Home loans closed last month had lower credit scores, higher loan-to-value ratios and higher debt-to-income ratios than a year earlier. While turn times have improved over that same period, closing rates have not.
Two-thirds of all single-family loans that were originated during October were conventional loans. The share thinned from a 68 percent share one year prior.
At one-fifth, here was no change from a year earlier in the share of U.S. mortgage production that was insured by the Federal Housing Administration.
Another tenth of last month’s closings were loans guaranteed by the Department of Veterans Affairs, more than the 9 percent share in the same 31-day period last year.
Ellie Mae Inc. reported the metrics in its October 2017 Origination Insight Report. The findings are reportedly based on an 80 percent sampling of applications initiated on Encompass.
Out of all loan applications started in the preceding 90-day period, 70.4 percent had closed as of October 2017. The closing rate deteriorated from 71.6 percent in the previous month and 73.0 percent the same month in 2016.
Refinance closing rates were 63.6 percent, and purchases were 75.2 percent. The closing rate was 70.9 percent on conventional mortgages, 68.8 percent on FHA activity and 66.7 percent on VA closings.
At 43 days, there was no change from September in time to close a loan, though that was five days faster than a year prior. Refinances took 40 days, and purchases took 44 days. Conventional turn times were 42 days, FHA transactions took 45 days and VA timetables were 47 days.
Ellie reported that FICO scores averaged 724 in October 2017, unchanged for four consecutive months. Credit scores averaged 730 in the same month last year. Conventional scores were 732 on refinances and 752 on purchases. FICOs averaged 650 on FHA refinances and 681 on FHA purchases, while they were 702 on VA refinances and 708 on VA purchases.
Loan-to-value ratios averaged 79 percent, the same as the prior month and up from 78 percent a year prior. Ratios averaged 65 percent on conventional refinances and 80 percent on conventional purchases. FHA LTVs were 79 percent on refinances and 96 percent on purchase financing. The ratio on VA loans was 88 percent on refinances and 98 percent on purchases.
Over the past three months, debt-to-income ratios have averaged 25/39 percent. DTIs have loosened from 24/37 percent in October 2016. Conventional transactions had a 25/39 percent ratio on refinances and a 24/36 percent ratio on purchases, while FHA refinances averaged 29/47 percent, and FHA purchases averaged 28/43 percent. VA DTI ratios averaged 25/41 percent for both transaction types.
Last month’s refinance share was 39 percent, widening from 38 percent but much more narrow than 45 percent in September 2016. Refinance share was 46 percent on conventional loans, 39 percent on FHA business and 32 percent on VA originations.
The report indicated that 30-year note rates retreated for the sixth consecutive month to 4.20 percent — a new 2017 low.
“We are continuing to see borrowers take advantage of the lower interest rates as the refinance percentage increased to 39 percent of total loans in the month,” Ellie Mae President and Chief Executive Officer Jonathan Corr said in the report.