Did you know that a low credit score can do you more than just make it difficult to get a loan or a credit card? If you didn’t realize your score could keep you from renting an apartment or getting a mobile phone, you’re not alone.
A new national survey sponsored by the Consumer Federation of America found that consumers greatly underestimate the cost of low credit scores, and a significant minority don’t know that non-creditors use credit scores.
The Stats
Only about half of the participants in the survey (53%) know that electric utilities may use credit scores to determine the required initial deposit. Only about two-thirds know that they may be used by home insurers (66%), cell phone companies (68%), and landlords (70%).
Only about half of consumers (51%) know when lenders are required to inform borrowers of their use of credit scores—after a mortgage application when a consumer does not receive the best terms on a consumer loan, and whenever a consumer is turned down for a loan.
“The good news is that consumers understand the basics of credit scores, such as the importance of making loan payments on time,” noted Stephen Brobeck, CFA’s Executive Director. “The bad news is that this knowledge is limited and, each year, can cost them hundreds of dollars in fees on services and additional interest on consumer loans,” he added.
Millennials Know Less Than Gen-Exers
The national survey also revealed that millennials (18-34 years of age) know less about credit scores than do gen-exers (35-51 years of age). On eight of nine key knowledge questions, gen-exers scored more highly than millennials. For example, 89 percent of gen-exers, but only 73 percent of millennials, know that 700 is usually a good credit score.
In part, these differences probably reflect simple experience. On nine key knowledge questions, the differences between those who had looked up their credit score within the past year, compared to those who had not, ranged from 10 to 20 percent points. On the same knowledge questions, the differences between those who had ever obtained a free copy of their credit report, and those who had not, ranged from 11 to 26 percentage points.
Millennials are less likely than older Americans to have obtained either their credit scores or credit reports. Nearly two-thirds (65%) of gen-exers, but only about half (51%) of Millennials, said they had ever received a free credit score. Moreover, nearly four-fifths (79%) of gen-exers, but less than three-fifths (57%) of Millennials, said they had ever obtained a free copy of their credit report.
What This Means For You
Ultimately, this points to an unfortunate gap in the knowledge of a generation that’s quickly aging into the marketplace. However the situation is not as dire as it seems. Millennials are very aware of their knowledge limitations about credit scores. Only 42 percent of Millennials, compared to 57 percent of gen-exers, said their knowledge of credit scores was good or excellent.
The Reserve Bank of India (RBI) on August 18, directed banks to allow individual home loan borrowers paying EMIs (equated monthly installments) under the flexi interest dispensation to opt for from a bouquet of options namely (1) fixed interest rate system or (2) increasing the loan amount or (3) extension of loan tenure —a move aimed at preventing loanees from falling into the trap of negative amortisation, in wake of rising interest rate as has been happening of late much to the chagrin of such borrowers. It has mandated banks and home loan companies to implement this diktat by December 31, 2023.
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Negative amortisation refers to the piquant situation when your EMI is insufficient to even pay off the interest due. Banks, like the usurers, are more keen on interest so that the principal remains undiminished. When negative amortisation stares at borrowers they have no choice but to acquiesce in the act i.e., willy-nilly settle for elongation of the loan tenure or settle for heightened EMI. Truly, a devil’s alternative.
Now the RBI wants banks to rub it in further — banks should allow the third option as well i.e., migrate to the fixed interest rate regime. And how? By signing their own death warrant, as it were. Because banks and home loan companies now offer home loans at fixed interest rate ranging from 14 percent to 17 percent depending upon the credit rating of the borrower, tenure and other relevant factors. In 1988 yours sincerely took a princely home loan of Rs 90K at a fixed rate of 14 percent on a tenure of 15 years. The clock seems to have come full circle. In those days flexi interest regime had not made its mark.
The millennials perhaps haven’t heard of the fixed interest regime. Even if they have, they would rather cling onto the flexi regime in the fond hope that interest rates would head south sooner or later so that they could savour the upside of the dwindling interest rates. At any rate, 14 percent to 17 percent fixed rate is shocking and avaricious vis-à-vis the floating rate of 8.5 percent which was only a couple of years ago hovering around 6 percent till the Corona pandemic and Ukraine-Russia war combined to wreak havoc. It is strange that the RBI has been a mute spectator to this collective show of unreasonableness and cupidity by banks and home loan companies.
Truth be told, the RBI has been responsible for obsessively and robotically hiking the interest rates by a full 250 basis points over the last two years taking a leaf from its US counterpart the Federal Reserve without achieving its objective of cooling down the inflation which the latter seems to be achieving in the US. For, the two economies are different.
The Keynesian theory that too much money chasing too few goods and services is responsible for inflation resonates in the US context but not in the Indian. India is characterised by supply side constraints especially seasonal which is largely responsible for the raging food inflation. RBI is guilty of prescribing the US medicine for the uniquely Indian disease and thus has been guilty of missing the wood for the trees. It has heated up the interest market without any concomitant benefit to be seen on the ground. Now it is mocking the home loan borrowers by presenting them with a Hobson’s choice.
At best, at every reset, the borrowers would become conscious of what is in store for them when they get to know from January 1, 2024 what is in store for them. The option to migrate to the fixed interest rate regime would be pressed only by the most pessimistic. Millennials are hardly pessimistic. So, they would soldier on with the flexi rate regime in the fond hope that there is after all light at the end of the tunnel. If they are sufficiently young, they may agree for tinkering with the loan tenure and if they have deep enough pockets on the back of double income, they may grin and bear the heightened EMI. But they wouldn’t touch the fixed rate option even with a barge pole. So, the RBI hasn’t done anything new really.
—The author, S Murlidharan, is a CA by qualification, and writes on economic issues, fiscal and commercial laws. The views expressed are personal.
A growing number of aspiring homeowners are turning to crowdfunding platforms as a way of raising funds to cover their down payments.
Crowdfunding platforms such as HomeFundMe and Feather the Nest have recently emerged, catering specifically for the home down payment market, Realtor.com reports. The idea is that wannabe homeowners can use the platforms to raise the funds they need to cover the down payment needed to purchase a home. Some platforms, including one called HoneyFund, also allow down payment contributions to be awarded as a “gift”.
“The number one challenge that we hear from millennials in terms of their ability to buy a home is the down payment,” Jonathan Lawless, vice president of customer solutions for Fannie Mae, told realtor.com. “Crowdsourcing is an interesting new way that a person can generate a down payment, one made possible by technology. … We think there is a great future for it.”
Aspiring homeowners who’re already prequalified for a mortgage can use crowdfunding sites to create a personal page, or plea, asking for funds towards their down payment.
