Despite rising mortgage rates, December saw the highest percent of closed mortgage in the past 18 months.
Of all mortgage applications, 73.2% of them were approved in the month of December. This is up one full percentage from November’s rate of 72.2%.
Mortgages have been slowing in popularity coming into the winter months, a change that is fairly typical for the season. Despite the slowing number of mortgage applications, home buyers had the highest chance of getting their mortgage application closed in December.
The percentage of closed mortgages has been rising gradually for the past year and a half. In December of 2016, only 67.3% of mortgage applications were approved.
The increase in the rate of closed homes also has coincided with a rising mortgage rate. Even though homes are beginning to get slightly more expensive to purchase, mortgages are getting easier to get approved for.
If this trend continues, January should end up being an excellent month for home buyers, Nearly three-quarters of all mortgage applications are getting approved, and that number could jump this month.
Also, mortgage rates have been decreasing since the new year began. Not only is mortgage approval getting easier, but they could be less expensive as well.
High Percentage Of Mortgages Closing
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.
The total percentage of mortgages that closed in December was high, but it was even higher for some specific mortgage types.
For all purchase loans, exactly 77 percent of mortgage applications closed. This is a jump from November, and the rate could be increasing to even higher levels in 2017.
The mortgage type that was most likely to close in December was the conventional loan. Conventional loans are the most commonly used mortgage type, largely due to their flexibility.
With a conventional mortgage, home buyers who make a downpayment of at least 20 percent don’t need to pay any form of mortgage insurance. However, home buyers also have the option to put down less than 20 percent on their conventional mortgage.
In December, over three-quarters of mortgage applications closed. This is up from 72.4% of mortgage applications one year ago.
If this trend continues, mortgages should start becoming more easily accessible for would-be home buyers. This is good news, especially since mortgage rates have been dropping gradually throughout the new year.
Credit Scores For Closed Loans Lowering
Not only are mortgages closing at a high clip, but the average credit score for closed mortgages is also dropping.
In December, the average credit score of closed loans dropped to 726. The average is taken from all mortgage types, so the average for some specific mortgage types were lower.
For example, closed FHA mortgages in December had an average credit score of 686, well below the average for all closed loans.
FHA loans are known for having low mortgage rates, low required downpayments and low required credit scores. The minimum required credit score for an FHA loan is 580, and a downpayment of just 3.5 percent is required.
The average credit score of closed loans was even lower for refinances. Also, refinances are currently closing at their highest clip of the past 18 months. At this time last year, refinances were six percent less likely to close than they were in December.
Current homeowners who are looking to save money on their mortgage might want to consider checking current refinance rates.
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.