Homes Loans Close At Highest Rate In Last 5 Years
February had the highest percentage of closed home loans since August 2011.
Ellie Mae, a leader in mortgage software, reported that 69.9 percent of home loan applications over a 90-day period closed. This is the highest percentage since Ellie Mae began collecting data on closed loans in August 2011.
Lenders have been making homeownership more easily achievable by loosening their requirements over the past few months.
Average approved credit scores are still low, and the number of days it took to close a loan decreased as well.
Mortgages are closing at an easier and quicker pace. With mortgage rates near their lowest levels of 2016, mortgage shoppers are taking advantage of a buyer-friendly housing market.
Homes Closing At High Rate
Ellie Mae provides mortgage origination software to thousands of lenders across the country. More than 3 million loans pass through its software each year.
The company aggregates this data each month to publish its Origination Insight Report. In February, data showed that loans are closing at the highest rate ever recorded.
Potential home buyers may find that getting a loan today is easier than it was in the past year.
The current rate of closing, at nearly 70 percent, is much higher than last year’s closing rate of just sixty percent.
The percentage of loan applications that have closed has been steadily increasing for over a year. If this trend continues, loans should have an even higher chance of closing in the coming months.
Mortgage Closing Process Is Getting Easier
As the percentage of closed loans increases, mortgage shoppers may find that it is easier to have their own loan applications “closed.”
A loan application is considered closed when it meets all requirements and the lender accepts you for the loan. If you are accepted for a loan and you sign the required paperwork, the loan will “close” and you can proceed with purchasing your new home.
Refinances are closing at a much higher percentage than in the past. Two out of three refinances closed last month, an increase from just half of refinance one year ago.
Refinancing has become a popular option recently due to ultra-low mortgage rates.
Also, the lower your home loan, the easier it will be to get accepted for a loan. Keeping your debt to income (DTI) ratio low will improve your chances of getting your loan closed. According to Ellie Mae, the average acceptable debt among mortgage shoppers has increased over the past year.
So shoppers may not need to lower the DTI by as much as they would have had to a year ago.
Purchase Applications More Likely To Be Completed Than Refinances
Purchase loans are closing at an even higher rate than refinances. In February, nearly 75 percent of home purchase loans were completed by the lender with which the home buyer applied.
Some loan types have become much easier to close than they would have been a year ago. For example, only 36% of FHA refinance applications closed last year. Last month, 59% of FHA refinance applications closed. At current levels, well over half of all FHA refi applicants will get accepted.
The Federal Housing Administration, or FHA, is one of the leaders when it comes to low downpayment mortgages. Currently, FHA mortgages require a 3.5% downpayment. Also, underwriters for FHA loans are fairly lenient when it comes to accepting loan applicants.
There’s a reason that 1 in 5 home buyers will opt to get an FHA loan.
Lenders More Confident In Housing Market
Loans closed at a historically high percentage. This means that lenders are optimistic about the current, and future, housing market.
As the housing market continues to gain strength, lenders are more likely to accept loan applications that were not accepted a year ago.
Low mortgage rates are also helping. They reduce costs for homeowners, increasing the lender’s flexibility to approve the home purchase or refinance application.
Today’s home buyers and refinancing households can take advantage of the current buyer-friendly housing market.