Mortgage loan originations for the purpose of purchasing topped 60 percent in October Ellie Mae said on Wednesday, for the first time since the company began publishing its Origination Insight Report. Quite naturally the refinancing share was below 40 percent for the first time as well.
Purchase mortgages represented 61 percent of all mortgages originated during the month compared to 58 percent in September and 31 percent in October 2012. Refinancing dropped to 39 percent from 41 percent the previous month and 68 percent a year earlier. Ellie Mae first began tracking this data in August 2011.
Sixty-eight percent of originations were conventional mortgages, down from 70 percent in September and 74 percent in October 2011 while FHA-backed mortgages remained at the 19 percent level where it has been for five of the last six months and where is stood in October 2012 as well.
The time to close a loan rose slightly for all mortgages, from 42 days in September to 45 days in October. The time to close was up 3 percentage points for both purchase and refinance mortgages which increased to 46 and 43 days respectively.
The pull-through rate, that is the percentage of applications which close as loans, fell slightly from 52.3 percent in September to 51.4 percent in October. The closing rate for purchase loans was 56.9 percent, down from 59.6 percent and for refis it was 44.6 percent compared to 45.2 percent.
Underwriting standards seem to be easing. Ellie Mae said that 28 percent of closed loans had an average FICO score of less than 700 compared to 16 percent one year earlier. The average loan-to-value ratio (LTV) has increased to 81 percent from 78 percent in October 2012 while the average FICO score is down to 732 from 750. The debt-to-income ratio is now at 25/38 instead of 23/34.
Ellie Mae draws its data from a sampling of loan applications that flow thought its proprietary software and loan network. That volume represents more than 20 percent of all U.S. loan originations.
Funds that can be verified as the borrower’s own, the source of which can be: (a) monies from borrower’s checking or savings account, or other similar time deposit account, which have been on deposit in the account for at least 2 months prior to loan application, (b) cash up to $1,000, (c) cash deposit towards property purchase, and (d) the market value of the lot owned by borrower, exclusive of any liens, on which the SONYMA financed home was or will be constructed, or the purchase price of the lot if it was purchased in the past 2 years, whichever is less. Other sources may be considered on a case-by-case basis.
Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include, but are not limited to, fees charged by lenders, attorney fees, taxes, insurance premiums (e.g. flood insurance, hazard insurance, PMI), escrow charges, title insurance costs and survey costs. Lenders or realtors can often provide estimates of closing costs to prospective home buyers.
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.
A property that has been previously occupied as a residence.
First-Time Home Buyer
A person who (i) has not had any ownership interest in his/her primary residence at any time during the three years prior to the date of making an application for a SONYMA mortgage loan; and, (ii) at the time of making the loan application to SONYMA, does not own a vacation or investment home. This definition includes residences owned in the United States and abroad.
Home Buyer Education
A course given by a SONYMA approved organization (usually a PMI company) in which participants learn budgeting techniques relevant to home owners. This is required for all loans with LTVs over 95% or down payments less than 5%. It is also required for all applicants applying for the Achieving The Dream and Remodel New York Programs.
The total combined income of all persons who are age 18 or older and who are expected to live in the SONYMA financed property regardless of whether they have signed or will sign the mortgage application.
The monthly costs associated with a mortgage loan, specifically: Principal, Interest, Taxes, and Insurance (PITI). Monthly costs also include maintenance fees, where applicable (e.g. condominiums, cooperatives, Planned Unit Developments, or Homeowners Associations).
SONYMA finances mortgage loans for persons with low or moderate incomes. The maximum incomes of persons eligible to receive SONYMA financed mortgage loans are subject to the requirements of federal and state law. The maximum income allowable may vary by SONYMA program, region of the state, and household size. Click here for current income limits.
Loan to Value
The relationship between the requested mortgage amount and the appraised value, or, sales price (whichever is lower) of the property. For example, a home valued and priced at $100,000 on which there is an $80,000 mortgage has an LTV of 80 percent.
A fee equal to 1% of the requested loan amount, which is paid to the lender by the borrower within 14 days of loan reservation to hold (“lock”) a specific interest rate for a specific period of time. In SONYMA programs the fee is non-refundable unless the mortgage application is denied by the Participating Lender or SONYMA.
Type of interest rate lock that may only be used for properties under construction or rehabilitation as of the SONYMA loan application date. The lock-in period is 240 days from the application date.
The mortgage company that services your SONYMA loan after closing. All mortgage payments and inquiries should be made directly to the mortgage servicer.
Newly Constructed Housing
A property that has not been previously used for residential purposes.
A building designed for occupancy by one family, which includes a condominium unit, cooperative unit, town home, planned unit development (PUD) unit, or factory-made housing permanently attached to real property.
A fee that is paid by the borrower to compensate the Participating Lender for assisting the borrower to obtain a SONYMA mortgage loan.
A lending institution that has been approved by SONYMA to originate, close and sell mortgage loans to SONYMA. Participating Lenders are familiar with SONYMA loan programs and requirements. Click here for a list of participating lenders.
Funds required by some lenders to be retained in a borrower’s bank account after loan closing in an amount equal to a specific number of monthly mortgage payments.
