Millennials have surged into rental markets1 recently, but many high earners in this demographic are more prepared for homeownership than they realize. When they learn about the array of flexible mortgages out there — in particular, the affordable loans with extremely low down payment options available to them — they can often realize their dreams much faster.
Like many 30-somethings, Tyler and Rae have been renters for their entire adult lives and haven't necessarily envisioned themselves purchasing a house anytime soon. After all, they and their peers came of age during the real estate market collapse of the late 2000s, and their generation endured a difficult job market while burdened with student loan debt. These days they're facing inflation for the first time while watching home prices climb. They're concerned about rising interest rates — plus, aren't down payments, like, 20 percent?
Yet, as pet parents to two pugs — Luna and Stella — the couple would certainly enjoy a bigger home with a backyard for their fur babies and room for any future human younglings, as well as more space to accommodate their work-from-home lifestyles. Tyler's job went fully remote over the pandemic, while Rae finished an advanced degree and is starting a WFM position. For these long-time urban hipsters, their loft-style rental in downtown Minneapolis is beginning to feel a bit cramped, and their ever-increasing rent payments, at $2,065 per month (the national average for a two-bedroom apartment) are taking too big of a bite out of their budget. Their combined household income will be close to the U.S. median of $71,566. Put simply, this couple is "adulting" successfully and on the verge of contemplating the next life stage.
Like many who work from home at least part of the time, their lack of a daily commute helps expand the pool of homes they can consider to include distant, more affordable towns or suburbs. Millennials, who have waited to buy their first homes, are more inclined to skip over starter models in favor of larger ones. They tend to seek out communities with lots of shared amenities such as gyms and pools. These desires, combined with rising rents — up by 25% in the past year — are leading more of them to the suburbs while making the idea of locking in a fixed-rate mortgage with a predictable payment look even more attractive.
Solving for the down payment
Down payments can be a mental hurdle for younger buyers, but they probably don't have to come up with as much cash as they think. More than half (54 percent) of today's first-time homebuyers say down payments are their biggest challenge, according to a 2021 Lending Tree survey. In a National Association of Realtors survey, 64% of respondents said lenders require down payments of 16% or more or didn't know how much is required up front.
In truth, it's much less. First-time homebuyers pay an average of 7 percent down — and eligible borrowers may qualify for down payments as low as 3 percent, 1 percent or even less with mortgage loans insured by programs available through Arch MI and Arch Mortgage Guaranty Company (AMGC).The median existing-home sale price is $416,0002, according to the National Association of Realtors, so a 3 percent down payment works out to $12,480. The majority (59 percent) of millennials with savings have $15,000 or more in the bank, according to a Bank of America report. That means buyers in this age group frequently have enough savings for a down payment, even if they don't fully realize it.
Flexible and affordable mortgages can make all the difference in their decision-making process. Learning about low down payment options can turn renters into homeowners faster than they knew was possible.
Flexible and affordable mortgage options with MIHome from Arch MI
By solving the down payment hurdle, originators can help folks like Tyler and Rae move their dreams forward while also increasing their financial health by avoiding expensive rent increases, investing in their future and building wealth over the long term. Lenders can structure home mortgages with down payments as low as 1 percent — or even 0 percent for qualified borrowers — with MIHome from Arch MI's full range of solutions, products and resources.
With MIHome from Arch MI, lenders have everything they need to serve high-income renters with a wide range of affordable mortgage options:
- Manufactured homes, condos, co-ops, single-family and construction-to-perm are all eligible.
- Flexible Arch MI guidelines work with down payments as low as 3 percent — gifts or grants are allowed.
- Down payments of 1 percent and even 0 percent for qualified borrowers are permitted, with coverage through the AMGC Community Program.
- Competitive MI pricing is available with RateStar and customized MI premium payments with RateStar Buydown.
- Appraisal gaps? There's a simple MI strategy to eliminate the need for extra cash at closing.
- Free online GSE-approved homebuyer education for loan programs.*
- Free Roadmap to Homeownership toolkit contains everything lenders need for your own homebuyer seminars.
*Limited to borrowers with loans insured by Arch MI or AMGC.
Private mortgage insurance beats FHA
Buyers with smaller down payments can get additional savings by choosing a conventional loan insured with Arch MI instead of an FHA loan. Let your borrowers know that, over the long term, one major advantage is that private mortgage insurance is cancelable[i], while for FHA borrowers who make down payments of 10% or less, FHA's coverage must remain in place for the life of the loan.
Borrowers who choose private mortgage insurance also save thousands of dollars by avoiding the FHA's hefty upfront payment of 1.75 percent of the loan amount — which amounts to $7,2803 on a median-priced home. Plus, conventional loans typically close more quickly, with less government-required paperwork, enabling buyers to move into their new home faster.
The Opportunity is Clear
After speaking with their lender about mortgage options, Rae and Tyler realized, happily, that homeownership was actually within reach. The once-distant dream of owning a house with room for home offices and a future family came into focus, and they started house hunting in earnest.
Whether your borrower's desired down payment is 5 percent, 3 percent or even less, learn more about MIHome from Arch MI's flexible mortgage options and training resources by visiting
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The median existing-home sales price climbed 13.4% from one year ago to $416,000, a new record high
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