 5 years for them to financially prepare to buy a homeThis is in stark contrast to 0wners, 60% of whom say they financially prepared for their first home purchase for less than 18 months.


Interestingly, 45% of owners put 5% or less down when buying their homes, and 76% put 15% or less down

OWNERSN=500

Q43: (Owners) Before purchasing a home, how much money did you hope to have for a down payment? Q44: (Owners): How much money did you ultimately use as a down payment on your home?

Amount hoped to have for a down payment Amount ultimately used as a down payment

14%15%15%

28%

14%14%

Over 20%16% - 20%11% - 15%6% - 10%5%Less than5%

10%

14%13%

28%

15%

20%

Over 20%16% - 20%11% - 15%6% - 10%5%Less than5%

56


Key takeaway

Non-buyers appear less comfortable with debt, which could be impacting their openness to buying a home.


Millennials across segments have similar, generally negative, views towards debt

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


“I believe that all debt is bad debt”(Shown: % agree (5-7), not sure (4), disagree (1-3))

34% 31%26%

17% 22%24%

49% 47% 50%

OWNERS POTENTIALBUYERS

NON-BUYERS


“I avoid using credit cards”(Shown: % agree (5-7), not sure (4), disagree (1-3))

45%38%

33%

12%16%

20%

43% 46% 47%


NON-BUYERS

“Borrowing money makes me feel uncomfortable”(Shown: % agree (5-7), not sure (4), disagree (1-3))

12% 15%10%

12%12%

14%

76% 73% 76%


NON-BUYERS

58


However, non-buyers have less debt than potential buyers have and owners had before their first home purchase

OWNERSN=500

POTENTIALN=750

Q33: (Owners) Before purchasing your first home, which of the following types of debt did you have? Q51: (Potential Buyers) Which of the following types of debt do you have?Q63:(Non-Buyers) Which of the following types of debt do you have?

NON-BUYERSN=750

Types of Debt currently/prior to home purchase(Shown: % that selected answer choice)

36%

2%

10%

19%

15%

33%

29%

23%

4%

13%

23%

29%

37%

40%

26%

5%

13%

11%

33%

37%

36%

None

Tax debt

Personal loan debt

Hospital bills/medical debt

Auto loan debt

Student loan debt

Credit card debt


59


49%

33%35%

20%16%

64%61%

51%

37%

31%

69%67%

60%

52%

41%

Personal loan debt Credit card debt Hospital bills/medical debt Auto loan debt Student loan debt


And non-buyers who have debt are more likely to want to pay it off completely before purchasing a home

OWNERSN=500

POTENTIALN=750

Q34: (Owners) Ideally, how did you want to manage this debt before purchasing a home Q52: (Potential Buyers) Ideally, how do you want to manage this debt before purchasing a home? Q64:(Non-Buyers) Ideally, how would you want to manage this debt before purchasing a home? *Please note the small sample sizes.

% that Plans to pay debt off completely before purchasing a home

NON-BUYERSN=750

This is particularly true for personal loan and credit card debt.

n=249n=278n=185n=112n=215n=163n=145n=172n=55*n=218n=299n=179n=77*n=99*n=67*

60


21%

17%18%

27%25%

23%22%

25%

20%

12%11%

9%

18%

21%

30%


Under $2,500 $2,500 - $4,999 $5,000 - $7,499 $7,500 - $9,999 $10,000 or more

Non-buyers also want to have more money left in their savings after purchasing a home

Q45: (Owners) How much money did you want to have left in your savings after paying for a down payment and closing costs? Q59: (Potential Buyers) What is the minimum amount of money you want to have left in your savings after paying for a down payment and closing costs? Q70: (Non-Buyers) And what is the minimum amount of money you would want to have left in your savings after paying for a down payment and closing costs?

Money desired in savings after Home Purchase

61

42% Above $5,000

57% Above $5,000

59% Above $5,000

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


In contrast, owners were willing to have more debt left than they’d originally hoped when purchasing a home

OWNERSN=500

Q34: (Owners) Ideally, how did you want to manage this debt before purchasing a home? Q35: (Owners) Ultimately, how did you manage this debt before purchasing your home? *Please note the small sample sizes.

