Mortgage Daily Logo
mortgage news from industry experts

New Low for FHA Credit Scores

Credit score requirements on government-insured closings fell to the lowest level in at least two-and-a-half years. Meanwhile, originators cut five days off the amount of time it took to close a loan to finance a home purchase — helping to push the closing rate on purchase loans to the highest level since at least 2011.

Out of all loans started in the previous 90-day cycle, 55.3 percent closed in February — the highest closing rate since July of last year’s 55.4 percent.

The residential closing rate was 54.9 percent a month earlier, while it came in at 56.8 percent a year earlier.

Ellie Mae reported the statistics in its Origination Insight Report based on a 57 percent sampling of applications run through its Encompass origination platform.

On purchase financing, the closing rate rose to 62.0 percent — the highest level ever recorded by Ellie based on the oldest available data back to November 2011.

The average loan closed in 41 days last month, four days faster than in January and the shortest turnaround since August 2013. Time to close was nine days less than in the same month last year.

Originators cut four days of the refinance process, which took an average of 40 days last month. The improvement was even more impressive on purchase financing, with turnaround falling five days to 42 days.

The average FICO score on last month’s closings was 724, unchanged from January. But lenders lowered their standards from February 2013, when credit scores averaged 743.

On denied loans, average FICO scores fell to 689 in February from the prior month’s 692.

Credit scores on refinances insured by the Federal Housing Administration declined to 669 — the lowest score ever reported by Ellie based on data back to August 2011. FICO scores fell from 688 in January to 686 on FHA purchase transactions — also a record low.

But just the opposite happened on conventional refinances, with average credit scores increasing to 730 from 727.

The average loan-to-value ratio on all loans was 82 percent, unchanged from the previous month. A year earlier, LTVs averaged 80 percent.

But lenders were more restrictive on denied loans, with average LTV ratios slipping to 82 percent from 83 percent in January.

Ellie reported that debt-to-income ratios averaged 25/38 percent, slightly tighter than 25/39 percent in January but looser than 23/35 percent in the same month last year.

DTI ratios on denied loans rose to 28/45 percent from 28/44 percent in January.

FHA-insured business is becoming a bigger factor in monthly activity; February’s FHA share of 22 percent was more than any month since April 2013. FHA share was 20 percent in the year-earlier report.

Last month’s refinance share dropped to 43 percent from 47 percent in January. During the same month in 2013, refinance share exceeded two-thirds.

“The share of purchase loans jumped four percentage points, representing 57 percent of all closed loans in February 2014,” Ellie Mae President and Chief Operating Officer Jonathan Corr said in a written statement. “This is the first time in four months that the share of purchase loans increased month over month and the largest one-month increase since August 2013, when the share of purchase loans also jumped four percentage points.”

The share of borrowers who opted for an adjustable-rate mortgage slipped to 6.9 percent from 7.2 percent in January. Still, ARM share has widened considerably from 2.3 percent in February 2013.

Popular posts

How Long Does It Take to Refinance a Mortgage
How Long Does It Take to Refinance a Mortgage

So, you’re interested in refinancing your mortgage. Maybe you want some extra capital to do that home project you’ve always dreamed of, interest rates are nearing record lows, or you want to start consolidating debt. Regardless of the motivation behind the refinance,...

How Does Refinancing a Mortgage Work
How Does Refinancing a Mortgage Work

A home purchase is considered an investment, and a robust one at that. Savvy owners are constantly looking for new ways to reduce debt, save money, pay less in interest, and ultimately build equity. Refinancing is one way to leverage your investment and do just that....

What Does It Mean to Refinance Your Home
What Does It Mean to Refinance Your Home

You can think of refinancing your mortgage as a debt redo. Essentially, you’ll swap out the existing loan for a new one - ideally with better terms and conditions. Only this time it could help you save money on high mortgage payments, rather than just borrow it....

Setting up the Utilities in My New House
Setting up the Utilities in My New House

All the tedious, time-consuming home closing documents have been signed, sealed, and delivered. Your belongings are packed into what seems like a million boxes and you have a solid plan to haul all your existing furniture to the new place. Just as your boxes and...

When Is My First Mortgage Payment Due?
When Is My First Mortgage Payment Due?

Navigating your way through a brand new mortgage loan can be a difficult task, especially for first time homeowners. After handing over a large sum of money for the down payment and closing costs, it’s important to pay attention to the timing of your first mortgage...

Newsletter

Don’t worry, we don’t spam

calculate your monthly mortgage payment

Related Topics

Helpful Links

Daily mortgage rate trends

Best mortgage lenders

First-time homebuyers programs by state

Loan limits by state

Types of mortgages

APR vs interest rate

Understanding PMI

Related Posts

THE TRUSTED PROVIDER OF ACCURATE RATES AND FINANCIAL INFORMATION