Home purchase market rebounds despite lenders tightening reins

Homeowners continued to grab the chance to purchase or refinance in June despite lenders shaking some off as they looked for borrowers with better credit scores.

With interest rates falling for the sixth straight month, the purchase market started to bounce back last month, according to the latest Origination Insight Report from Ellie Mae.

“Interest rates decreased for the sixth consecutive month, and we’re seeing a rebound in the purchase market, which now represents 42% of all closed loans, a 7% increase from May,” said Jonathan Corr, president and CEO of Ellie Mae.

Refinances accounted for the remaining 58% of closed loans, falling from 65% in May.

Interest rates on all closed loans were on a downturn, down slightly from 3.43% to 3.4% month over month. The report showed a two-basis-point drop for the 30-year rate on conventional loans, down to 3.42% in June. Similarly, the 30-year rates on FHA loans and VA loans edged down four basis points to 3.41% and 3.24%, respectively.

Other highlights of the June report included:

• The time to close all loans increased to 47 days, up from 45 the month prior. Time to close for purchase loans decreased to 46 days, down from 47 the month prior, while time to close refinances increased to 48 days, up from 44 days the month prior.
• FICO scores on all loans increased to 751 in June, up from 750 in May. FICO scores also increased month-over-month for both purchases and refinances across Conventional, FHA and VA loans.
• Closing rates dropped to 73.4% in June, down from 76.0% in May.

“Home buyers 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,” Corr said.