Many home buyers noticed the rising rates throughout the month of November. However, some may be surprised to find out that it actually became slightly easier to be qualified for a loan last month.
The average credit score for all closed loans in November was 728, the lowest average since summer of 2016.
While the required credit score for most loan types is much lower than November’s average, the dropping average score indicates that more potential home buyers may be becoming eligible for a mortgage.
All this occurred while mortgage rates rose toward their highest levels of 2016.
Those who may have had a hard time getting approved for a mortgage over the past few years due to their credit score could find that they are now eligible.
The lowering average credit scores could be a sign that lenders are loosening their standards for mortgages. Rates are rising, and lenders will want to try and get as many loans closed as possible.
Home buyers can take advantage of the market right now. Rates are only going to keep rising, and standards for mortgages may begin to get stricter as more people lock in on rates and purchase homes.
Conventional Loans Remain A Popular Option
Every month, mortgage software company Ellie Mae tracks mortgage information from around the country. Roughly 75 percent of all mortgages go through their software, so their monthly origination report is seen as a trustworthy source for mortgage data.
Their report tracks mortgages that closed in a 90-day period, although many mortgages close much quicker than that.
In November, the most popular mortgage option was the conventional loan. Conventional loans made up over two-thirds of all closed mortgages, and the average rate for conventional loans in November was 3.88 percent.
Conventional loans are popular because of their flexibility. While many home buyers opt to make a 20 percent downpayment on conventional loans to avoid mortgage insurance, home buyers can put down as little as three percent.
For example, the 80-10-10 loan, also known as the piggyback loan, allows home buyers to put as little as 10 percent down on their home without having to pay any type of mortgage insurance.
Conventional loans have been growing in popularity over the past 18 months, and they should continue to help home buyers throughout 2017.
Refinancers Locking In On Low Rates
According to Ellie Mae, refinances became easier to get approved for despite rising mortgage rates.
Refinances made up 47 percent of all closed mortgages in November, and number of closed refinances rose by nearly one percent. This made November the easiest month to get approved for a refinance in the past year and a half.
Many refinancers are locking in on rates before they raise to higher levels. While mortgage rates have already hit their highest levels of 2016, they are still lower than most rates available five years ago.
Those who have had a mortgage for more than five years might find that refinancing can reduce their monthly payments, and possibly even remove the need to pay for mortgage insurance.
However, it will become harder to save money through a refinance as time goes on. Mortgage rates are likely going to rise throughout 2017, and they are currently approaching a five-year high.
But rates are still well below pre-recession levels, and they will stay below them for a while. That means that anyone with a mortgage from before, during or after the recession could potentially save money on a refinance.
Ellie Mae’s Origination Insight report gives valuable information to home buyers, but the data is a collection of mortgage rates from the previous month. Currently, mortgage rates are higher than those reported.
Home buyers and refinancers looking for the lowest possible rates will want to keep their eye on rate trends.