How Owners wanted to manage debt

How Owners managed debt

10%20%

13%20%

31%

36%

29% 44%

33%

26%

49%35% 33%

20% 16%

Personalloandebt

(n=67*)

Hospitalbills

(n=55*)

Creditcarddebt

(n=179)

Autoloandebt

(n=163)

Studentloandebt

(n=185)

30% 29% 28%34% 37%

33% 22% 36%

25%23%

33% 29%25% 17% 13%

Personalloandebt

(n=67*)

Hospitalbills

(n=55*)

Creditcarddebt

(n=179)

Autoloandebt

(n=163)

Studentloandebt

(n=185)

62

Pay off Significantly Pay off completelyPay off Somewhat


Owners were also willing to have less in their savings after their home purchase

OWNERSN=500

Q45: (Owners) How much money did you want to have left in your savings after paying for a down payment and closing costs? Q46: (Owners) And how much money did you ultimately have left in your savings after paying for a down payment and closing costs?

Money wanted left in savings after down payment/closing costs

Money actually left in savings after down payment/closing costs

18%

12%

22%

27%

21%

$10,000 or more

$7,500 - $9,999

$5,000 - $7,499

$2,500 - $4,999

Under $2,500

15%

10%

19%

22%

34%

$10,000 or more

$7,500 - $9,999

$5,000 - $7,499

$2,500 - $4,999

Under $2,500

63


There is a relationship between millennials’ comfort and willingness to invest and their willingness to purchase a home.

Key takeaway


Current owners are much more likely than potential buyers and non-buyers to believe they are knowledgeable about investing and to take risks when investing

OWNERSN=500

POTENTIALN=750


NON-BUYERSN=750

Agree/Disagree statements on financial management(Shown: % agree (5-7 on a 1-7 scale))

41%

31%

20%

"I LIKE TO TAKE RISKS WHEN INVESTING FORTHE CHANCE OF A HIGH RETURN"


54%

39%

20%

"I CONSIDER MYSELF KNOWLEDGEABLE ABOUTINVESTING AND INVESTMENT OPTIONS"


65


In addition, current owners are also more likely to take investing in their future seriously and consider their home a part of their retirement plan

OWNERSN=500

POTENTIALN=750


NON-BUYERSN=750

Agree/Disagree statements on financial management(Shown: % agree (5-7 on a 1-7 scale))

72%

64%

46%

"I MAKE INVESTING FOR THE FUTUREA MAJOR PRIORITY"

70%

62%

45%

"Purchasing a home is a part of myinvestment plan for retirement"


63%

47%

29%

"I regularly save money in anaccount outside of a 401(k) or IRA"

Owners also save more outside of their 401(k)/IRAs than the other segments.

66


Millennials have a limited understanding of how credit scores work.

Key takeaway


Most millennials have a decent understanding of how high credit card balances impact their credit scores

OWNERSN=500

POTENTIALN=750


NON-BUYERSN=750

5% 8% 7%

19%21%

36%

76% 71% 57%

OWNERS POTENTIAL-BUYERS NON-BUYERS

DISAGREE NOT SURE AGREE

“A high debt-to-income ratio will negatively impact your credit score”

“High usage/balances on credit cards may negatively impact your credit score”

Agree/Disagree statements on Credit ScoreS(Shown: % agree (5-7 on a 1-7 scale), not sure (4), disagree (1-3))

8% 12% 13%

21%

26%

35%

71% 62% 52%

OWNERS POTENTIAL-BUYERS NON-BUYERS


68


66%

27%

7%

75%

19%

6%

Most understand that outstanding collections (no matter how small) will negatively impact their credit scores

OWNERSN=500

POTENTIALN=750


NON-BUYERSN=750

“Outstanding debt collections, however small, can have serious impacts on your credit score”

OWNERS Potential Buyers Non-buyers

81%

15%

4%

AGREE NOT SURE DISAGREE

Agree/Disagree statements on Credit Scores(Shown: % agree (5-7 on a 1-7 scale), not sure (4), disagree (1-3))

81%agree

75%agree

66%agree

69


However, millennials, especially non-buyers, are less sure about how the ratio of credit cards to balances affects their score