“[Many] people find they can afford [mortgage] payments, but not the down payment to own a home,” Christopher George, CEO of CMG Financial, a mortgage banking firm that launched HomeFundMe, told realtor.com.
The idea is proving to be a big hit with government too, as HomeFundMe is already being backed by mortgage financing giants Fannie Mae and Freddie Mac.
Lenders do have restrictions in place on how down payment assistance is handled. In most cases, lenders will want to see a letter from whoever is providing financial assistance stating that the money is a gift and not a loan. However, one crowdfunding platform called HoneyFund is helping borrowers to bypass that by allowing its users to contribute money as a “gift”, with no paperwork needed.
HomeFundMe does something similar, allowing up to $7,500 to be gifted towards a single campaign without any documentation needed. The site also encourages responsible lending too, offering to award buyers $2 for every $1 they raise up to a total of $1,000, or one percent of their home’s purchase price, on the condition that the buyer undergoes counseling first. In addition, the buyer must agree to obtain their mortgage through CMG Financial, which is the parent company of HomeFundMe.
Not everyone is so keen on the idea of crowdfunding however, as some experts warn there is often a very good reason why some buyers cannot save for a down payment.
“If somebody is not able to save for their own down payment, it might be because they are stretched financially,” Lawless said. “But it [also] might be that they are bad at saving. The ability to generate savings is a critical aspect of being a responsible homeowner.”
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
This article is part of a series put together by the Total Mortgage marketing team that provides loan officers and other sales professionals with a crash course in marketing and self-promotion. To read other articles in this series, click here.
Good business doesn’t change.
Or does it?
As the market recovers from the housing crisis, many loan officers and housing professionals are making the mistake of trying to return to a pre-crash business model.
Pre-crash, there was no such thing as a smartphone. Your average homebuyer hadn’t grown up with the internet. Most transactions were conducted over the phone, maybe with an email or two here and there. Unfortunately, this isn’t 2005. Reaching today’s homebuyers requires a different set of skills.
This guide will help start you down the right path.
Meet the next generation of homebuyers
You’ve probably heard the word “Millennials” thrown around to describe today’s college kids and recent grads, but that moniker actually applies to anyone born from the early 80’s up until around 2000.
So while one of the biggest myths out there right now is that Millennials are still years and years away from buying their first homes, that’s simply not true. They’re already here.
So is the intent to buy homes. According to a 2014 survey conducted by Fannie Mae, 76% of younger renters actually think that owning is more sensible than renting in the long term.
What’s more—there are a LOT of them. Millennials number around 76.6 million, more than even Baby Boomers. In a few years, they’ll make up a majority of buyers, and without an understanding of what separates them from past generations, you may find yourself struggling.
Marketing to Millennials
There’s one thing that will never change: a house is still a huge purchase, especially for a generation crippled student loan debt.
Winning over Millennials will be an uphill battle for most loan officers, as they may be the toughest generation to market to yet. In a 2012 Pew Research Center survey, just 19% said most people could be trusted, compared with 40% of Baby Boomers.
To earn the trust of Millennials, you’re going to have to be able to:
Meet them halfway, on the platforms they use most.
Be fast, accurate, and personable.
Promote yourself in ways that make them feel involved, understood, and educated, not marketed at.
Understand what they value and promote accordingly.
If all that has you scratching your head, don’t worry. We’ll go through the basics components of a good marketing plan next.
Going beyond the phone
Traditionally, the phone has been the key point of contact when it comes to mortgages. Regardless of where the lead came from or how it reached the loan officer, the goal has always been to get that lead on the phone.
But Millennials are much less likely to respond to offers of phone calls so you can talk about their concerns. In fact, many will try to get out of talking to you completely. A greater reliance on personal cell phones over a family landline has turned talking on the phone into a much more personal act.
Many other older marketing tactics also won’t work, either because younger generations have started to abandon the medium or grow wise to marketing lingo:
Direct mail
Radio ads
Print ads
Even email marketing can backfire if not done right. Millennials have grown up sifting through junk mail. They’ll have no problem deleting anything that isn’t relevant to their needs or interests. To learn more about email marketing the right way, our guide on email lead nurturing is a great start.
The importance of a CRM
We’ve already touched on Customer Relationship Management tools (or CRMs) in our blog on referral partners, but here are the basics.
CRMs are built to keep all of your contacts, accounts, leads, referral partners, and emails in one place, organized and ready for you. A CRM isn’t the sort of platform you can wave around to impress prospective clients or referral partners, but it will help you stay on top of all the channels you manage on a day to day basis.
There are tons of platforms out there. If a CRM sounds right for you, shop around before settling on one. At Total Mortgage, we offer our loan officers a few different CRM options just so they can find one that fits their workflow.
Creating content you can market
A great way to build a relationship with potential clients? Give them something valuable, no strings attached, with your name on it. This builds goodwill while attracting potential clients to a space you control—generally a blog or newsletter.
This isn’t a new idea. Way back in 1904, for instance a struggling Jell-O gave out free cookbooks full of Jell-O recipes, only to see their sales balloon to over one million (on a ten cent product).
The trick, of course, is knowing what sort of content will be most valuable to the kind of people who are likely to become your customers. That’s something we can definitely help you out with. We’ve run a popular industry blog for almost 10 years. Our guide to content will be a great jumping off point.
Once you’re ready to post, you encounter a whole new set of problems. In order for your content to reach as many people as possible, you have to make it friendly to search engines like Google. If you’re wondering how we do it, this guide on on-page optimization and this other one on generating links to your page will be a treat for you.
If you’re looking for a way to stand out from the crowd, though, you might want to check into our guide on marketing videos. Total Mortgage creates video for a wide range of uses, and we’ve found that it can really make a difference (especially if you use our tips).
Social media and you
Social media isn’t a hot new fad anymore—it’s a fact of life for a large percentage of the population, Millennials and Boomers alike. That makes it a great way for you to connect directly with your audience and give potential customers a feel for who you are.
Most companies big and small have a Facebook page these days. That’s a great first step, but it’s not going to get you far. If you’re wondering where to go next, we have some great resources on how to get started on other platforms and engaging with followers.
Of course, gathering followers and interacting with your peers isn’t the only thing social media is good for. It also makes for a great advertising platform. Facebook especially offer tons of options for targeting your ads to a specific audience. Take a look at our primer on social advertising here.
Mobile and apps
Housing is a slow and steady kind of industry. Many smaller companies and brokers still haven’t made the jump to online lending, much less considered the part mobile will play in their future.
However, that future is coming up quick. Right now about 56% of internet traffic already comes from mobile devices. That’s a huge number, and it’s only going to go up as new users age into the market.
