Home buyers are a growing part of the U.S. mortgage market, with purchase mortgage transactions accounting for 38% of the nation’s closed mortgages last month, the largest percentage since August 2012.
Refinance activity has grown this year, but purchase activity has grown faster.
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, purchase home loans increased market share 6 percentage points last month as compared to refinance activity, marking the largest one-month increase since March of last year.
Not surprisingly, market conditions from last month resemble those from March 2012 :
- Home prices were rising nationally, creating urgency among U.S. home buyers
- U.S. mortgage rate were rising sharply, increasing the cost of homeownership
- The FHA had a planned MIP increase, set to launch at month’s end
Buyers got busy in March, the data shows; even application volume soared. According to the Mortgage Bankers Association (MBA), purchase applications climbed last week to a near 3-year high.
Plus, for today’s home sellers, the good news is that a growing percentage of those loan applications is turning into closed loans. As compared to one year ago, the closing rate of purchase loan applications is higher by six points to 60 percent.
For buyers, it means tougher competition.
Ellie Mae : Mortgage Approval Statistics
The March 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 when home buyers attempted to buy a home using FHA-insured financing, their average offered downpayment was 5 percent. However, the likelihood of gaining bank approval wasn’t linked to downpayment, per se, but to debt-to-income (DTI) ratios.
Buyers whose DTI exceeded 45 percent were typically denied mortgage financing, while the average DTI of an approved FHA mortgage was 40 percent.
Other statistics from the report :
- Average FICO for a closed conventional mortgage was 743 — an 18-month low
- FHA mortgages accounted for 1 in 5 transactions — the highest in seven months
- The average purchase required 44 days from application-to-closing
Also noteworthy was that the average LTV for an approved conventional mortgage jumped to 74 percent, up from 65 percent one year earlier. This is a function of the hugely popular HARP 2.0 mortgage program for underwater homeowners.
13 percent of last month’s closed conventional loans featured 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 in your bid.
Getting pre-approved is easy, is no-cost, and starts with seeing your mortgage rates.