OWNERSN=500

POTENTIALN=750


NON-BUYERSN=750

18% 22% 21%

31%

37%

49%

51% 41% 30%



“Having many credit cards with no balances negatively impacts your credit score”

“When it comes to your credit score, it is better to have a few credit cards with small balances than it is to have many

credit cards with no balances”


10% 12% 14%

29%34%

43%

61% 54% 43%



70


Few non-buyers understand that closing an account or having a financial institution pull your credit negatively affects credit


16% 18% 19%

30%

37%

54%

54% 45% 27%

OWNERS POTENTIAL BUYERS NON BUYERS


“Choosing to close a credit card account will negatively impact your credit score”

“Every time a potential financial institution pulls your credit, it lowers your credit score”


10% 15% 17%

21%

26%

42%

69% 59% 41%



71

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


57%29%

14%

61%22%

17%

The majority of millennials believe that credit scores reflect their history of paying rent and utilities on time


“Credit scores reflect your history of paying rent and utility bills like electricity, gas, cable, etc. on time”


67%

20%

13%


Agree/Disagree statements on Credit Scores(Shown: % agree (5-7 on a 1-7 scale), not sure (4), disagree (1-3))

67%agree

61%agree

57%agree

72

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


Many non-buyers also aren’t sure how bankruptcy or student loans impact credit scores


9% 11% 10%

29%35%

48%

62% 54% 42%



“A bankruptcy will stay on your credit report for 10 years”

“Student loan debt significantly contributes to lowering your credit score”


23% 19% 19%

31% 33%

43%

46% 48% 38%



73

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


Finally, though over 50% of millennials believe that credit scores play too large of a role in securing a mortgage, roughly the same amount believe credit scores accurately reflect someone’s ability to buy a home


20%15% 15%

21% 25%

38%

59% 60% 47%



“Credit scores play too large of a role in a person’s ability to secure a mortgage”

“Credit scores accurately reflect a person’s financial ability to purchase a home”


21%

27% 25%

20%22%

32%

59% 51% 43%



74

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


The mortgage process and pmi


Potential buyers and non-buyers have little understanding of mortgages or the mortgage process.

Key takeaway


2%12%

25%

60%

21%

48%

21%

10%

VERY KNOWLEDGEABLE SOMEWHAT KNOWLEDGEABLE NOT VERY KNWOLEDGEABLE NOT KNOWLEDGEABLE AT ALL

4%

31%

39%

27%

69%

Only 35% of potential buyers and 14% of non-buyers feel somewhat to very knowledgeable about the process of securing a mortgage

Q77: (Owners) How knowledgeable did you feel about the process of securing a mortgage before you bought your home? Q85/92: (Potential Buyers/Non-Buyers) How knowledgeable do you feel about the process of securing a mortgage?

35% 14%


Felt knowledgeable before buying

Feel knowledgeable Feel knowledgeable

Knowledge about the Mortgage process

In contrast, 69% of owners say they felt knowledgeable about the process before buying their home

77

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


Most potential buyers and non-buyers have at least heard of at leastone mortgage type

Awareness of mortgage types

55%53%

49%46% 46%

33%

16% 15%12% 11%

9% 9%

45%41%

38%

31%

38%

24%

9%

30%

9% 6% 5% 4%

Fixed-Rate 30-year 15-year FHA Adjustable- Rate VA FederalGovernment

HomeownershipVouchers

None of these Construction Othergovernmenthome buyingassistanceprograms

FHA 203(k) FederalGovernment

Indian Home LoanGuaranteeProgram

Potential Buyers Non-Buyers

Q86/Q93: (Potential Buyers/Non-Buyers) Which of the following types of mortgages or government home buying programs have you heard of?

78

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


34% 33%

25%

19%

15%

10%7% 6% 6% 4% 4% 2%

48%

20%22%

19%

13% 14%10%

6%3% 3%

5%4%

None of these 30-year Fixed-Rate 15-year FHA (FederalHousing

Administration

Adjustable- Rate VA (VeteransAffairs)

FederalGovernment

HomeownershipVouchers

Othergovernment homebuying assistance

programs

FHA 203(k) Construction FederalGovernment

Indian Home LoanGuaranteeProgram

Potential Buyers Non-Buyers

However, most potential buyers and non buyers are not sure which mortgages they want or which are best for potential home owners

Q87: (Potential Buyers) Which type(s) of mortgage(s)/programs are you planning to use to buy a home? Q88: (Potential Buyers) Why are you planning to secure those types of mortgages to purchase your home? Q94 (Non-Buyers) Which type(s) of mortgage/programs do you believe are the best for Potential Buyers?

