Click To See Today's Rates

Posted 07/22/2016

Report: Just 1-in-4 Mortgage Applications Don’t Close

Ellie Mae: Refinance loans hold 34% market share vs purchase loans

Refinance Loans Trail Purchase Activity

Today's mortgage rates are the lowest they've been in history, excepting for a 3-week span three years ago. Furthermore, home values are climbing, up more than 5% annually.

It's no wonder mortgage demand is rising.

Refinance loans are in demand with homeowners lowering mortgage rates and taking cash out for home improvement projects, among other reasons.

However, it's purchase loans which continue to be housing's big story.

Rising rents are putting pressure on today's renters. And, as that's been happening, lenders have made it easier for buyers to get home-loan approved.

Nearly 74% of home buyers' purchase loan applications were approved in June, according to Ellie Mae. That's a super-high percentage of approved loans.

Click to see today's rates (Jul 27th, 2016)

Low Mortgage Rates Spur Purchase, Refinance Activity

According to mortgage origination software firm Ellie Mae, which handles approximately 3.7 million mortgage applications per year, refinance mortgage loans accounted for 34% of all loans closed in June 2016.

This is down 13 ticks from the start of the year. But don't be fooled. Overall, refinance volume is much higher as compared to prior months -- there's just a lot more purchases, too.

There are two main catalysts for the rise in home loan refis.

The first catalyst for recent refinance activity has been rising home values.

Home values were up more than five percent last year, and are now higher by more than 30% from the market bottom, set in 2012.

In many U.S. cities, valuations have eclipsed last decade's peak.

When home values rise, refinancing becomes easier for homeowners not using underwater loan programs such as the HARP 2 loan. It's also easier for homeowners with existing FHA loans to cancel FHA MIP.

Cash out refinance loans are also on the rise after several down years.

The second cause of the refinance boomlet is that today's mortgage rates have given U.S. households incentive to refinance.

When mortgage rates are low, there's a potential to save big money.

Today, there are potentially more than 7 millions households eligible to refinance, with more than 1 million of them in the money for a refinance.

"In the money" is defined as having a mortgage rate more than 150 basis points (1.50%) above today's rates; plus having sufficient home equity to qualify.

Today's mortgage rates are in the mid-3s and bank are quoting equally-low APRs. Some homeowners are getting rates in the twos.

Refinance loan volume remains strong.

Click to see today's rates (Jul 27th, 2016)

Mortgage Approval Statistics Improving

The most recent Ellie Mae Origination Insight Report provides a good look at today's typical loan approval, and the makeup of today's mortgage applicants.

As one example, buyers with FHA loans are making a four percent downpayment, on average; and their credit scores are slightly higher as compared to last year.

Today's FHA buyers carry an average FICO of 686.

This is interesting because lenders have aggressively lowered their minimum FHA credit score requirements last year, with some lenders now allowing FICO scores as low as 580 FICO in order to get approved.

Plus, the FHA's Back to Work program gives FHA borrowers access to mortgages just 12 months after a bankruptcy, foreclosure or short sale, which typically makes for a low FICO.

Despite lender willingness to make loans to borrowers with below-average credit scores, the typical FICO score of an approved mortgage borrower is climbing.

Other data from the Ellie Mae report included:

  • FICOs averaged 754 on closed conventional purchases
  • FHA mortgages accounted for 23% of all loans; VA loans accounted for 9 percent
  • The typical mortgage took 46 days to approve

However, the most noteworthy statistic from the Ellie Mae report was the one which showed more mortgage applicants getting approved than during any period this decade.

In June, 74% of purchase loan applications got "closed", which marks a huge increase 2014's average rate of 63 percent.

This statistic refutes the general belief that "mortgages are tough to get". The opposite is true.

The Ellie Mae report shows that mortgages are easier to get than they've been in years. Lenders are loosening requirements and a variety of new low- and no-downpayment loans have reduced the hurdles to homeownership.

What Are Today's Mortgage Rates?

With mortgage rates low, demand for mortgage loans is high. And, with lenders approving a growing percentage of loans, the time to apply is today.

Get today's live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.

Click to see today's rates (Jul 27th, 2016)

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

3 Testimonials

Michael J. Network Engineer

The Mortgage Reports is one of the most accurate, detailed, and informative sources of mortgage-related information on the internet.

Don B. Retired

The Mortgage Reports has helped me so much. I can't thank you enough.

Dan H.

The Mortgage Reports is very informative and very helpful. Its daily updates are among the first emails I open each morning.

2016 Conforming, FHA, & VA Loan Limits

Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)