While updating (or even creating) your site, consider optimizing for mobile, so that it will look nice and stay usable to potential borrowers on the go. Another thing to consider? An app. Our MyTotal Mortgage app has played a huge part in allowing us to reach a new set of homebuyers. It might not be right for everyone, but if you’re working with a larger company that has the resources, consider raising the issue with your sales manager.
Referral partners
In the face of all this talk of SEO and Twitter, it’s easy to overlook the old-school tactics that will still play well with this generation of homebuyers. Namely, building up a network of referral partners.
One thing that hasn’t changed about buying a house? It still takes a small army of people, including realtors, inspector, contractors—you get the picture. By creating a network of professionals you trust (and who trust you), you create opportunities for buyers to find you through word of mouth.
If you’re interested in seeing a breakdown of how Total Mortgage loan officers make this happen, guess what—we have a guide for it. Just click here to learn more.
To get more specifics about what the Total Mortgage marketing team does for our loan officers, check out other articles in this series, or by visiting our career portal.
According to the National Association of Realtors, the average age of first-time homebuyers is 36 years old, which means that the millennial generation—generally regarded as individuals born between 1981 and 1996—has reached the stage in their lives where buying a home is often a top priority. Yet recently, the cost of homeownership has skyrocketed in large part due to an adverse combination of high interest rates and scarce inventory, leaving millennials with a daunting homeownership outlook.
This difficult homebuying landscape has resulted in a dramatic shift in mortgage originations. Prior to the COVID-19 pandemic, U.S. mortgage originations were already on the rise—climbing from $344 billion in Q1 2019 to a 14-year high of nearly $752 billion in Q4 2019. After a brief dip due to pandemic-era stay-at-home orders and social distancing, originated mortgage volume skyrocketed to a new high of over $1.2 trillion in Q2 2021. This abrupt growth is mostly attributed to historically low interest rates, low inventory, and an increased desire for more space amid the pandemic, but these conditions were short-lived. Rapidly rising interest rates combined with other forces, such as return-to-office mandates, have brought mortgage originations down to under $324 billion in Q1 2023, the lowest it has been in nearly nine years.
In order to cope with rising prices, millennials are taking out larger home loans. In 2022, the median loan amount for mortgages taken out by applicants age 25–34 was $315,000, and $365,000 for applicants age 35–44, higher than any other age group. Similarly, the loan-to-value ratio—or the amount of the mortgage compared to the sale price of the home—was 88% for 25- to 34-year-olds and 80% for 35- to 44-year-olds. Inherently, many millennials are first-time homebuyers and typically have less existing home equity to apply to new mortgages. Additionally, millennials are at the stage of their lives where they may be supporting a growing family and require more living space compared to older generations.
Despite the overall decline in homebuying across the country, millennials still account for the majority of home purchase loans in 2022. However, millennial home purchasing varies by location. Millennials in northeastern states account for the largest share of home purchase loans, with Massachusetts (64.5%), New York (63.8%), and New Jersey (63.0%) leading the country. Midwestern states such as Minnesota (62.9%), Illinois (62.6%), and North Dakota (62.4%) also rank among the top 10 states for millennial homebuying. On the other end of the spectrum, Delaware (41.1%), Florida (45.2%), and South Carolina (46.9%) have the lowest share of home purchase loans taken out by millennials and notably have older populations.
To determine the locations where millennials are buying homes, researchers at Construction Coverage, a website that provides construction insurance guides, analyzed the latest data from the Federal Financial Institutions Examination Council. The researchers ranked states according to the millennial share of conventional home purchase loans originated in 2022. For the purpose of this analysis, millennials were considered to be those age 25–44 in the year 2022. In the event of a tie, the location with the greater total number of millennial home purchase loans was ranked higher.
The analysis found that millennials took out 57.4% of home purchase loans in South Dakota last year, with a median loan amount of $275,000. Here is a summary of the data for South Dakota:
Millennial share of home purchase loans: 57.4%
Total millennial home purchase loans: 4,193
Median loan amount: $275,000
Median loan-to-value ratio: 83.8%
Median interest rate: 5.00%
For reference, here are the statistics for the entire United States:
Millennial share of home purchase loans: 57.8%
Total millennial home purchase loans: 1,669,539
Median loan amount: $335,000
Median loan-to-value ratio: 83.1%
Median interest rate: 4.99%
For more information, a detailed methodology, and complete results, see Where Are Millennials Buying Homes in the U.S.? on Construction Coverage.
While the exact numbers will vary depending on where you live, the latest survey of real estate experts forecasts that home prices will end 2016 up 4.5 percent on year-over-year basis.
And the bad:
Looking forward, they also expect the annual pace of home value appreciation to slow to 3.6 percent in 2017, 3.2 percent in 2018, 3.1 percent in 2019 and to 2.9 percent in 2020.
America’s two housing markets
House prices have always varied greatly by location, but never more so than during the current housing recovery. Prices are—and have been—rising at very different rates in major markets.
Since the housing boom and bust gave way to recovery, the U.S. housing market has seemingly split into two unequal parts: Middle America, and coastal America. Home values are growing rapidly in markets on both East and West Coasts as hot job markets help keep demand for housing high, and more slowly in the Midwest and Heartland, where negative equity is still pervasive and job growth scant.
As a result, Americans—especially younger millennials—are moving away from Middle America and to the coasts in large numbers, whether for jobs, lifestyle preferences or both.
This June, home prices in San Francisco were rising 9.5 percent on a year-over-year basis while prices in Chicago rose only 1.4 percent.
How long will this trend continue?
More than half of those experts in the survey said they believed this trend has either already begun to reverse or will reverse in coming years.
Another 11 percent said this trend was actually an illusion, and that coastal markets are no more or less popular now than they’ve always been relative to Middle America. Just 25 percent of experts with an opinion said the coastal/Middle America split was likely to be permanent.
Of those experts who said the trend was likely to reverse, a majority (56 percent) said job growth in the middle of the country—driven by companies looking for cheaper alternatives to the coasts in which to expand—would eventually lure residents back to the Heartland.
Similarly, almost a quarter (24 percent) said Americans would migrate inland in search of more affordable housing, and 13 percent said Americans would start to seek the most traditional lifestyle that the middle of the country has to offer. Only 2 percent said climate change is likely to force residents away from the coasts.
In addition to the coastal/inland divide, the housing market has also experienced a notable shift between urban and suburban communities. The suburban home – long a symbol of success, stability, and the American Dream—may be losing some of its luster as urban homes grow in value more quickly.
Local factors, like employment and income growth, transportation infrastructure improvements like new highways and mass transit, and new home construction will have as much or more impact on home prices in your community than national or regional factors.