Mortgages Types Potential Buyers Want/Non-buyers Believe are Best

“Because [a 30-year and a fixed- rate] seem to make the most sense and it’s what my

parents did.” – Potential Buyer

“With the VA, I wouldn't have to have a down payment and the FHA is a nice loan

for rural communities and would make the down payment a lot less than a

conventional loan.” – Potential Buyer

“I have been previously told that I would probably qualify for those types of mortgages,

and my wife is a federally recognized native American so I am hoping that will help with

some programs too.” – Potential Buyer

79

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


Millennials aren’t familiar with PMI or its potential benefits.

Key takeaway


12%

22%

19%17%

31%

VERY FAMILIAR SOMEWHAT FAMILIAR KNEW A LITTLE BIT HEARD OF PMI, BUT KNEW NOTHING NEVER HEARD OF PMI

2%3%6%

13%

76%

5%

11%

13%

18%

53%69%

The majority of non-buyers and potential buyers have never heard of PMI

Q83: (Owners) Before purchasing a home, how familiar were you with private mortgage insurance (PMI)? Q89/95: (Potential Buyers/Non-Buyers) How familiar are you with private mortgage insurance (PMI)

47% 24%


Heard of PMIbefore buying

Have heard of PMI Have heard of PMI

Knowledge about the Mortgage process

However, the majority of owners claim they had at least heard of PMI before buying their homes.

81

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


Over 45% millennials mistakenly believe that PMI will protect them in the case of foreclosure

Q84/Q91/Q96: Regarding private mortgage insurance, which of the following statements do you believe are true, and which do you believe are false?

PMI statements considered true/false

“PMI protects me as a homeowner in the event of a foreclosure.”

53%

41% 41%

47% 59% 59%


FALSE TRUE

“PMI protects the financial institution’s investment in my home in the event of a foreclosure.”

21%

28%

38%

79% 72% 62%


FALSE TRUE

Most millennials understand that PMI protects the financial institution’s investment in their home in the event of a foreclosure.

82

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


While millennials don’t know much about PMI, most infer that PMI makes homeownership more affordable for some buyers

Q84/Q91/Q96: Regarding private mortgage insurance, which of the following statements do you believe are true, and which do you believe are false?

PMI statements considered true/false

“PMI allows people with down payments of less than 20% to qualify for a mortgage.”

24%29%

38%

76% 71% 62%


NON-BUYERS

“PMI allows people to save part of their down payment because they don’t have

to put as much money down.”

35% 36% 38%

65% 64% 62%


NON-BUYERS

FALSE TRUE

32% 33%38%

68% 67% 62%


NON-BUYERS

“PMI helps buyers purchase their desired homes faster because they don’t have to

put as much money down.”

83

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


37%

40%

23%

YES NO NOT SURE

23%Not sure if mortgage

includes PMI

Among owners, 23% don’t know if they have PMI

Q81. (Owners) Does your mortgage currently include private mortgage insurance (PMI)? Q82: (Owners) Why did you choose to secure a mortgage that required PMI?

mortgage includes pmi(Owners, n=500)

62%

36%

21%

It was the only way Icould qualify for the

mortgage with thedown payment I had

I wanted to save part ofmy potential down

payment in case I neededit for other expenses

I needed to use part ofmy original down

payment for closingcosts and fees so I hadto select a loan with

PMI

Of the 40% who do have PMI, the majority chose PMI because it was the only way they could afford to secure a mortgage.

Reasons for choosing mortgage with pmi

(Owners, n=183)

OWNERSN=500

84

OWNERSN=500


Seventy-two percent (72%) of potential buyers aren’t sure if they will secure a mortgage with PMI

OWNERS

Q90: (Potential Buyers) Do you think the mortgage you’ll ultimately secure will require private mortgage insurance (PMI)?

