Falling mortgage rates last week brought increased demand.
Total home loan applications increased 2.8% for the week ending Dec. 1 compared to the previous week, according to data from the Mortgage Bankers Association (MBA). The 30-year fixed-rate mortgage averaged 7.17% last week.
Slower inflation and the confidence financial markets have that we are nearing the end of the Fed’s hiking cycle has brought mortgage rates to the lowest level since August.
Purchase applications rose by 35% week-over-week on an unadjusted basis, though they were 17% lower than a year ago. According to Joel Kan, MBA’s vice president and deputy chief economist, they were mostly held back by “low inventory and still-challenging affordability conditions.”
Meanwhile, refinance applications posted their strongest week in two months. The refinance index rose by 14% on a weekly basis and was 10% higher than a year ago. Refinance applications exceeded their 2022 levels for the second week in a row, a first since late 2021.
“The overall level of refinance applications is still very low, but recent increases could signal that 2023 was the low point in this cycle for refinance activity, consistent with our originations forecast,” Kan said in a statement.
The adjustable-rate mortgage (ARM) share of activity decreased to 7.4% of total applications, down from 8.1% last week.
The share of Federal Housing Administration (FHA) loan activity increased to 15%, down from 13.5% the week prior. The share of Department of Veterans Affairs (VA) loan activity was 12.8%, up from 12.6% over the previous week, while the share of U.S. Department of Agriculture (USDA) loan activity remained unchanged at 0.5%.
Veterans who are unable to work because of a service-related disability may qualify for Total Disability Based on Individual Unemployability (TDIU) benefits from the Department of Veterans Affairs. They receive the same benefits as veterans with a 100% disability rating (even if they don’t have that rating)
.
To qualify for TDIU, you must be unable to work and have a minimum level of service-related disability rating.
The Department of Veterans Affairs (VA) reviews claims and provides benefits for TDIU.
How much is TDIU?
In 2024, TDIU benefits range from $3,737.85 to $4,433.39
. Monthly compensation might be higher for eligible veterans with multiple children.
Veterans who qualify for TDIU are eligible for the same benefits as someone who has a 100% disability rating with VA disability benefits. The VA adjusts the rates based on the SSA’s annual cost-of-living adjustment
.
Receiving TDIU comes with enhanced eligibility status for VA health care benefits. That isn’t a guarantee that you’ll receive them, but the VA says you are more likely to be approved for them if you receive TDIU.
.
How to qualify for TDIU
To qualify for TDIU, a veteran must:
Have a service-related disability rating of 60% or higher, or two service-related disabilities: one with a rating off 40% or higher, and a combined disability rating of at least 70%
.
Be unable to work in a job that supports them consistently because of the service-related disability.
🤓Nerdy Tip
If you have one service-related disability, it must have a rating of at least 60%.
If you have two service-related disabilities, at least one must be rated 40% or higher — but together, they must have a combined rating of at least 70%.
The VA assigns the percentage ratings for disabilities.
You meet the unemployed requirement if you are unable to earn enough to support yourself, also known as substantial gainful activity (SGA). Generally, this means you are unable to work consistently and pay for necessities such as food and shelter.
The Social Security Administration (SSA) determines the monthly income limit to qualify for TDIU. The substantial gainful activity limit for 2023 is $1,470 per month ($2,460 if you’re blind). In 2024, the limit is $1,550 per month ($2,590 if blind).If you earn more than the monthly income limit, you are unlikely to qualify for TDIU.
You don’t have to be unemployable in every field to qualify for TDIU
. You can still qualify for TDIU if you have marginal employment, which is a job that provides earnings below the current poverty threshold for an individual. Marginal employment can also include work in a “protected environment,” such as family business where you receive accommodations that other jobs cannot provide. In that case, you might still qualify for TDIU even if you earn more than the annual poverty threshold.
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TDIU qualification examples
Here are several examples of how people might qualify or not qualify for TDIU.
Single disability approved for TDIU
Haley has a service-related disability that affects her shoulder and is rated at 70%. She is a truck driver and struggles to drive for long periods of time. She has had to take more time off recently because of her disability, and it has dropped her income to $1,245 a month.
Haley is approved for TDIU because:
Her single disability is rated above 60%.
Her disability keeps her from earning more than the SGA limit.