What this means for you
So far, coastal markets have been doing well. Prices are up, and many have started to think they’re on their way back to pre-crash highs. However, thanks to all the possibilities discussed above, that may not be the case at all.
If you’re in a hot coastal market, this can mean three things for you:
Thinking about selling your home? 2016 might just be the best year to do so.
Just bought a home this year? Don’t expect your new home to appreciate as it has been, at least through the end of the decade.
Looking at buying a home as an investment? You’ll probably get a better rate of return in the stock market. However, these predictions will vary greatly depending on where you live.
Homebuyers, especially first-time buyers shopping for entry-level homes, can expect to pay a significant premium for houses with listings that tout popular farmhouse or craftsman-inspired features, according to a new report from RealEstate.com, a Zillow Group brand tailored to helping first-time buyers find and budget for their first home.
RealEstate.com analyzed listing descriptions from millions of entry-level homes, defined as those priced within the bottom third of the market, to see how certain home features, amenities and design styles affected sale price.
Starter homes mentioning “coffered ceilings,” “claw foot tubs” or “farmhouse sinks” in their listing descriptions saw some of the highest sale premiums of the keywords analyzed – selling for as much as 29 percent above expected values. Furthermore, homes described as “craftsman” performed better than any other design style analyzed. Even though Chip and Joanna Gaines’ ‘Fixer Upper’ TV show may be over, their farmhouse chic style has certainly had an impact on home trends, especially among entry-level homes or first-time buyers.
Energy efficient features also command high premiums among entry-level homes. Homes mentioning “solar panels” sell for as much as 40 percent more than expected, but mentions for higher-tier homes only saw a 13 percent boost.
Millennials are playing an increasingly larger role in the housing market. They make up 42 percent of all homebuyers today and 71 percent of first-time buyers, and their preferences – from location to home features – may have an increasingly notable impact on the market.
“In today’s competitive housing market, understanding what homes may command a premium or attract multiple offers can be hugely beneficial to buyers,” says Jeremy Wacksman, Zillow Group chief marketing officer. “However, it’s important to keep in mind which features or amenities matter most to you in a home. While a farmhouse sink or butcher block counters may appeal to many millennials and first-time buyers, not everyone may want to pay the premium those features may command.”
Buying a home can feel like a moving target. With 24 percent of homes selling over list price, determining a realistic budget – and sticking to it – can be challengingiii. To help first-time buyers, RealEstate.com allows home shoppers to search for homes based on the home’s “All-In Monthly Price,” which includes estimates for costs such as mortgage, property tax and utilities, giving them a more accurate picture of the cost of homeownership.
Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
Robo-advisors have barely been around for 10 years, but in the past couple of years several have been steadily expanding their investment menus, and even offering valuable add-on services. One of the leaders in this regard is Wealthfront. The robo-advisor has been growing its investment capability in every direction but is now even offering financial planning. The platform now bills itself as offering High-Interest Cash, Financial Planning & Robo-Investing for Millennials. If you’re looking for more than just investing, Wealthfront has it. And as has become their trademark, it’s all available at a low cost.
What is Wealthfront?
Based in Palo Alto, California, and founded in 2011, Wealthfront has about $25 billion in assets under management. It’s the second-largest independent robo-advisor, after Betterment. And while dozens of robo-advisors have arrived in recent years, Wealthfront stands out as one of the very best. There isn’t any one thing Wealthfront does especially well, but many. And they’re adding to their menu of services all the time.
Their primary business of course is automated online investing. You can open an account with as little as $500, and the platform will design a portfolio for you, then manage it continuously. Your money will be invested in a globally diversified portfolio of ETFs–just like most other robo-advisors. But Wealthfront takes it a step further, and also adds real estate and natural resources.
Like other robo-advisors, Wealthfront uses Modern Portfolio Theory (MPT) in the creation of portfolios. They first determine your investment goals, time horizon, and risk tolerance, then build a portfolio designed to work within those parameters. MPT emphasizes proper asset allocation to both maximize returns, and minimize losses.
But in a major departure from other robo-advisors, Wealthfront now offers the ability to customize your portfolio and get access to a variety of investment methodologies and portfolios, including Smart Beta, Risk Parity and Stock-Level Tax-Loss Harvesting. And more recently, they’ve also stepped into the financial planning arena. They now offer several financial planning packages, customized to very specific needs, including retirement planning and college planning.
If you haven’t checked out Wealthfront in the past year or so, you definitely need to give it a second look. This is a robo-advisor platform where things are happening–fast!
How Wealthfront Works
When you sign up with Wealthfront, they first have you complete a questionnaire. Your answers will determine your investment goals, time horizon, and risk tolerance. A portfolio invested in multiple asset classes will be constructed, with an exchange-traded fund (ETF) representing each.
The advantage of ETFs is that they are low-cost, and enable the platform to expose your portfolio to literally hundreds of different companies in each asset class. With your portfolio invested in multiple asset classes, it will literally contain the stocks and bonds of thousands of companies and institutions, both here in the U.S. and abroad.
Wealthfront offers tax-loss harvesting on all portfolio levels. But they’ve also added portfolio options for larger investors, that include stocks as well as ETFs. The inclusion of stocks gives Wealthfront the ability to be more precise and aggressive with tax-loss harvesting.
Each portfolio also comes with periodic rebalancing, to maintain target asset allocations, as well as automatic dividend reinvestment. As is typical with robo-advisors, all you need to do is fund your account–Wealthfront handles 100% of the investment management for you.
More recently, Wealthfront has also added external account support. The platform can now incorporate investment accounts that are not directly managed by the robo-advisor. This will provide a high-altitude view of your entire financial situation, helping you explore what’s possible and providing guidance to optimize your finances.
And much like many large investment brokers, Wealthfront now offers a portfolio line of credit. It’s available only to investors with $25,000 or more in a taxable account, but if you qualify you can borrow money against your investment account and set your own repayment terms in the process
Wealthfront Features and Benefits
Minimum initial investment: $500
Account types offered: Individual and joint taxable accounts; traditional, Roth, rollover and SEP IRAs; trusts and 529 college accounts
Account access: Available in web and mobile apps. Compatible with Android devices (5.0 and up), and available for download at Google Play. Also compatible with iOS (11.0 and later) devices at The App Store. Compatible with iPhone, iPad and iPod touch devices.
Account custodian: Account funds are held in a brokerage account in your name through Wealthfront Brokerage Corporation, which has partnered with RBC Correspondent Services for clearing functions, such as trade settlement. IRA accounts are held with Forge Trust.
Customer service: Available by phone and email, Monday through Friday, from 7:00 AM to 5:00 PM, Pacific time.
Wealthfront security: Your funds invested with Wealthfront are covered by SIPC, which insures your account against broker failure for up to $500,000 in cash and securities, including up to $250,000 in cash.