Belief that first mortgage will include pmi

15%

13%

72%

Yes No Not sure

72%Not sure if mortgage will

include PMI

85

POTENTIALN=750


Influencers and information sources


Millennials rely on parents, friends, realtors and financial institutions for financial advice.

Key takeaway


80%

65%63%

61%59%

56%

45%

39% 39%

32%

71%

49%

58%

53%

44%

55%

43%

34%30%

26%

74%

Na

58%56%

na Na

32%30% 28%

23%

parents/family my realtor close friend my bank my loan officer my financialadvisor

onlineresources

privatemortgageinsurancecompany

financial media otherinsurancecompanies

owners Potential Buyers Non-Buyers

Millennials trust their parents more than anyone else to provide them with financial advice about buying a home

Q99. How much do you trust each of the following sources to provide you with information about financing a home?

Trusted sources of financial advice about home buying

(Shown: % chosen; [Top 3 Box Trust])

88

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


73% 72%

65% 65%61%

45% 44%39%

31% 29%

54%

64%

45%

60%

66%

49%45%

35%35%

29%

my realtor Parents/family my loan officer my bank onlineresources

close friend my financialadvisor

privatemortgageinsurancecompany

financial media otherinsurancecompanies

owners Potential Buyers

Homeowners relied most heavily on their realtors, parents and their bank or loan officer when buying a home

Q97. When buying your first home, how much did you rely on each of the following sources for information about financing a home?Q98. How much are you currently relying on each of the following sources for information about financing a home?

Sources owners relied on/potential buyers are relaying on for information about financing their home

Potential buyers are relying more heavily on online sources than owners did.

Note: Roughly 25% of potential buyers say they currently do not have a realtor or loan officer.

(Shown: % “somewhat” and “heavily”)

89

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


24%

15%13%

11%9%

6%5% 2% 2% 1% 1%

35%

11%

8%

15%13%

5%6%

1% 3% 1% 1%

parents/family my realtor my loanofficer

my bank my financialadvisor

onlineresources

close friend privatemortgageinsurancecompany

other otherinsurancecompanies

financialmedia

owners Potential Buyers

Over 30% of owners and potential buyers say their parents either were or will be their greatest influencer for financial advice when buying a home

Q99a. Who would you say was your ultimate influencer when it came to your decisions about financing your home?Q99b. Who do you think will be your ultimate influencer when the time comes to make decisions about financing a home?

Ultimate influencer in deciding how to finance home purchase

90

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


50%

36%

29%

21%19%

14%11%

8% 7%

56%

31%27%

25%21%

16%13%

7% 5%

60%

30%

20%

12%

24%

15% 14%12% 12%

family members/friends/

colleagues

general newswebsites

financial media financialwebsites

social media national TV newsprograms

local tv newsprograms

none of theabove

Don't know

owners Potential Buyers Non-Buyers

Roughly 2% of each segment gets financial information from other sources, including:

*Dave Ramsay*NPR*Suze Orman*Reddit*Money Under 30*Planet Money

While all millennials get financial news and information from friends/ family/colleagues, owners are more likely to consume financial information from other sources

Q99. How much do you trust each of the following sources to provide you with information about financing a home?

Sources of financial information

91

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


Appendix

92


Demographics


Demographic Proportion

AGE

18-24 38%

25-30 32%

31-36 31%

Gender

Male 51%

Female 49%

Race

White (alone) 71%

African or African descent (alone)

17%

Hispanic or Latino (of any race)

21%

Asian American/Asian (alone)

8%

Other (non-Hispanic) 3%

Race

Region

Northeast 17%

Midwest 20%

South 39%

West 23%


Educational Attainment

Less Than High School Diploma 4%

High school Diploma 30%

Technical or vocational School 3%

Some College 23%

College Graduate (4-year degree) 27%

Graduate or professional School 11%

Prefer not to answer 2%

Individual Income

Less than $24,999 31%

$25,00 - $49,999 23%

$50,000 - $74,999 14%

$75,000 - $99,999 11%

$100,000 - $124,999 5%

$125,000 - $149,999 2%

$150,000 - $174,999 1%

$175,000 - $199,999 1%

$200,000 or more 1%

Total – Demographics



Marital Status

Single, not in a relationship 38%

In a relationship, not living With A partner

13%

In a relationship, living with a partner

16%

Married 30%

Civil Union/domestic partnership 0%

Divorced/Separated 2%

Widowed 0%

Prefer Not to answer 1%

Living arrangement

Roommate(s), non-related 12%

Spouse/Partner 46%

Child(ren) 30%

Parent(s) 28%


Living arrangement (Cont’d)