Single disability not approved for TDIU
Manuel has a service-related disability that is rated 90% and affects his digestive system. He is a teacher. His disability requires him to use the restroom every hour or so and keeps him from sitting through long meetings or participating in outdoor activities where a restroom isn’t nearby. He currently earns $3,400 a month.
Even though Manuel’s single disability is higher than 60%, the VA doesn’t approve him for TDIU because he is still able to earn more than the monthly income limit. An alternative is for him to speak with his employer about accommodations for certain situations.
Two disabilities approved for TDIU
Aisha has two service-related disabilities. One affects her neck and is rated 60%, and the other affects her grip strength and is rated 90%. Together they have a disability rating of 70%. She works as a contract architect for a construction company and is only paid for the projects she completes. Because she can only sit for so long and must take frequent breaks to rest her neck and hands, her income has dropped to $1,360 a month.
Aisha is approved for TDIU because:
Of her two service-related disabilities, one is rated at least 40%.
Her combined rating for her disabilities is at least 70%.
Her disabilities are affecting her ability to earn more than the monthly income limit.
Two disabilities not approved for TDIU
Deidra has two service-related disabilities. One affects their lung capacity and is rated at 70%, and the other affects their sinus cavity and is rated 30%. Together they have a disability rating of 50%. They work as wait staff at a cafe and depend on hourly wages plus tips to earn a living. Because they have limited lung capacity, they must go a little slower at work than their colleagues and take breaks if they get out of breath. They also have to limit how long they are in the kitchen because any smoke can bother their lungs and sinuses. Despite not cutting their hours, they are serving fewer tables and working more slowly than other wait staff because of their disabilities. This has affected their tips and dropped their income to $1,480 a month.
Even though Deidra’s income is below the monthly income limit, the VA doesn’t approve them for TDIU because their combined disability rating is below 70%. An alternative is for them to speak with their employer about accommodations for certain situations and apply for Social Security disability insurance (SSDI).
When determining TDIU benefits, the VA doesn’t consider the following information:
The applicant’s age
.
How non-service-related disabilities affect the applicant’s ability to keep substantial gainful employment.
Reasons (other than the applicant’s service-related disability) the applicant left a job.
TDIU vs. Social Security Disability Insurance (SSDI)
The main difference between TDIU and Social Security Disability Insurance (SSDI) is that TDIU is for disabled veterans who are unable to work in a job that supports them consistently, and SSDI is for disabled people who are not able to work at all. Although the two programs have the same goal, they have several differences.
Veterans Affairs
Social Security Administration
Program contribution
Doesn’t require the beneficiary to contribute financially to the program.
Requires beneficiaries to have contributed financially to the program.
Disability type
Considers only service-related disabilities that prevent someone from working.
Doesn’t restrict disabilities to those related to military service.
Disability rating
Doesn’t require someone to have a VA rating of 100%.
Requires someone to be completely disabled (the equivalent of a VA rating of 100%).
Work ability
Only requires that an applicant be unable to work a job that meets the definition of substantial gainful employment.
Requires that an applicant be unable to work any type of job.
Veterans may qualify for both TDIU and SSDI, but the programs are from different federal agencies, which means you’ll have to apply to each program separately if you want to receive benefits for both
.
🤓Nerdy Tip
The SSA expedites veterans’ claims for SSDI benefits. You might need to self-identify as a veteran when you apply for SSDI and provide proof of VA-rated disability.
How to apply for TDIU
To receive TDIU benefits, you’ll apply for VA disability benefits and provide documentation such as medical records to show that you are unable to keep steady employment. You’ll also submit records of your work history and education so the VA understands what work you’ve done in the past and what you’re trained to do.
When filing a disability claim for TDIU, you’ll submit two forms that are unique to these types of benefits:
A Veteran’s Application for Increased Compensation Based on Unemployability (VA Form 21-8940).
A Request for Employment Information in Connection with Claim for Disability Benefits (VA Form 21-4192).
The first form requires information about your disability and medical treatment, employment history and education
. You’ll need to provide dates that you were in the hospital within the last 12 months, the dates you last worked full-time and became unable to work because of your disability, the highest annual income you earned during your career and the time lost at each job you’ve held during the past five years due to your service-related disability.