Wealthfront uses third-party providers to maintain secure, read-only links to your account. The providers specialize in tracking financial data, as well as employ robust, bank-grade security, and in general, they follow data protection best practices. In addition, Wealthfront does not store your account password.
Wealthfront Investment Methodology
For regular investment accounts, Wealthfront constructs portfolios from a combination of 10 different specific asset classes. This includes four stock funds, four bond funds, a real estate fund, and a natural resources fund.
Each portfolio will contain various allocations of each asset class, based on your investor profile as determined by your answers to the questionnaire. The one exception is municipal bonds. That allocation will appear only in taxable accounts. IRAs don’t include them since the accounts are already tax-sheltered.
Notice in the table below that most asset classes have two ETFs listed. This is part of Wealthfront’s tax-loss harvesting strategy. In each case, the two ETFs are very similar. To facilitate tax-loss harvesting, one fund position will be sold, then the second will be purchased at least 30 days later, to restore the asset class. (We’ll cover tax-loss harvesting in a bit more detail a little further down.)
The ETFs used for each asset class are as follows, as of December 29, 2018:
Specific Asset ClassGeneral Asset ClassPrimary ETFSecondary ETF
US Stocks
Stocks
Vanguard CRSP US Total Market Index (VTI)
Schwab DJ Broad US Market (SCHB)
Foreign Stocks
Stocks
Vanguard FTSE Developed All Cap ex-US Index (VEA)
Schwab FTSE Dev ex-US (SCHF)
Emerging Markets
Stocks
Vanguard FTSE Emerging Markets All Cap China A Inclusion Index (VWO)
iShares MSCI EM (IEMG)
Real Estate
Real Estate
Vanguard MSCI US REIT (VNQ)
Schwab DJ REIT (SCHH)
Natural Resources
Natural Resources
State Street S&P Energy Select Sector Index (XLE)
Vanguard MSCI Energy (VDE)
US Government Bonds
Bonds
Vanguard Barclays Aggregate Bonds (BND)
Vanguard Barclays 5-10 Gov/Credit (BIV)
TIPS
Bonds
Schwab Barclays Capital US TIPS (SCHP)
Vanguard Barclays Capital US TIPS 0-5 Years (VTIP)
Municipal Bonds (taxable accounts only)
Bonds
Vanguard S&P National Municipal (VTEB)
State Street Barclays Capital Municipal (TFI)
Dividend Stocks
Bonds
Vanguard Dividend Achievers Select (VIG)
Schwab Dow Jones US Dividend 100 (SCHD)
Wealthfront’s historical returns are as follows (through 1/31/2019). But keep in mind these numbers are general. Since the portfolios designed for each investor are unique, your returns will vary.
Specialized Wealthfront Portfolios
As mentioned in the introduction, Wealthfront has rolled out several different investment options, in addition to its regular robo-advisor portfolios. Each represents a specific, and generally more specialized investment strategy, and is typically available to those with larger investment accounts.
Smart Beta: You’ll need at least $500,000 to be eligible for this portfolio. Smart beta departs from traditional index-based investing, which relies on market capitalization. For example, since Apple is one of the most highly capitalized S&P 500 stocks, it has a disproportionate weight in strict S&P 500 index funds. In a smart beta portfolio, the position in Apple will be reduced based on other factors.
In general, under smart beta, the weighing of stocks in the fund uses a variety of factors that are less dependent on market capitalization. There’s some evidence this investment methodology produces higher returns. This portfolio is available at no additional fee.
Wealthfront Risk Parity Fund: This is actually a mutual fund–the first offered by Wealthfront. It involves the use of leverage with some positions within the portfolio. It attempts to achieve higher long-term returns by equalizing the risk contributions of each asset class. It’s based on the Bridgewater Hedge Fund, and requires a minimum of $100,000, with an additional annual fee of 0.25% (0.50% total). This is the only Wealthfront portfolio that charges a fee over and above the regular advisory fee.
Socially responsible investing (SRI): Wealthfront just recently began to offer a specific SRI portfolio option. Once you sign up, you’ll be able to customize your portfolio and add socially responsible ETFs.
Sector-specific ETFs: If you want to invest in a particular portion of the market, such as technology or healthcare, Wealthfront gives you the option to build a portfolio that focuses on certain industries to portions of the stock market.
Customized Wealthfront Portfolios:
Wealthfront also lets investors build their own portfolios, which is somewhat uncommon among robo-advisors.
Most robo-advisors will build your portfolio automatically based on your risk tolerance and goals. If you like that service, Wealthfront can do it. However, more hands-on investors are free to make tweaks to the automatically designed portfolio by adding or removing ETFs.
You can also build a portfolio entirely from scratch if you’d rather. You can choose which ETFs to invest in and how much you want to invest in them. You can then let Wealthfront handle things like rebalancing and tax-loss harvesting while maintaining the portfolio you desire.
Wealthfront Tax-loss Harvesting
If there’s one investment category where Wealthfront stands above other robo-advisors, it’s tax-loss harvesting. Not only do they offer it on all regular taxable accounts (but not IRAs, since they’re already tax-sheltered), but they also offer specialized portfolios that take it to an even higher degree.
Wealthfront starts with a tax location strategy. That involves holding interest and dividend-earning asset classes in IRA accounts, where the predictable returns will be sheltered from income tax. Capital appreciation assets, like stocks, are held in taxable accounts, where they can get the benefit of lower long-term capital gains tax rates.
But for larger portfolios, Wealthfront offers Stock-level Tax-Loss Harvesting. Three specialized portfolios are available, using a mix of both ETFs and individual stocks. The purpose of the stocks is to provide more specific tax-loss harvesting opportunities. For example, it may be more advantageous to sell a handful of stocks to generate tax losses, than to close out an entire ETF.
Given that Wealthfront puts such heavy emphasis on tax-loss harvesting, it’s not surprising they’ve published one of the most respected white papers on the subject on the internet. If you want to know more about this topic, it’s well worth a read. The paper concludes that tax-loss harvesting can significantly increase the return on investment of a typical portfolio.
US Direct Indexing
US Direct Indexing is an enhanced level of tax-loss harvesting that Wealthfront offers to people with account balances exceeding $100,000.
Instead of building a portfolio of ETFs, Wealthfront will use your money to directly purchase shares in 100, 500, or 1,000 US companies. By buying shares in so many companies, Wealthfront can emulate an index fund in your portfolio while owning individual shares in the businesses.
Owning individual shares in hundreds of companies makes tax-loss harvesting easier as it lets Wealthfront’s algorithm trade based on movements in individual stocks rather than in funds. This can increase the number of tax losses that Wealthfront harvests each year, reducing your income tax bill.