Sibling(s) 9%

Other/Non-immediate Family 4%

None of these/I live alone 12%

Employment status

Employed full-time 45%

Employed part-time 13%

Self-employed full-time 3%

Self-employed part-time 2%

Retired 0%

Temporarily unemployed 12%

Student 13%

Homemaker 8%

Other 2%


Number of children (mean)

Infant or toddler under 2 years old 0.42

2 to 5 years old 0.60



Child 16 to 17 years old 0.08

Total – Demographics (continued)



Household Income

Less than $24,999 22%

$25,00 - $49,999 15%

$50,000 - $74,999 16%

$75,000 - $99,999 15%

$100,000 - $124,999 8%

$125,000 - $149,999 4%

$150,000 - $174,999 2%

$175,000 - $199,999 2%

$200,000 or more 2%

Total – Demographics (continued)



AGE

18-24 15%

25-30 35%

31-36 50%

Gender

Male 37%

Female 63%

Race

White (alone) 76%


5%


13%


3%


Region

Northeast 19%

Midwest 20%

South 38%

West 20%



Less than High school Diploma 2%



Some College 19%




Individual Income

Less than $24,999 11%

$25,00 - $49,999 22%

$50,000 - $74,999 19%

$75,000 - $99,999 22%

$100,000 - $124,999 11%

$125,000 - $149,999 4%

$150,000 - $174,999 2%

$175,000 - $199,999 3%

$200,000 or more 2%

Owner – Demographics



Number of Homes Owned

One 68%

Two 28%

Three or more 4%

Marital Status


In a relationship, not living With A partner

5%


11%

Married 57%



Widowed 0%


Living arrangement


Spouse/Partner 70%

Child(ren) 59%

Parent(s) 13%



Sibling(s) 4%



Employment status





Retired 0%


Student 3%

Homemaker 11%

Other 1%








Owner – Demographics (continued)



Household Income

Less than $24,999 7%

$25,00 - $49,999 12%

$50,000 - $74,999 22%

$75,000 - $99,999 25%

$100,000 - $124,999 14%

$125,000 - $149,999 6%

$150,000 - $174,999 3%

$175,000 - $199,999 3%

$200,000 or more 3%

Owner – Demographics (continued)



AGE

18-24 29%

25-30 40%

31-36 31%

Gender

Male 53%

Female 47%

Race

White (alone) 63%


11%


18%


7%


Region

Northeast 17%

Midwest 22%

South 38%

West 23%






Some College 23%




Individual Income

Less than $24,999 27%

$25,00 - $49,999 28%

$50,000 - $74,999 17%

$75,000 - $99,999 10%

$100,000 - $124,999 5%

$125,000 - $149,999 2%

$150,000 - $174,999 1%

$175,000 - $199,999 1%

$200,000 or more 0%

Potential Buyer – Demographics



Marital Status


In a relationship, not living With apartner

11%


23%

Married 34%



Widowed 0%


Living arrangement


Spouse/Partner 57%

Child(ren) 33%

Parent(s) 21%



Sibling(s) 6%



Employment status





Retired 0%


Student 7%

Homemaker 10%

Other 1%








Potential Buyer – Demographics (continued)



Household Income

Less than $24,999 20%

$25,00 - $49,999 19%

$50,000 - $74,999 18%

$75,000 - $99,999 16%

$100,000 - $124,999 10%

$125,000 - $149,999 3%

$150,000 - $174,999 2%

$175,000 - $199,999 2%

$200,000 or more 1%

Potential Buyer – Demographics (continued)



