Three Out Of Four Purchase Applicants Have Their Mortgage Closed
One common reason would-be home buyers don’t apply for a mortgage is because they don’t think their loan will get approved and close.
Getting a loan closed can be a long and sometimes difficult process. It makes sense that some would avoid the process entirely because they don’t believe their loan would close.
But those would-be home buyers may want to reconsider before they decide to not apply for a mortgage. Recent data shows that home buyers are more likely to get their mortgage application closed now than any time in the past five years.
In the month of March, three out of four purchase applicants were approved for their mortgage.
Mortgage shoppers will find that confidence in the housing market is still strong. As a result, lenders are going to be more willing to approve home buyers for mortgages.
There are plenty of reasons to feel optimistic about buying a home. High chances of getting a loan closed, the quick pace loans are closing at and today’s low mortgage rates all combine to make a buyer-friendly market.
Highest Ever Recording Of Closed Applications
According to mortgage software company Ellie Mae, over 75% of purchase applications closed in a 90-day cycle. This is the highest rate recorded since Ellie Mae began collecting data in August 2011.
When a mortgage “closes” it means that the terms have been accepted by both the home buyer and their lender. After your mortgage closes, you’ll get the keys to your new home. One way of looking at it is that 75% of purchase applicants had the keys to their new home within 90 days.
Ellie Mae also found that over 70% of mortgages closed in March. Overall, loans were seven percent more likely to close this March than a year ago.
The same goes for refinance applications. Last March, the number of closed refinance applications rose to over 66%. At the end of 2014, only 51% of refinance applications were getting closed.
Surprisingly, the loan type that was most likely to close was not FHA, conventional or VA. Other loans, which make up about 3% of mortgage applications, had the highest percent chance of closing.
One loan type included in the “other loans” category is the USDA loan. USDA loans have been waning in popularity despite not requiring a downpayment and often having lower monthly payments than FHA loans.
In any case, a higher percentage of loans were closing in March than previously recorded. This should be an encouraging sign for home buyers over the next few months.
Mortgages Closing At Quick Pace
Along with a high percentage of loans getting closed, Ellie Mae reports that the average number of days it took for a loan to close decreased in March.
Last month, it took an average of 44 days for a mortgage to close. At the beginning of the year, it took an average of 50 days to close a loan. That means that on average loans are closing about a week faster than they were at the beginning of the year.
The number of days it took a mortgage to close depended on what loan type it was. For example, conventional purchase loans took an average of 45 days to close while conventional refinances only took 41 days.
Refinances closed sooner than purchase loans across the board. Refinancers have been taking advantage of falling rates for a while, and March was no exception.
Despite the speed that refinances are closing at, a majority of mortgages were purchase loans.
Purchase loans continue to increase in popularity. Currently, the housing market is in the middle of the busy spring buying season. Despite the number of buyers looking to purchase a home, purchase applications are closing at a high percentage and fast pace.
Loans Closing With Low Rate Average
Not only are loans closing quickly and at a high percentage, but they’re averaging low mortgage rates.
March saw an average mortgage rate on 30-year fixed rate mortgages fall to 4.12%. This marks a drop in 10 basis points (0.10%) from the month of February.
Mortgage rates have been plummeting during 2016, and the month of April has seen some of the lowest rates available in years.
Ellie Mae’s report took the average rate for all 30-year mortgages over the month of March. However, mortgage rates began to fall toward the end of March, and April has seen some of the lowest mortgage rates in years.
Also, some mortgage types are going to offer lower rates. For example, FHA mortgages tend to have lower rates than similar conventional mortgages.
So the rates that Ellie Mae reported are higher than today’s rate average. Freddie Mac, a leader in mortgages, found that recent rates fell to 3.59% which is well below Ellie Mae’s reported rates.
However, Ellie Mae’s report shows that mortgage rates are trending down while the percentage of closed mortgage applications is trending up. If this trend continues, it means that home buyers today are getting ultra-low rates and they have more than a 75% chance of closing their purchase mortgage.