Other Wealthfront Features
Wealthfront Cash Account
Wealthfront offers acash account where you can safely and securely store your money for anything–emergencies, a down payment for a home, or to later invest. By working with what they call Program Banks, Wealthfront has quadrupled the normal FDIC insurance on this account, so you’re protected for up to $5 million.
There’s also no market risk since it’s not an investment account and the money isn’t being invested anywhere. You can make as many transfers in and out of the account as you’d like, and it only takes $1 to start.
So what’s the catch?
There really isn’t one. Wealthfront will skim a little off the top to make some money before giving you an industry-leading 4.30% APY, but other than that, you’re just giving them more financial data. Since we’re doing this all the time with technology anyway, it shouldn’t make that big of a difference.
I see no downside, especially if you’re already a client of Wealthfront.
They’re really making a play to be your all-in-one financial services provider, too.
A new feature, just launched, is the ability to use your cash account as a checking account. This includes the ability to access your paycheck up to two days early when you set up a direct deposit. Additionally, you can invest in the market within minutes using your Wealthfront Cash account. Put the two together and you give yourself the ability to invest more than 100 days more in the market. The account also allows you to auto-pay bills and use apps like Venmo and PayPal to send money to friends or family. Account-holders also get a debit card to make purchases and get cash from ATMs. And you can use the account to organize your cash into savings buckets – like an emergency fund, down payment on a house, or other large purchase – and use Wealthfront’s Self-Driving Money offering to automate your savings into those buckets.
If you have cash that’s getting rusty in a traditional bank account and you want to earn more, the Wealthfront Cash Accountis a great place to keep it.
Read more about the cash account in our Wealthfront Cash Account full review.
Wealthfront Portfolio Line of Credit
This feature is available if you have at least $25,000 in your Wealthfront account. It allows you to borrow up to 30% of your account value, and currently charges interest rates between 3.15% and 4.40% APR depending on account size. You can make repayments on your own timetable, since you’re essentially borrowing from yourself. And since the credit line is secured by your account, you don’t need to credit qualify to access it.
Wealthfront Free Financial Planning
This is Wealthfront’s entry into financial planning. But like everything else with Wealthfront, this is an automated service. There are no in-person meetings or phone calls with a certified financial planner. Instead, technology is used to help you explore your financial goals, and to provide guidance to help you reach them. And since the service is technology-based, there is no fee for using it.
The service can be used to help you plan for homeownership, college, early retirement, or even to help you plan to take some time off to travel, like an entire year!
Simply choose your financial objective, enter your financial information, and Wealthfront will direct you on how to plan and prepare.
Self-Driving Money
One of the biggest and largely unrecognized obstacles for most investors is something known as cash drag. That’s when you have too much of your portfolio sitting in cash, which may earn interest, but it doesn’t provide the investment returns you can get in a diversified investment portfolio.
Wealthfront has addressed the cash drag dilemma with their newly released Self-Driving Money features. It’s a free service offered by the robo-advisor that essentially automates your savings strategy. It does this by automatically moving excess cash to help meet your goals, including into investment accounts where it will earn higher returns. And in the process, it eliminates the need to make manual cash transfers, and the judgment needed to decide exactly when to make that happen.
Our vision of Self-Driving Money is going to be a complete game-changer for people’s finances, said Chris Hutchins, Head of Financial Automation at Wealthfront. We want to completely remove the burden of managing your money so you can focus on your career, your family or whatever is most important to you.
You can take advantage of Self-Driving Money from the Wealthfront Cash Account. You’ll set a maximum balance for the connected account, which should be an amount that’s more than you expect to spend or withdraw on a monthly basis.
How It Works
When Wealthfront determines you’re over your maximum balance by at least $100 it will schedule an automatic transfer of the excess cash based on your goals. For example, you can tell Wealthfront you want to save $10,000 in an emergency fund, then max out your Roth IRA, then put the rest toward saving for a down payment on a house. Once you set the strategy, Wealthfront will automate the rest.
And before it happens, you’ll receive an email alert, then always have 24 hours to cancel the transfer if you need to cover unexpected expenses. You’ll also be able to turn on and off your Self-Driving Money plan at any time.
It’s usually possible to set up automated transfers from external accounts into most investment accounts. But what sets Wealthfront apart is the fact that it will make those transfers automatically. They will make sure you always have enough cash to pay your bills, then automatically transfer any excess into your savings buckets or investment accounts to improve the return on your money.
The strategy is designed to optimize your money across spending, savings, and investments, and to make it all flow with no effort on your part. You can simply have your paycheck direct deposited into your external checking account or Wealthfront Cash Account, cover your expected monthly spending, then have excess funds automatically transferred into the Wealthfront account of your choice.
By delivering on its Self-Driving Money vision, Wealthfront is taking the robo-advisor concept to a whole new level. Not only do you not need to concern yourself with managing your investments, but now even funding those investments will happen automatically. The result will be near complete freedom from the financial stresses that plague so many individuals.
Wealthfront Fees
Wealthfront has a single fee structure of just 0.25% per year for their advisory fee. That means you can have a $100,000 portfolio managed for just $250, or only a little bit more than $20 per month.
The one exception is the Wealthfront Risk Parity Fund, which has a total fee of 0.50% per year.
How to Sign Up with Wealthfront
To open an account with Wealthfront, you’ll need to be at least 18 years old, and a U.S. citizen.
You’ll need to provide the following information:
Your name
Address
Email address
Social Security number
Date of birth
Citizenship/residency status
Employment status
As is the case with all investment accounts, you’ll also be required to supply documentation verifying your identity. This is usually accomplished by supplying a driver’s license or other state-issued identification.
As mentioned earlier, you complete a questionnaire that will be used to determine your investment goals, time horizon, and risk tolerance. Your portfolio will be based on your answers to that questionnaire, and will be presented to you upon completion of the questionnaire.
For funding, you can use ACH transfers from a linked bank account. You will also have the option to schedule recurring deposits, on a weekly, biweekly, or monthly basis. The platform can even enable you to set up dollar-cost averaging deposits.
If you already have a brokerage account with another company, Wealthfront makes it easy to transfer your funds to your new account. If you’re invested in ETFs that Wealthfront supports, Wealthfront will assist with an in-kind transfer.
That means that you won’t have to sell your shares before transferring funds, which lets you avoid capital gains taxes that would be triggered by a sale.
Wealthfront Alternatives
Wealthfront’s closest competitor, and the robo-advisor that offers the most comparable services, is Betterment. They also have an annual advisory fee of 0.25%, but require no minimum initial investment. That could make it the perfect robo-advisor for someone with no money, who plans to fund their account with monthly deposits. Read the full Betterment review here.
