Recently, mortgage giants Fannie Mae and Freddie Mac announced plans to begin securitizing home loans with down payments as low as three percent. Yes, that means on a $100,000 home, borrowers may only have to cough up as little as $3,000. Further, a recent agreement to institute less rigid lending guidelines is making securing a loan more accessible for those with less-than-perfect credit. Finally, Fed chair Janet Yellen recently said interest rates would remain low for at least the next several months.

This amounts to a win-win-win for millennial homebuyers.



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Despite a positive economic outlook and growing employment numbers, however, the short-term future of the housing market is still uncertain. According to Fannie Mae's Mortgage Lender Sentiment Survey for the fourth quarter of 2014, mortgage lenders project a decrease in profits because of low consumer demand for homes over the next several months. The negative market outlook is due, at least in part, to declining mortgage purchases between August and November of this year.

There is reason to be optimistic, however, and it's the fact that less than half of millennials — those born between 1980 and 1999 — are homeowners. Now, more than ever, the market is crying out for the generation to stop shoveling their money into monthly rent payments and, instead, turn those payments into a tangible investment. A 30-year investment, perhaps.



Above investing, millennials site student loan payments and accumulating savings as higher priorities. Perhaps it is a lack of investment knowledge or distrust in the banking system holding them back.

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But, one thing is certain: We need millennials to start purchasing homes. Thankfully, there are new programs in place designed to increase their confidence as they navigate the complicated world of homeownership.

Freddie Mac's new Home Possible Advantage and Fannie Mae's as yet unnamed program are tailored to first-time homebuyers and low- and moderate-income borrowers who take advantage of a fixed-rate mortgage with a three percent down payment. In exchange for the lower down payment, the applicants must be able to demonstrate their ability to repay their loan, secure mortgage insurance, and attend pre-purchase counseling.



While pre-purchase loan counseling might seem like the dreaded training session you barely tolerated during a recent on-the-job tech rollout, the truth is it is extremely beneficial for millennial homebuyers. Attendees are educated in areas of homeownership that are often overlooked but critically important to generating a feeling of comfort and understanding before closing day.



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For example, new homeowners likely expect to make a monthly mortgage payment. But, have they considered how expenses such as property taxes and homeowners insurance will impact their wallets? Are they budgeting for a lawn mower, snow shovel, plumbing supplies, and outdoor trash bags? Do they know what to do if they get behind on their payments?

Closing the knowledge gap is the first step to addressing insecurity that makes purchasing a home daunting rather than exciting. The next step is to change the way we talk to them about homeownership.



If millennials are going to buy in — and buy homes — the conversation about their motivation for purchasing a home needs to shift. This isn't about the American Dream or the accumulation of things. This is about putting their money to work for them. It's about growing wealth. It's about having more money to pay off student loan debt.



Millennials will get that.



Then we can tell them why there has never been a better time to purchase their first home. We can tell them that home prices are rising and that fixed interest rates are at record lows. They'll understand why we say that owning a home will put their money to work for them.

Commentary by Donald J. Frommeyer, the CEO of the National Association of Mortgage Brokers. He serves as a mortgage originator at American Midwest Bank.