Your most recent employer will fill out and submit the second form
. They will send it directly to the VA after they’ve filled it out, so you only need to provide them with the form.
3 things to know about TDIU
The forms require a lot of information. Because TDIU requires two additional forms, you’ll have to provide a lot of information about your disability and work history. It might take you a while to collect all of this information, so be prepared to gather everything in advance.
Your most recent employer needs to submit a form. Your employer must fill out the Request for Employment Information in Connection with Claim for Disability Benefits — you can’t do it. The employer’s HR department should know how to handle the form. Once you’ve provided the form, ask for an estimate of when they’ll submit the form to the VA, and ask for an email confirming that they’ve submitted it.
You can also receive additional government assistance. Because VA benefits are separate from SSA benefits and those offered through individual states, such as Medicaid, you can also apply for other assistance programs. However, qualifying for TDIU does not guarantee that you are eligible for other benefit programs.
When you’re shopping for a mortgage, you’ll likely see two of the most common repayment terms — 30 years and 15 years — no matter which lender you shop with. Each term has its benefits and drawbacks, and the better option depends on your unique situation. Here’s a look at the pros and cons of 15-year mortgages, how to qualify for one and what mortgage rates you might expect.
Pros and cons of a 15-year mortgage
A 15-year mortgage can be a great option if you want to save money on interest and can afford higher monthly payments. But before taking out a 15-year home loan, consider the pros and cons of choosing this term.
15-year fixed-rate mortgage vs. ARM
Home loans may come with a fixed rate or an adjustable rate. A fixed rate won’t change throughout the life of the loan, even if market rates rise or fall. That means your monthly principal-and-interest payments won’t change either, which can be helpful for budgeting purposes.
With an adjustable-rate mortgage (ARM), your interest rate is fixed rate for a certain number of years and then fluctuates at regular intervals. A 15-year ARM is less common, so you’ll likely see the adjustable-rate option when taking out a 30-year mortgage. The frequency at which your rate changes depends on the loan you choose, but it’s common to see 5/1, 7/1, 10/1, 5/6, 7/6 and 10/6 ARMs.
The top number indicates the fixed period, while the bottom number shows how often the rate can change. With a 5/1 ARM, for instance, your rate remains fixed for five years, then fluctuates once a year through the rest of the loan term. And with a 5/6 ARM, your rate will be fixed for five years and then will change every six months.
ARMs typically come with rate caps, so your rate can only increase by so many percentage points even if market rates skyrocket. In general, an ARM can make sense if you plan to stay in your home for a short time, or you’re willing to risk potentially higher rates for possible rate decreases in the future.
How to qualify for a 15-year mortgage
Lenders consider several factors when evaluating prospective borrowers. In general, you’ll need to meet the following criteria to qualify for a conventional mortgage loan.
Credit score: You’ll typically need a credit score of at least 620 when you apply for a conventional home loan, though a higher credit score might be necessary in some cases. Loans backed by the Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA) and Department of Veterans Affairs (VA) often have looser qualifying criteria because they pose less risk for lenders.
DTI ratio: Your debt-to-income (DTI) ratio shows the amount of debt you carry relative to your monthly income. Most lenders prefer a DTI below 36%, though some will accept a DTI of up to 50%.
Down payment: Some lenders may allow for a down payment as low as 3% of the loan amount, but you may need a down payment as high as 20% in some cases. Requirements vary by lender and loan type.
Employment: Lenders often check two years’ worth of employment history when you apply for a mortgage.
Qualification requirements can vary with each lender and the loan you want to take out. Before you apply for a mortgage, you can research lenders and ask about their requirements to determine your approval odds. Consider doing a preapproval, which can help you check how much you can borrow.
Comparing current 15-year mortgage rates
Your mortgage is likely the largest loan you’ll ever take out, so it’s wise to compare rates before applying. Even a slightly lower rate could help you pay much less in interest costs over the life of your 15-year term.
For instance, if you’re approved for a $350,000 home loan with a 15-year term, a 7% interest rate and a 3% down payment, you’d pay $209,845 in interest over your loan term. But the same loan with a 6.75% rate would cost just $201,303 in interest.
While your rate depends on many factors (including location), here’s a look at current 15-year mortgage rates from some well-known lenders, as of November 2023.