AGE

18-24 51%

25-30 26%

31-36 23%

Gender

Male 53%

Female 47%

Race

White (alone) 65%


12%


13%


5%


Region

Northeast 18%

Midwest 19%

South 40%

West 23%






Some College 26%




Individual Income

Less than $24,999 48%

$25,00 - $49,999 17%

$50,000 - $74,999 8%

$75,000 - $99,999 4%

$100,000 - $124,999 2%

$125,000 - $149,999 0%

$150,000 - $174,999 1%

$175,000 - $199,999 0%

$200,000 or more 1%

Non-Buyer – Demographics



Marital Status


In a relationship, not living With a partner

18%


16%

Married 13%



Widowed 0%


Living arrangement


Spouse/Partner 28%

Child(ren) 16%

Parent(s) 40%



Sibling(s) 13%



Employment status





Retired 0%


Student 20%

Homemaker 6%

Other 5%








Non-Buyer – Demographics (continued)



Household Income

Less than $24,999 32%

$25,00 - $49,999 12%

$50,000 - $74,999 10%

$75,000 - $99,999 9%

$100,000 - $124,999 4%

$125,000 - $149,999 3%

$150,000 - $174,999 3%

$175,000 - $199,999 1%

$200,000 or more 2%

Non-Buyer – Demographics (continued)


Additional Findings


Most impactful emotional drivers

Q2: (Owners) Of the options you selected, which two had the greatest impact on your decision to finally purchase a home? Q12: (Potential Buyers) Of the options you selected, which two are having the greatest impact on your decision to consider purchasing a home?

Most Impactful Emotional drivers to purchasing a home(Shown: top five [select two])

24%

21%

17%

17%

16%

I wanted to invest my money andbuild equity, rather than pay

rent

It felt like the right next step atmy age

I got married and wanted to buya home with my partner

I realized that I could actuallyafford to purchase a home


than renting

OWNERS

29%

28%

18%

16%

15%

I want to invest my money andbuild equity, rather than pay

rent

It feels like the right next step atmy age


than renting

As a renter, I am upset that I ampaying someone else's mortgage

I am living with family and wantto move out

Potential Buyers

107

OWNERSN=500

POTENTIALN=750


Q5: (Owners) Of the options you selected, which two were your GREATEST concerns at the time? Q16: (Potential Buyers) Of the options you selected, which two are your GREATEST concerns? *Some verb tenses were changed to reflect segments.

GREATEST Concerns about purchasing a home (Shown: top five [select two])

Greatest concerns about purchasing a home

32%

27%

23%

21%

20%

Maintenance on the home mightbe more money than I anticipated

I was making a commitement Icouldn't easily back out of if my

circumstances changed

I wouldn't be able to afford themonthly payments

I wasn't buying the right home

I was using too much of mysavings for the downpayment/closing costs

OWNERS

28%

27%

20%

20%

16%

Maintenance on the home mightbe more money than I anticipated

I won't be able to afford themonthly payments

I won't buy the right home

I will make a commitment I can'teasily back out of if mycircumstances change

Buying might not be the rightthing to do for my finances

overall

Potential Buyers

108

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


Q8: (Owners) Of the options you selected, which two options made you MOST excited to purchase a home?

Most exciting benefits of purchasing a home(Shown: top five [select two])

Most exciting benefits of purchasing a home

31%

26%

25%

24%

17%

I was excited to have a place I could customize to mystyle, needs and wishes

It felt like an accomplishment or measure of success

It made me feel like an adult

I was excited to have a place that would become afamily home

I was excited to have more space for my children andfamliy to live

109

OWNERSN=500


Actions taken to financially prepare for home purchase(Shown: % chosen [multi-select])

Q36: (Owners) Other than managing your debt, did you do anything else to financially prepare to purchase a home?

36%

35%

34%

32%

30%

25%

18%

15%

11%

8%

0%

Saved money for a down payment using my extraincome

Used an online tool/calculator

Sought the advice of a parent/family member

Put myself on a strict budget

Actively tried to improve my credit score

Investigated the total cost of home ownership

Sought the advice of a financial professional

Took on an extra job/work

N/A - I didn’t do anything

Reduced my retirement fund contributions

Other

Actions taken to financially prepare for home purchase

110

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


Less than 25% 25%-49% 50%-74% 75%-99% 100%

Personal Savings 27% 15% 20% 13% 25%

Gift from a familymember/friend 69% 12% 9% 6% 3%

Loan from a family member/friend

76% 9% 8% 5% 3%

Retirement plan loan (e.g. 401(k) loan)

77% 9% 7% 4% 3%

Government vouchers/grants or other government homebuying assistance

73% 12% 7% 5% 3%

Other 79% 6% 7% 4% 4%

Q47: (Owners) How much of your down payment was composed of each of the following?

