The interest rates on mortgage loans that closed
in June averaged 3.40 percent, down 3 basis points from the average in May
according to Ellie Mae’s Origination Insight Report. The rate for 30-year
conventional loans was 3.42 percent compared to 3.44 percent the previous month
and there were declines of 4 basis points for both FHA and VA loans to 3.41
percent and 3.20 percent, respectively.
The share of purchase loans moved
substantially higher during the month, from 35 percent to 42 percent, causing a
corresponding drop in the refinance share from 65 percent to 58 percent. The
distribution of loans also shifted slightly; the conventional loan share dipped
to 80 percent from 82 percent with the VA and FHA each picking up 1 percentage
point to 7 and 10 percent.
“Interest rates decreased for
the sixth consecutive month and we’re seeing a rebound in the purchase market
which now represents 42 percent of all closed loans, a seven percent increase
from May,” said Jonathan Corr, President and CEO of Ellie Mae. “Homebuyers are
taking advantage of these historically low rates to both buy and refinance but
it does appear that lenders are looking for borrowers with better credit across
all mortgage products as FICO scores have continued to increase across the
board since March.”
Those FICO scores averaged 751 in
June, up from 750 in May and up 9 points since March. Scores rose for both
purchase and refinances and across all loan types.
Another sign that credit may be
tightening is the closing rate. It dropped to 73.4 percent in June, down from
76.0 percent in May and is nearly 4 points lower than in March. The closing
rate for both refinances and purchase loans moved lower; the former fell from
75.9 percent to 73.2 percent and the latter from 76.4 percent to 74.2 percent.
Ellie Mae computes the closing rate from a sample of loan applications
initiated 90 days prior-or the March 2020 applications.
The time to close all loans
increased to 47 days, up from 45 days in May. Time to close for purchase loans
decreased to 46 days, down from 47, while time to close refinances increased to
48 days, up from 44 days the prior month.
Ellie Mae’s Origination Insight
Report mines data from a sample of approximately 80 percent of all mortgage
applications that were initiated on the company’s mortgage management system. Ellie
Mae says the report is a strong proxy of the underwriting standards employed by
lenders across the country.