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Mortgage Closings Speed Up as FHA Share Falls

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As government-insured mortgage share has diminished over the past year, the time to close has shortened. But it has become slightly more difficult to qualify for a home loan.

Conventional mortgages accounted for more than two thirds of all loans closed during February, widening from a 63 percent share in the same month last year.

At the same time, the share of loans that were insured by the Federal Housing Administration thinned to 19 percent from 23 percent in February 2017.

No change from a year previous left the share of mortgages guaranteed by the Department of Veterans Affairs
at exactly a 10th.

Ellie Mae Inc. reported those details and far more in its February 2018 Origination Insight Report.

Of all loan applications started in the previous 90-day cycle, 70.6 percent were converted to closed loans in February. The closing rate slipped from 70.9 percent the prior month and was the same as a year prior.

Refinances had a closing rate of 65.0 percent, and it was 75.7 percent on purchase financing. Closing rates were 70.8 percent on conventional transactions, 68.6 percent on FHA closings and 66.5 percent on VA loans.

Home lenders took 42 days to close a loan last month, two days less than in January and four days faster than in February 2017. Refinances took 37 days, and purchases took 45 days.

Turnaround was 41 days
on conventional loans, 43 days of FHA mortgages and 47 days for VA transactions.

The report indicated that FICO scores averaged 721 on February’s production, no different than in the previous month but a point higher than in the same month during 2017.

Conventional transactions had average credit scores of 729 on refinances and 751 on purchases, while FHA scores averaged 643 on refinances and 679 on purchases. On VA originations, scores averaged 697 on refinances and 707 on purchases.

While there was tightening on credit scores, loan-to-value ratios relaxed to 78 percent from 77 percent but were tighter than 79 percent in February 2017.

Conventional refinances had average LTV ratios of 64 percent, while they averaged 80 percent on conventional purchases. On FHA transactions, ratios averaged 77 percent on refinances and 96 percent on purchases,
and VA loans had LTV ratios of 89 percent on refinances and 98 percent on purchases.

No change in debt-to-income ratios left the average at 26/40 percent. But average DTI ratios were less restrictive than 25/40 percent one year prior.

Conventional closings had average DTI ratios of 26/39 percent on refinances and 24/37 percent on purchases. Ratios were 30/49 percent on FHA refinances and 29/44 percent on FHA purchases. The average was 26/42 percent on both types of VA transactions.

Ellie said refinance share thinned to 43 percent from 45 percent the preceding month but was no different than in the same month last year. The share was 48 percent on conventional closings, 28 percent on FHA transactions and a third on VA loans.

“With interest rates on the rise, we’re seeing the purchase market begin to gain some momentum,” Ellie Mae President and Chief Executive Officer Jonathan Corr said in an accompanying statement. “We know that the shift to a purchase market will drive the shortened time to close and we will watch to see if the trend continues into the spring and summer months.”

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