Homebuyers are getting set for a tough buying summer season and to prepare for it, an increasing number are applying for and closing purchase loans. According to the latest Originations Insight Report released by Ellie Mae on Wednesday, May saw the percentage of closed purchase loans increasing four percentage points to 70 percent.
This, despite 30-year interest rates continuing their upward climb during the month, rising to a new high of 4.84 percent from 4.79 percent in April. The percentage of “adjustable rate mortgages (ARMs) also held at 6.6 percent for the second consecutive month, the highest since June 2014,” the report said.
One of the reasons, for this uptick in closed purchase loans, is the upcoming home buying season that is set to see some tight competition among homebuyers amidst a tight inventory market. “The start of the summer homebuying season is in full swing and while inventories are tight, we’re seeing an increasing percentage of purchase loans,” said Jonathon Corr, President, and CEO of Ellie Mae.
According to the report, the percentage of refinances decreased across the board in May with FHA refinances dropping from 22 percent in April to 20 percent in May. Conventional refinances dropped from 38 percent in April to 34 percent in May, while VA refinances declined to 25 percent in May compared with 27 percent in the month prior.
While overall FICO scores of borrowers increased slightly for the fourth consecutive month to 724, LTV remained stable at 79 and DTI remained at 26/39, the report revealed. The time to close all loans held steady across the board with time to close all loans at 41 days for the third consecutive month.
“Even with the shift to a strong purchase market, closing times have remained steady, hovering around 41 days, and closing rates have increased slightly to just over 70 percent as more lenders take advantage of digital mortgage solutions to drive efficiencies and improve the consumer experience,” Corr said.
A rise in mortgage applications, according to the MBA’s Weekly Mortgage Applications Survey, also points to this factor. Mortgage applications increased 5.1 percent during the week as rates in June stabilized.