Mortgages were more likely to close in the month of July than they have been for the past 16 months.
Almost 72 percent of all mortgage applications closed last month. The number was even higher for purchase loans where over three-quarters of applications were closed.
The high percentage of closed loans means that banks are looking to close as many mortgages as possible. This is good for home buyers since the high number of closed mortgages is also tied to low mortgage rates.
The housing market has been one of the strongest, and safest, sectors of the economy in 2016. Since summer started, mortgage rates have been dropping to record-low levels to encourage potential home buyers to lock in and buy a house.
Because mortgage lenders are looking to create more loans, home buyers who have had trouble getting approved in the past could be more likely to get approved.
The percentage of closed loans has been steadily increasing over the past year. If this trend continues, it could be even easier for home buyers to get approved today than it was in the month of July.
Home Buying Becoming Easier
Every month, mortgage software company Ellie Mae releases their Origination Insight Report. The report is meant to reveal the average data for mortgages that went through their software during the previous month.
Lenders across the nation use Ellie Mae’s software, so their data is an excellent gauge for how the mortgage industry and housing market are performing.
Ellie Mae reported that 71.6 percent of all mortgage applications closed in a 90-day cycle. This means that of all mortgage applications filed, nearly 72 percent of them were approved.
Even more impressive was that 75.7 percent of purchase applications were closed in a 90-day cycle. This is good news for home buyers since this is the highest percentage of closed applications in over a year. At this time one year ago, only 70.7 percent of mortgage applications were closed.
The high clip of closed mortgage applications shows lenders’ confidence in the market. For most of the past decade, lenders have been cautious about who they lend to. In many cases, this was less about the home buyer and more about the lender wanting to be safe.
Now that the housing market is performing well, some lenders are becoming less strict when it comes to approving mortgages. This is beneficial for both the lender and the home buyer.
Mortgage Rates Also Hit 16 Month Lows
Along with the high percentage of closed loans, the average mortgage rate for closed loans also set a 16-month record.
The average rate for 30-year fixed rate mortgages was 3.87% in the month of July. This is over 40 basis points (0.4%) lower than the average rate at the beginning of 2016 and in July of last year.
Rates have been low for the past few months, and they are not expected to increase by much anytime soon. In fact, rates today are possibly lower than those reported by Ellie Mae in the month of July.
It is unlikely that there will be any big news that will affect mortgage rates until the Federal Open Market Committee (FOMC) meets again. They aren’t scheduled to meet until September 20.
Prospective home buyers may want to begin their housing search sooner than later, however. The summer buying season is almost over, and traditionally it is harder to find available homes in the fall and winter. The number of available homes for sale has been low, and it has made home buying more difficult for a number of people.
Also, rates may not hold low into the coming months. Low rates are combatting the rising cost of homes. Once rates begin to increase, the process of home buying will become more expensive.
Mortgage rates change every day, and there is a good chance that they are much lower than Ellie Mae’s data reports.
Rates have been falling steadily in August, and they are currently near their lowest levels of the past three years.