Related: Wealthfront vs. Betterment
Another alternative is M1. Also a robo-advisor, M1 enables you to invest your money in what they call “pies”. These are miniature investment portfolios comprised of both stocks and ETFs. You can invest in existing pies, or create and populate pies of your own design. Once you invest in one or more pies, the platform will automatically manage it going forward. What’s more, M1 is free to use. Read more about M1 here.
Related: Wealthfront vs. Vanguard
Read More: The Best Robo Advisors – Find out which one matches your investment needs.
Wealthfront Pros and Cons
Investment options: Wealthfront offers more investment options than just about any other robo-advisor, particularly for investors with at least $100,000.
Reasonably priced: The annual fee of 0.25% is extremely reasonable, especially when you consider the degree of sophistication offered by Wealthfront’s investment methodology.
Tax-loss harvesting: This is available on all accounts, and Wealthfront is probably better at this investment strategy than any other robo-advisor.
Portfolio credit line: Gives you the ability to borrow against your portfolio with ease, and represents a form of margin investing.
Financial planning feature: The financial planning service is free to use and is available to all investors.
Limited access for smaller investors: Some of the more advanced investment portfolios and services are available only to investors with $100,000 or more to invest.
$500 minimum initial investment: It’s a minor issue, though some competitors require no funds to open an account.
FAQs
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Should You Sign Up for Wealthfront?
In a word, absolutely! Wealthfront is one of the very top robo-advisors, and you can’t go wrong with this one. Not only do they offer far more services than most other robo-advisors, but they also allow you to grow along the way. For example, as your account increases in value, you can take advantage of more sophisticated investment strategies, including advanced tax-loss harvesting.
That Wealthfront offers its portfolio line of credit and free financial planning services only makes the platform a bit more attractive, But the real benefit is the actual investment service. Wealthfront’s investment service comes extremely close to that of traditional human investment advisors, but at only a fraction of the annual cost.
After spending months researching and applying to colleges, you’ve finally decided on a school.
You should be proud of this achievement. But weighing and comparing schools isn’t the only decision you’ll be faced with. At some point, you’ll also need to choose a major.
Many college freshmen haven’t settled on a field of study, so you’re not alone if you’ve been wondering, “What should I major in?” Choosing what to study at college can feel nerve-racking, but it doesn’t have to be that way.
There are steps you can take to make an informed decision you’ll be happy with. One tool that can help you narrow your options? Taking a college major quiz.
Read on to learn more about choosing a major, take our college majors quiz, and then discover the strategies that will help you pick the right major.
When Is It Necessary to Declare a Major?
Schools usually require that you declare a major by the end of your sophomore year. Generally, there’s not a particular rush to declare. What’s more important is that you take a variety of classes if you’re still trying to figure out “what should I major in?,” to find the subjects that interest you most.
Just be aware that if your chosen field requires sequential classes, you may not be able to take quite as long to shop around for a major. For instance, it’s easier to switch out of being a science or engineering major than it is to switch into that field.
Why Choosing the Right Major Is Important
Your college major is the first stepping stone to your career. It won’t decide your entire career path, just as your first job won’t determine your entire career, but it will launch you on a particular trajectory and help you develop certain skills you’ll need to be successful.
Practically, you’ll want to choose a major with college program costs you can afford, that will pay you the kind of income you’re looking for, and has good employment prospects for the future.
On a more personal level, some of the most important considerations are: Is it something that truly engages you? Does it set you up for a career that you’ll enjoy? And does it suit your personality?
It seems obvious to say that you should choose a degree based on your interests, but it’s a consideration that you should respect. True engagement in a topic can have numerous ripple benefits. For instance, you’ll probably be more motivated and committed to lifelong learning and less likely to feel burnt out in school or later in your career.
College Major Quiz
Now that you understand why the right major is important, take this college major quiz to help answer the question, “which college major should I choose?”, and find the right area of study for you.
Satisfaction Survey Results
How do college graduates feel about the majors they chose? BestColleges.com conducted a survey to see how happy college graduates were with their choice of major. The survey asked numerous questions, with results tabulated for each question from each of the following generations: Millennials, Gen X, Baby Boomers, and the Silent Generation.
Here are three key findings:
• 61% of respondents would change their major if that were possible.
• About 26% of participants would change their major to reflect their passions.
• About 30% of the Millennials who participated said they should have chosen a major with better job opportunities.
It’s important to remember that this survey focused on people who graduated and were looking back at decisions they’d already made about their majors. As a current college student, you still have the ability to make the right decision.
6 Steps to Choosing Your College Major
Here are some key steps you can take to find the best college major for you.
1. Exploring
What’s tough about making a decision about which major to choose when you’re a teenager is that you haven’t tried a lot of things yet. The first year or two of college is a fine opportunity to explore, even if you think you know what major you’ll choose.
To begin, think about what you enjoy and what you’re good at. In addition to subjects, include skills such as leadership or organization. Next, consider the majors that match up with those interests. Branch out beyond the same subjects you took in high school.
Sign up for academic or pre-professional clubs—they’re a great way to learn more about career possibilities, create a support network as you’re enrolling in classes, seek out job-related opportunities, and meet people who share your interests. If you plan on working while you’re in college, find a job in a field you’re interested in.
2. Talking to People
As you’re thinking about, what major should I choose?, speak with other students, professors, and guest lecturers about their career experience. You’re likely to learn more about what a career is like by talking to someone with real-life experience.
Find a career counselor at your school who is willing to discuss with you options for majors and career opportunities.
It’s also no secret that we can have very skewed opinions of ourselves. Often, we’re too hard on ourselves or don’t recognize our own talents. It can help to have conversations with the people in your life (family, friends, teachers, coaches, and so on) whom you know will provide constructive observations and advice. It’s entirely possible that you’ll learn something about your strengths you never knew before.
3. Thinking About the Money
While no one expects that you have money figured out, you should have a general idea about how the decisions you make in college will affect you later in life.
First, investigate the starting salaries for different majors and entry-level jobs. This is an especially important exercise if you have student loans. As you’re choosing a major, it’s helpful to understand the basics of student loans and what they cover.
For instance, you’ll need to be aware of when you need to start putting money toward student loans, and how much your payments might be. Your loans can affect your financial future for many years, so make sure your major and career of choice will allow you to cover what you owe.
Even if you don’t have student loans, having a realistic idea about salaries, job availability, and cost of living in the area where you expect to live is important. Find a major that works within your budget and schedule.
It’s also important to look ahead. Is a career of choice expected to be in demand in the future? Is the demand expected to actually increase?
