In April, the number of purchase loans closed rose compared to refinances, furthering the gap between the two.
Now, nearly ⅔ of all closed mortgages are purchase loans.
Last month, purchase loans made up 65% of closed mortgages, compared to 35% for refinances. This could largely be due rising rates a little over a month ago.
It could also be because many refinancers aren’t aware that they can save big on their mortgage by refinancing to a lower mortgage rate.
In any case, the number of days it took for both types of mortgage to close dropped. In April, it took an average of 42 days for a purchase loan to close and an average of 41 days for refinances. Both marked the fastest clip in the past 18 months.
Right now, many lenders are looking to generate more mortgages. As a result, they are going to try and help home buyers make through the process as easily as possible.
One draw to try and bring in more mortgages is low mortgage rates. The lower the mortgage rates, the better the chance that home buyers will finally lock in.
Fortunately for home buyers, mortgage rates have been dropping – and they’re currently lower than the average rate found in April. This can mean that getting a mortgage today might be even easier than it was in April.
Mortgage Rates Dropping
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.
According to Ellie Mae, closed 30-year fixed rate mortgages in April had an average mortgage rate of 4.41%, just a slight increase from the previous month.
However, mortgage rates have been falling since the end of April, so rates available today are likely to be lower than those reported by Ellie Mae.
One way home buyers were taking advantange of even lower rates was by opting for a five-year adjustable rate mortgage (ARM). the five-year ARM usually has lower rates than 30-year mortgages, but then adjusts to the current rates after a five-year period.
In April, 5.9% of all closed loans were ARMs, the highest share for any month in the past 18 months.
This could be a sign that many home buyers expect mortgage rates to drop in the coming years, or it could be because they would rather lock in on low rates now.
Depending on your home buying situation, a five-year ARM could be best for you.
Mortgage Approval Becoming Easier
Not only did mortgages close at a quick pace in April, but a high percentage of mortgages closed as well.
Ellie Mae reported that 69.4% of all mortgages closed in April, a jump of nearly two percent from the previous month.
With a majority of mortgages getting closed, this could end up being an ideal summer buying season for home buyers. While there is still a national shortage of housing, other factors that go into home buying are helping shoppers get into homes.
Mortgage rates have been a big part of this. The lower mortgage rates go, the easier it is to afford a home.
Also, there are new homes constantly being added to the market. Whether they are newly built homes or existing homes put up for sale, there is never a finite never of houses on the market.
Home buyers that have been getting discouraged shouldn’t lose faith just yet – a lot can happen over the coming months.
The best way to be prepared to buy a house is to begin the pre-approval process to see just how much home you can afford with your current situation. This will speed up the entire process of searching for, and buying, a home.
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 lower than those reported.
Home buyers and refinancers looking for the lowest possible rates will want to keep their eye on rate trends.