Home Buyers Dominating New Mortgage Originations

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A new report by mortgage origination software firm Ellie Mae, home buyers are dominating loan originations, making up the highest share of the market since 2011. As home prices continue to rise, economic optimism seems to be driving a buying frenzy. The report shows that 68 percent of mortgage closings by the end of May 2017 were for home purchase loans. The highest rate ever recorded.

According to the National Association of Realtors (NAR), home prices are expected to increase about four percentage points, after a 6% growth in 2016. It appears many buyers feel the time is still right to get into a home before appreciation levels off. As the housing market tightens, buyers begin engaging in bidding wars, further driving up demand and prices. It appears that there will not be a foreseeable slowdown before the end of 2017.

The Ellie Mae report also indicates that refinance loans currently make up roughly 32 percent of the market. That number is significantly down from the 73% that was reported in the beginning of 2013. The refinance market has been drying up since 2013 after most homeowners took advantage of record low-interest rates that followed the recession.

According to NAR, home buyers still consider owning real property to be a solid long-term investment. The average homeowner nationwide is seeing about $13,000 in appreciation per year. Although, some metro areas are seeing much higher home value increases. Some owners in major metropolitan areas such as Los Angeles or San Diego are seeing $40,000 or more of appreciation in just one year. The numbers appear to be a factor in continuing to drive enthusiasm for home ownership.

Mortgage Approvals Up

The Ellie Mae Origination Insight Report provides a study of a wide sampling of today’s mortgage applicants. The report offered encouraging news on the amount of mortgage applications getting approved. The study showed that over 60 percent of FHA loan applicants had FICO scores below 700. That compares with 17 percent applying for conventional mortgages with the same FICO numbers. The report also shows that FHA loans accounted for 23% of the entire mortgage market, with VA mortgages making up about 10 percent.

Some of the most encouraging news according to Ellie Mae is that mortgage applications are getting approved at the highest rate since 2010. At the end of May, it was reported that nearly 76 percent of all mortgage applications were closed, that is up over 12% from all of 2016. The report also indicates that borrowers felt that obtaining a mortgage was easy. Confidence in the mortgage application approval process is also contributing to the record-high purchase starts, with lenders continue to offer an excellent variety of loan options for applicants with less-than-perfect credit.

The news comes at a time when consumer confidence is high, and overall loan applications are bumping up from a year ago. According to the Mortgage Bankers Association (MBA) Mortgage Applications Survey for the week ending June 23, the data shows a slight dip in purchase and refinance applications from the previous week. Although the report also indicates that overall applications are up a full eight percent over this time last year.

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