February saw rising rates for all types of loans, but that doesn’t mean that it was harder for mortgages to close.
The average number of days it took for a mortgage to close last month was just 46 days, the fewest number of days it has taken since August of last year.
Some home buyers might be taking advantage of what is often the slowest season in the housing market. As spring approaches, home buying will become more popular, and it could slow down the entire process for everyone.
Also, many home buyers might be trying to lock in on rates before they begin to rise to even higher levels. According to Freddie Mac, mortgage rates have already risen by over .25% in the past month.
But home buying also seems to be becoming easier for some.
Right now, the housing market is in a period of growth, so there will be a number of factors changing on a weekly and monthly basis. The stronger the housing market gets, the lower the required credit scores will become and the faster loans will close.
However, rates will also rise as the housing market gets stronger.
It isn’t too late to take advantage of the growing housing market and still get relatively low mortgage rates.
Click to see today’s mortgage rates.
Home Buyers No Longer Need “Great” Credit
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. A closed mortgage is a mortgage that went through the mortgage application process and was approved.
According to Ellie Mae, the average credit score for all closed loans was just 720, tied for the lowest average credit score in the past 17 months.
Over the past decade, lenders have wanted to see higher credit scores from home buyers to make sure that the mortgage will be safe. Now that the economy is improving and the housing market is strong, lenders are more willing to generate mortgages at more normal levels.
This means that those who were not able to secure a loan in the past because of their credit score could not potentially be eligible.
The average credit score was even lower for some mortgage types.
For example, the FHA mortgage had an average FICO score of just 649 last month, the lowest they’ve approved in well over a year.
FHA loans are popular for their low required downpayment and credit score. Home buyers can put down as little s 3.5 percent on an FHA mortgage, and some lenders are willing to approve FHA mortgages with credit scores as low as 580.
Percentage Of Closed Mortgages Decreasing
While Ellie Mae reported plenty of positive news, it also reported that it may start to become harder to get a mortgage closed.
Mortgages might not get closed for a number of reasons. While the average credit score is lowering for closed loans, the percentage of loans that were closed dropped.
Last month, just over 70 percent of loans closed, as compared to over 72 percent of loans in January.
While it might seem like it’s becoming harder to get approved, this could just be a momentary change as the market adjusts.
Mortgages are closing faster than they have in recent months, and with lower required credit scores and higher average mortgage rates. Not all mortgages are going to get approved, so lenders are probably trying to figure out exactly what types of mortgages should go through.
Home buyers should not be deterred by the drop in the percentage of closed mortgages. Over 70 percent of mortgage applications are still closing, a high mark considering how many people apply for mortgages each month.
In fact, the percentage of closed mortgages in March could easily be higher than in February.
That being said, those that are wanting to purchase a home should check their home buying eligibility by beginning the approval process. This will let them know about how much home they can afford.
Check your mortgage eligibility.
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.