Hip

Still, Generation Y is falling behind previous generations in one aspect: that of home loans. A recent study by the Loan Market Group discovered that around 10 percent of home loan applications from people in that generation failed to be approved. The reasons weren’t necessarily that they didn’t have the required income or a sufficiently good credit rating. In many cases, they’re losing out on home loans because they fail to pass a job stability test.

It’s common practice for Gen Y’ers to have a high degree of job mobility. Home lenders, however, don’t always approve of this kind of mobility. Lenders look for stable employment histories, often wanting the applicant to have a record of two years or more at the same job. Even jobs in the same field, without a gap of employment, often isn’t enough to qualify a Gen Y’er for a home loan.

This isn’t always a problem, of course. Many lenders will accept changes in employment as long as everything else looks good. The problem is that most people in the Generation Y category don’t have a large down payment to put up, meaning that they need to borrow a significant portion of a property’s purchase price. This means stricter lending practices, and it can also mean additional requirements for home loan insurance.

It’s not impossible for Gen Y’ers to get a home loan, of course. Banks are recognizing that the days when a person would work for the same company for 30 years are long gone. Mobility is the name of the game, especially when it comes to tech-savvy careers like the ones that are often most suited to Gen Y’ers. If home lenders want to continue to do business and have a consistent customer base into the decades to come, they’re going to have to redefine what “job stability” means in terms of getting a home loan.

Photo via striatic

Today, the housing market has been affected by many factors. There was the housing bubble, where many people bought houses that they couldn’t afford and now find themselves with homes worth less than what they owe on the home. In some of these cases, the homeowners may feel very stuck and about ready to just send their keys to the home loan holder.

The FHA is doing many things to try to help. They’re propping up the market in a number of ways. They’re funneling capital into the market by guaranteeing that lenders will be paid, even if the home loan borrowers default. The money is funded by insurance premiums, rather than by taxpayers, so it’s argued that this is a safe approach in terms of fiscal responsibility.

Still, this may be sowing the seeds of future foreclosures. This may eventually make the FHA just another agency that will need a bailout from the taxpayers. The capital reserves in the FHA have fallen dangerously low. The FHA is supposed to have a cushion of a full two percent, but today their capital reserves are under half a percent.

While this has been going on, Congress has actually stepped in and doubled the maximum amount that the FHA can guarantee on a mortgage. The limit is now $729,000 for a single family home, and $1 million for multiple family properties.

This move may have made sense in some markets where housing is priced significantly higher, such as in California. However, in many places, this is much more than is necessary. On top of that, there is discussion about making some of these steps permanent. There is even talk by some people in Congress to make the maximums even higher than what they are today. This puts the FHA in a position where they’re no longer just concentrating on home loans for families of low or moderate income levels.

Some folks in Congress are proposing changes. They’re suggesting that borrowers for FHA loans be required to have higher credit scores, for example. They also suggest cutting the amount that lenders can put toward closing costs or the down payment. Currently, the down payment amount is low at just 3.5 percent. Traditionally, this amount has been in the area of 20 percent.

The challenge now for the FHA is to support the market without putting themselves in a position where they will need a bailout, and where they won’t be providing loans that lead to another wave of foreclosures.

Photo via anadelmann