Share of Purchase Loans now Catching up With Refis

Refinance loans continued to dominate mortgage originations in July, but the gap with purchase loans is closing. Ellie Mae's Origination Insight Report for the month showed refinances with a 54 percent share, down from 58 percent in June. Purchasing increased to 46 percent from 42 percent.

The rate on closed 30-year fixed rate mortgages declined from an average of 3.40 percent the previous month to 3.24 percent. Those originated as conventional loans had a rate of 3.26 percent, down from 3.42 percent. The FHA rate averaged 3.26 percent and the VA rate 3.02 percent, down 15 and 18 basis points, respectively.

The distribution of loan types shifted slightly. The FHA share picked up 1 percentage point to 11 percent and conventional and VA loans each lost a point, dipping to 79 percent and 6 percent.

The time to close all loans held at 47 days for the second month but the time to close refinances increased by two days to 50 and purchase loans closed in 44 days rather than 46 the prior month.  

The average FICO score for all loans ticked down 1 point in July but that score is 12 points higher than in January. That magnitude increase is generally reflected across all refinances and VA purchase loans but scores for conventional and FHA purchase loans have increased by only about half that amount.

Closing rates increased to 77.1 percent in July, up from 73.4 percent in June. Ellie Mae determines the closing rate by reviewing a sample of loan applications initiated 90 days earlier, in this case April 2020 applications.

"Interest rates have continued to decrease, down to 3.24 percent in July. If we look at this month versus the same time in 2019, interest rates are down close to a full percentage point, giving new homebuyers the opportunity to stretch their dollar as they purchase and existing homebuyers the ability to reduce monthly costs," said Jonathan Corr, President and CEO of Ellie Mae. "We're also seeing an increase in closing rates for Ellie Mae lenders highlighting the value of mortgage technology as they contend with significant volume, remote workforces and homebuyers looking to complete the process completely online."  

The Ellie Mae's Origination Insight Report mines data from a sample of approximately 80 percent of all mortgage applications initiated through its mortgage management system. The company says its report is a strong proxy of the underwriting standards employed by lenders across the country.