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Factors Shaping the Purchase Loans Market

The share of purchase loans closed in September increased to 71 percent of total closed loans, according to data from Ellie Mae's Origination Insight Report. The report indicated that closed refinance loans returned to their July average represented 29 percent of total closed loans.

“We see refinances remain at a low percentage of aggregate closed loans and purchase inventory continues to be tight as we move into the fall,” said Jonathan Corr, President, and CEO of Ellie Mae.

The report found that the percentage of adjustable-rate mortgages (ARMs) increased to 7.2 percent from 6.6 percent in August as the 30-year fixed-rate interest for all loans decreased for the first time in 2018 in September to 4.91 percent from a high of 4.92 percent in August.

“We did see the first reduction in interest rates this month and with that, the percentage of ARMs began to increase. However, we believe that the seasonal decline in home buying and continued affordability constraints will shape the purchase market,” Corr said.

September saw the closing rates for all loans rising to 71.1 percent—the highest percentage in 2018. The closing rate for purchase loans rose slightly to 76.4 percent from 75.9 percent in August and those for refinance loans increased from 63.5 percent in August to 64.4 percent in September.

However, the time to close all loans increased to 44 days during the month, up by a day from 43 in August, the report said. While the time to close refinances loans also increased by four days from 38 in August to 42 in September, the time to close purchase loans remained steady at 45 days.

Looking at consumer credit scores, the report indicated that the overall FICO scores increased by three points to 727 in September. Breaking these up, the report indicated that 70 percent of all closed loans had FICO scores over 700 while 72 percent of purchase loans had FICO scores over 700. Sixty-five percent of refinances had FICO scores over 700.

During the month, loan-to-value held at 79 for the second consecutive month. The average debt-to-income ratio decreased to 25/39.

About Author: Radhika Ojha

Radhika Ojha, Online Editor at the Five Star Institute, is a graduate of the University of Pune, India, where she received her B.A. in Commerce with a concentration in Accounting and Marketing and an M.A. in Mass Communication. Upon completion of her master’s degree, Ojha worked at a national English daily publication in India (The Indian Express) where she was a staff writer in the cultural and arts features section. Ojha also worked as Principal Correspondent at HT Media Ltd and at Honeywell as an executive in corporate communications. She and her husband currently reside in Dallas, Texas. You can contact her at Radhika.Ojha@theMReport.com.

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