Continuing a 2016 trend, mortgages in October closed at the highest clip in the past 16 months.
Of all mortgages applications in October, exactly 73% of them closed, meaning the mortgage was approved by the lender. Last October, under 67% of all mortgage applications closed.
Purchase loans were even more likely to close in the month of October. Over 77% of mortgage applications closed last month, meaning more than three-quarters of all applications were approved.
Home buyers took advantage of ultra-low rates in October, and lenders were eager to approve the mortgage applications. This could have been due to economic uncertainty moving into November.
November had a few moments that impacted the mortgage world. First, the Fed met at the beginning of month, opting to keep their rate the same. However, they hinted at a rate hike in December, meaning mortgage rates could be increasing after their next meeting.
Also in November was the Presidential Election. Donald Trump’s victory came as a surprise, but the market reacted in a positive way. The result was skyrocketing mortgage rates.
While mortgage rates aren’t as low as they were in October, lenders are still going to be eager to approve mortgages. Those looking to get the best rates available may want to act sooner rather than later since mortgage rates are bound to increase over the coming months.
Click to see today’s mortgage rates.
Mortgages Becoming Easier To Close
Every month, mortgage software company Ellie Mae tracks mortgage information from around the country. Roughly 75% 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.
While they aren’t able to track why the average number of closed mortgages increased, the high clip could be attributed easier standards created by lenders.
In October, the average credit score for all closed loans dropped to 730, the lowest it’s been in the past three months.
The average credit score for some specific loan types is even lower. Of all closed FHA loans, the average credit score was just 653, near the lowest average level for the year.
It is important to note that these are the average credit score for closed loans and not the minimum required amount. Home buyers with credit scores lower than the averages were approved in October, and those with similar credit scores will likely get approved for a mortgage in November or December.
This is particularly true with mortgages like FHA loans. FHA loans require a credit score of just 580, and home buyers can make a downpayment of as little of just 3.5 percent.
Click to check your FHA eligibility.
Rates On The Rise
According to Ellie Mae, the average mortgage rate for all closed loans in October was 3.76 percent, near the lowest average for the year.
However, mortgage rates have been increasing throughout November, and they are likely to continue steadily rising throughout the rest of 2016.
The biggest takeaway from Ellie Mae’s origination report is that mortgages are becoming easier to get approved for. Those who applied for mortgage just one year ago may now be eligible to buy a home.
Lenders might even make mortgages easier to get approved for in the coming months. High mortgage rates are going to deter potential home buyers, but lenders will want to create as many mortgages as they can.
Those looking to purchase a home may want to act soon. Rates are near their highest levels of 2016, but they should be rising for the next few months.
In other words, mortgage rates today may be lower than they will be in the next few months.
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.