One point equals 1% of the mortgage loan amount. Fees associated with mortgage loans are often calculated in points.
Mortgage insurance paid for by SONYMA that is required for all loans which provides protection in the event of a loss resulting from a borrower default.
Private Mortgage Insurance (PMI)
Mortgage insurance paid for by the borrower that SONYMA requires for all loans where the Loan to Value exceeds 80%. PMI protects the Participating Lender and SONYMA in the event of a loss resulting from borrower default.
Purchase Price Limits
SONYMA provides mortgage loans for moderately priced homes. The maximum sale price of homes eligible for SONYMA financed mortgage loans is subject to the requirements of federal and state law. The maximum sale price allowable may vary by SONYMA program, region of the state, and size of the home. Click here for current purchase price limits.
An agreement specifically stated in the sales contract between the seller of the property and the buyer of the property in which the seller commits to pay a specific portion of the buyer’s closing costs. SONYMA limits the amount of Seller Concessions allowed.
Type of interest rate lock that must be used for all Existing Housing and completed new construction or rehabilitation properties. The SONYMA rate lock-in period is 100 days from the application date.
An entire census tract or portion thereof which has been designated by the federal government as economically distressed. For borrowers who purchase in these areas, in accordance with federal law, SONYMA waives the First-Time Home Buyer requirement, applies higher income and purchase price limits, and will finance two-family homes that are less than 5 years old.
Total Monthly Expense
Expected monthly expenses of the borrower including, but not limited to, the Housing Expense, car lease payments, credit card payments, and, any installment debt with more than 10 monthly payments remaining (i.e., personal loans, car loans, student loans, 401K or pension loans, etc.).
The maximum debt burdens allowable to applicants for mortgage loans expressed as two separate ratios – Housing Expense to gross monthly income and Total Monthly Expense to gross monthly income. SONYMA requires that the Housing Expense not exceed 33% of the borrower’s gross monthly income, and that the Total Monthly Expense not exceed 38% of the borrower’s gross monthly income. These percentages are increased to 40% and 45%, respectively, for applicants having a down payment of 3% or more.
Value of the Property
The lower of the purchase price being paid for the property or the property’s market value as established by a qualified property appraiser.
What is Risk-Based Pricing?
Risk-based pricing is a system that evaluates the risk factors of lenders mortgage application and credit profile and adjusts the interest rate and discount points up or down based on this risk evaluation.
What Factors Can Affect My Loan Pricing?
Various factors interact to adjust lenders loan pricing. The major factors include:
Credit Profile: They will obtain a credit report that shows the amount of debt you have outstanding and how you have historically paid your debt and obligations. The credit report will also contain a “credit score” that ranks lenders credit history. Credit scores look at five main kinds of credit information, namely: payment history; amount; length of credit history; new credit; and types of credit in use. Generally, if you have had any history of nonpayment or late payments on any loans or debt, this may lower your credit score and increase lenders interest rate and costs. People with high credit scores consistently: pay their debts on time, keep balances low on credit cards and other revolving loans; and apply for and open new credit accounts only as needed.
Property: The type of property you are mortgaging also impacts lenders loan pricing. For example, investment property, condominiums or multifamily housing are usually considered to have a higher risk to lenders than single-family detached homes. The value of the property (usually determined by an appraisal) as compared to the amount you wish to borrow (the “loan-to-value ratio” or “LTV”) also impacts lenders loan price. The higher the LTV, the higher the interest rate and costs. LTV’s over 80% also usually require mortgage insurance. The price of mortgage insurance may vary based on lenders credit profile.
Income/Debt: The amount of lenders mortgage payments and total debt payments as compared to lenders income, (“debt-to-income ratios”) may also impact lenders loan cost. The higher lenders debt-to-income ratio, the higher lenders risk, and so the higher the interest rate and fees.
Other Factors: Other factors may also affect lenders risk, and lenders interest rate and origination charge. These factors include, but are not limited to: previous bankruptcies, foreclosures or unpaid judgments; and the type of loan product applied for, such as adjustable rate versus fixed rate, or cash out refinance versus rate and term refinance.
Lenders price is determined by evaluating all the risk factors that are involved in lenders loan, and determining where you fit into lenders risk/price range.
REMEMBER, that lenders risk-based pricing may change from this initial estimate if any of the risk factors discussed above change – for example, if the appraised value of the property is determined to be different than the value used for lenders initial estimate or if your credit profile changes from the time of the initial estimate and closing.
If you choose to “lock” a rate range prior to the final risk assessment, you will be locked for the interest rate range available at that time. Lenders actual price will be established based on where lenders final risk level fits into that particular interest rate range. Lenders final risk level is determined at time of closing, when there are no further changes to lenders credit profile or loan factors.
If you are not in the lowest price bracket available, you may be able to obtain a lower price if you are able to lower lenders risk. You may accomplish this in various ways, such as: by putting more money down and lowering the LTV; finding a co-signer with additional income to support the loan; clearing inaccurate items on lenders credit report; paying off other debt to lower your debt-to-income ratio; changing from a cash-out refinance to rate and term refinance; or changing the term on the loan.