Recommended: Private Student Loans Guide
4. Getting Granular
At this point, it may be obvious to you which major is best. If not, and you’re still asking, “what major should I choose?”, a good strategy can be to create an in-depth list that includes:
• Your strengths
• Your weaknesses
• Activities you enjoy
• Tasks you dread
Also ask a college counselor if you can do aptitude testing. Are career fairs that you can attend coming to your school? Do some volunteer work or see if you can secure an internship in an area of special interest. Spread your net wide and take all you’ve listed and learned to make a choice that’s right for you.
5. Post-graduate Plans?
Is a bachelor’s degree what’s needed for the career you’re considering? Or will more schooling be required? Before finalizing your major, it makes sense to be clear about how much education you’ll need for a particular job.
If a master’s degree or more is required, is this something you’re interested in pursuing? And can you afford it?
And again, it makes sense to think about your student loans and the repayment terms they have. One thing to know is that you don’t necessarily have to stick to those terms if they won’t work for you. Refinancing student loans could help you get a more favorable rate and term, and possibly make your payments more affordable.
When you refinance, you replace your current loans with a brand-new private loan. It’s important to explore the advantages of refinancing student loans as well as the disadvantages.
One thing to know is that refinancing federal student loans makes them ineligible for federal programs and protections, like income-driven repayment plans. If you think you’ll need access to these benefits, refinancing may not be the best choice for you.
6. Filling in the Gaps
Once you choose a major, you might also want to select a minor. Having a minor opens up another academic discipline and can provide you with additional skills that can help you pursue your ideal career.
If, for example, you want to become a psychiatrist, it can make sense to have a business minor if you want to open a solo practice.
Whenever possible, it makes sense to choose a minor at the same time you declare your major. This allows you to strategically schedule classes so you can graduate within the planned time frame.
In the end, no matter what major and minor you decide on, know that your flexibility, creativity, and passion for life-long learning will have much to do with your success.
SoFi Private Student Loans
As you’re determining your major and also thinking about paying for college, student loans can help you cover some of the cost of college. If you’re exploring student loan options, shop around for the best rates and terms. SoFi private student loans have low fixed or variable interest rates and no fees. It’s easy to apply online and you can add a cosigner in just minutes. Additional benefits include exclusive member discounts and the flexibility to choose from multiple repayment options.
Students are encouraged to explore their federal student loan options before applying for any private loans. Federal student loans come with benefits that may not be offered by private lenders. Private student loans can also be more expensive than federal student loans.
If you have student loans and you’d like to lower your monthly payments, refinancing might be one way to do it. SoFi offers loans with low rates, flexible terms, and no fees. And you can find out if you prequalify in just two minutes.
With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.
SoFi Student Loan Refinance NOTICE: The debt ceiling legislation passed on June 2, 2023, codifies into law that federal student loan borrowers will be reentering repayment. The US Department of Education or your student loan servicer, or lender if you have FFEL loans, will notify you directly when your payments will resume For more information, please go to https://docs.house.gov/billsthisweek/20230529/BILLS-118hrPIH-fiscalresponsibility.pdf https://studentaid.gov/announcements-events/covid-19
If you are a federal student loan borrower you should take time now to prepare for your payments to restart, including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income based repayment plans or extended repayment plans.
SoFi Private Student Loans Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Private Student Loans Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. SoFi Bank, N.A. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
New Zillow research finds the share of first-time buyers has hit 50%, the highest level in years
SEATTLE, Aug. 23, 2023 /PRNewswire/ — Half of all home buyers are purchasing their first home, the highest share that Zillow has ever recorded. Zillow’s 2023 Consumer Housing Trends Report finds that first-time buyers now make up 50% of all home buyers, up from 45% last year and a meaningful jump from 37% in 2021. The share of first-time buyers likely hasn’t been this high since around 2010, when there was a first-time home buyer tax credit.
First-time buyers are making gains relative to repeat buyers. Zillow research finds a vast majority of homeowners with mortgages have locked in a rate below 5%, and are almost half as likely to consider moving. It’s true that first-time buyers make up a larger piece of a smaller pie, as home sales and inventory shrink. However, this significant rise in the share of first-time buyers helps explain what’s driving demand and keeping upward pressure on prices in a market with mortgage rates surpassing 7%.
“High mortgage rates and a shortage of inventory is keeping would-be repeat buyers in their current homes,” said Zillow senior population scientist Manny Garcia. “A greater relative share of first-time buyers is filling the gap, and they’re competing against each other for the limited number of affordable starter homes on the market.”
Affordability is the greatest hurdle for first-time home buyers. It now takes nearly 12 years for a typical first-time buyer to save up for a down payment, compared to nine years prior to the pandemic. Meanwhile, the typical monthly home payment has more than doubled in that time. Yet the growing share of first-time buyers suggests many are getting creative to make homeownership a reality.
Zillow’s report finds that most first-time buyers are tapping at least two sources to finance their down payment (60%), most commonly their savings and gifts from family or friends. Down payment assistance can help, and available programs are included on every for-sale listing on Zillow.
There are other tools helping first-time buyers anticipate and manage monthly costs. A new app filter on Zillow allows shoppers to search for homes by monthly mortgage cost, instead of by list price. In addition, a growing share of buyers are paying an upfront fee to reduce the interest rate on their mortgage and in turn, lower their monthly payment. Research from Zillow Home Loans finds nearly 45% of conventional primary home borrowers bought points to ease monthly costs, compared to 30% who did the same in 2021.
Nearly half of first-time home buyers are millennials (49%), a massive generation of adults ages 29–43 who are fueling fundamental housing demand as they hit their prime home-buying years. Gen Z adults between 18 and 28 years old are hot on their heels, making up more than one-quarter of all first-time buyers (27%).
These younger buyers are debunking the “lazy millennial” myth by working harder during the home-buying process. Zillow’s report finds that first-time buyers are more likely to contact at least three real estate agents and three mortgage lenders, compared to repeat buyers. They’re also more likely to make at least two offers on homes, and are more likely to report being denied a mortgage at least once before they’re approved for a loan. First-time buyers are seeing their persistence pay off for a piece of the American Dream, and many still believe the opportunity to build equity outweighs today’s higher costs of entry.
About Zillow Group:
Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make home a reality for more and more people. As the most visited real estate website in the United States, Zillow and its affiliates help people find and get the home they want by connecting them with digital solutions, great partners, and easier buying, selling, financing and renting experiences.
Zillow Group’s affiliates, subsidiaries and brands include Zillow®; Zillow Premier Agent®; Zillow Home Loans℠; Trulia®; Out East®; StreetEasy®; HotPads®; and ShowingTime+℠, which includes ShowingTime®, Bridge Interactive®, and dotloop®.