(Shown: % chosen)

Method of Down Payment

Method of down payment

111

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


Rental income and mortgage qualification


Agree/Disagree statements on mortgage qualification(Shown: % chosen; [Top 3 Box Agree, Not sure, Bottom 3 Box Disagree])

“If a person plans to buy a single home but rent out rooms in that home, the mortgage company will factor in this potential rental

income when qualifying that person for a mortgage”

“A mortgage company will only consider potential rental income when qualifying a person for a mortgage if the home contains a

separate apartment”

40%30%

23%

39% 54% 63%

21% 16% 14%



43%31%

20%

45%

54%65%

12% 15% 15%



112

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


Q78: (Owners) When you started the home buying process, which type(s) of mortgage(s) or government home buying assistance did you want?

37%

36%

27%

20%

13%

9%

8%

7%

5%

5%

4%

30-YEAR

FIXED-RATE

FHA (FEDERAL HOUSING ADMINISTRATION)

I WASN’T SURE/DIDN’T KNOW

15-YEAR

CONSTRUCTION

ADJUSTABLE-RATE

VA (VETERANS AFFAIRS)

FEDERAL GOVERNMENT HOMEOWNERSHIP VOUCHERS

FHA 203(K)

OTHER GOVERNMENT HOME BUYING ASSISTANCE PROGRAMS

Pre-Purchase Preference for Different Mortgages/Buying Assistance Programs

(Shown: % chosen)

Pre-purchase preference for different mortgages/buying assistance programs

113

OWNERSN=500


Type of mortgage procured

Mortgages/buying assistance secured or of interest(Shown: % chosen)

39%

39%

22%

13%

11%

8%

6%

6%

5%

3%

1%

30-YEAR

FIXED-RATE

FHA (FEDERAL HOUSING ADMINISTRATION)

15-YEAR

ADJUSTABLE-RATE

OTHER GOVERNMENT HOME BUYING ASSISTANCE PROGRAMS

CONSTRUCTION

VA (VETERANS AFFAIRS)

FHA 203(K)

FEDERAL GOVERNMENT HOMEOWNERSHIP VOUCHERS

FEDERAL GOVERNMENT INDIAN HOME LOAN GUARANTEE PROGRAM

Q79: (Owners) Which type(s) of mortgage(s)/programs did you ultimately secure to purchase your home?

114

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


USE OF Personal finance management tools

54%

27%

12% 11% 9% 8% 6% 5% 4% 3% 3% 3% 3% 2%

52%

30%

11% 11%

2%

11%

3%6%

3%1% 1% 2% 2% 3%

44% 45%

5% 6%2%

11%

3% 3%1% 2% 1% 2% 1%

3%


Q101: Which, if any, of the following do you use to send money or manage your personal finances?

(Shown: % chosen)

Use of personal finance management tools

115

OWNERSN=500

POTENTIALN=750

NON-BUYERSN=750


EssentIQ was created to educate millennials and other first-time homebuyers who may not be aware of all of the homebuying options that are available to them outside the conventional 20% down.

Through education and accessible resources, such as EssentIQ, homeownership and the American dream may be more achievable than many millennials think.

EssentIQ is free and also available en español at essent.us/essentiq.

About EssentIQ™

Mortgage Insurance provided by Essent Guaranty, Inc.© 2017 Essent Guaranty, Inc., All rights reserved. | Two Radnor Corporate Center, 100 Matsonford Road, Radnor, PA 19087 | essent.us

EGI-6008.182 (05/17)

Documents

JUNE 2017 ESSENT MILLENNIAL HOME purchasing STUDY...homebuying - one that specifically lays out the process step-by-step and specifically explains closing costs, mortgage terms and