Demand For Mortgages Rise Sharply Among Today’s U.S. Home Buyers
Home buyers are a growing part of the U.S. mortgage market. Purchase mortgage transactions now account for 49% of the nation's closed mortgages, the largest percentage in more than two years.
The refinance market has remains warm, but purchase loans are hot.
Home Buyers Crowding The U.S. Market
According to mortgage origination software firm Ellie Mae, which handles more than 3 million mortgage applications per year, market share for purchase home loans increased 7 percentage points in June as compared to refinances, marking the largest one-month increase since Ellie Mae began tracking such data in 2011.
Market conditions have favored purchase mortgage lending versus refinancing:
- Home prices are rising nationwide, creating urgency active U.S. home buyers
- U.S. mortgage rates are climbing, increasing homeownership costs
- New refinance regulations have affected some FHA-insured homeowners
On a raw numbers basis, purchase activity remains strong, too. According to the Mortgage Bankers Association (MBA), purchase applications continue to increase, up 5% from last year's active summer season.
Furthermore, the majority of this year's home purchase loan applications are getting approved.
In 2012, 58.8% of purchase mortgage applications were approved by U.S. lenders. Last month, 60.4% of applications were approved. This 1.6 percentage point increase means more competition among today's buyers which, ultimately, should lead home prices higher through 2013 and into 2014.
Ellie Mae : Mortgage Approval Statistics
The June 2013 Ellie Mae Origination Insight Report also provided data about recent mortgage applications, and what is required for an approval.
For example, the report showed that home buyers using an FHA loan to buy a home made an average downpayment of 5 percent, and the average downpayment size showed little correlation to approval rates. Rather, the likelihood of getting approved for an FHA loan bank approval was more closely linked to debt-to-income (DTI) ratios.
Buyers whose DTI exceeded 44 percent were typically unable to get a loan. The average DTI on approved FHA purchase mortgage was 41 percent.
Other statistics from the report :
- Average FICO for an approved conventional purchase loan was 760
- FHA mortgages accounted for 19% of all June loans -- the lowest in 5 months
- The average purchase loan took 46 days to approve, up 1 days from the month prior
Also noteworthy was that the average LTV for an approved conventional refinance moved to 71 percent, higher than the 2012 average of 69 percent. This is a function of the hugely popular HARP 2.0 mortgage program for underwater homeowners.
8 percent of last month's closed conventional loans carried LTVs of 95% or higher.
Get Today's Mortgage Rates
With the growing share of purchase mortgage applications, the Ellie Mae report suggests that home buyers can expect more competition for homes, and, likely, more bidding wars on listings. As a buyer, consider getting pre-approved.
Pre-approvals are not required before buying a home, but they can help you plan for an upcoming purchase. You'll have the confidence of knowing what home you can afford, and sellers will know you're serious about your bid.
Getting pre-approved is easy, is no-cost, and starts with getting today's mortgage rates.