How to find the best rate and lender
Finding the best mortgage lender and the lowest interest rate comes down to doing some prep work. Take the following steps to find the best deal when you get a home loan:
Check your finances. Pull your credit reports and look for any reporting errors that are dragging your credit score down. Also check your credit score, which will directly impact the rate you receive. The best rates are usually reserved for borrowers with excellent credit.
Research several lenders. Create a list of prospective lenders you may want to borrow from. These could be traditional banks, credit unions or online lenders.
Compare rates and terms. Lenders often list available mortgage rates and terms on their websites. Using a mortgage calculator, you can estimate your monthly payment based on the potential loan size, down payment and interest rate.
Get pre-qualified. Once you’ve narrowed your list of lenders, check whether they offer a pre-qualification tool on their websites. Pre-qualifying involves providing some basic personal and financial information to get insight into potential rates and loan amounts.
Apply for the loan. After you’ve found a lender and a home loan that works for you, you’ll need to formally apply for the mortgage. Expect to provide in-depth personal and financial information as part of the application process.
Frequently asked questions (FAQs)
As of November 22, 2023, the average interest rate for a 15-year mortgage is 7.06%. But rates vary by lender, so it’s important to shop around and compare loans.
While 15-year mortgage rates are currently high, they will likely decrease at some point. The National Association of Realtors predicts rates may decline through fall and winter of 2023 if the federal funds rate stabilizes.
Your interest rate is the percentage your bank charges you to borrow money. Your APR includes both the interest rate and the fees you’ll pay for your mortgage loan, such as broker fees and points. Both rates are expressed as a percentage, so you can use them to compare multiple loan options.
Whether a 15-year is better than a 30-year mortgage depends on your situation. A longer term comes with a lower payment, but you’ll pay more in interest costs over time.
“So when it comes to a 15-year mortgage, the question that most people need to answer is: ‘Am I comfortable with this higher monthly payment?’ and ‘Is paying the home off more quickly a priority for me versus using that monthly cash for other purposes?’” says Jon Bodan, a strategic financing adviser at Real Estate Bees.
“There’s no right or wrong answer here,” Bodan adds. “But if you have other savings and are contributing to your retirement, then doing a shorter-term mortgage can be another good way to build net worth and wealth.”
Interest rates on 15-year mortgages are often slightly lower compared to 30-year home loans. Because repayment terms are shorter with 15-year mortgages, lenders take on less risk. Thus, the rates borrowers receive for shorter-term mortgages tend to be lower.
Renting a house or apartment comes with several perks, like minimal commitment to live in one place. After a certain point, however, most people want to put down roots and purchase their own home.
Owning your own home is the American Dream. Plus, you won’t have a landlord breathing down your neck about what you can and can’t do. But what kind of credit score is needed to buy a house?
We’ve got the answers, plus some extra tips on how to seal the deal, no matter what kind of credit score you have.
How does your credit score affect buying a home?
Your credit score influences your ability to buy a home as a major factor in whether you’re approved for a mortgage. That’s because your credit score is a reflection of how likely you may be to default on your loan.
Weighing all the items on your credit reports, such as payment history and amounts owed, a complex calculation then creates your FICO score. FICO scores are the credit scores that 90% of lenders use. They give mortgage lenders a better idea of how you handle your finances.
Even after you’re approved for a loan, your FICO score also affects the interest rate on your mortgage. Why is that a big deal? Well, depending on how expensive your loan is, you’ll likely end up paying tens of thousands of dollars (if not more) in interest. That’s on top of your principal loan amount.
An interest rate of even just ¼ percent less can save you a lot of money over the course of a 30-year loan. So, it’s clear that your credit history is an important factor not just for getting approved, but also for getting the best interest rates to lower your monthly payments.
Ready to Raise Your Credit Score?
Learn how credit repair professionals can assist you in disputing inaccuracies on your credit report.
What credit score do you need to buy a house?
The minimum credit score needed to buy a house can vary based on the economy and the housing market. However, there are some basic guidelines you can go by to determine how likely you are to be approved for a home loan. First, the minimum credit score depends on the type of mortgage you’re getting.
Conventional Loans
For conventional loans, which come with the strictest lending standards, the credit score needed to buy a house is 620. With a conventional loan, the minimum down payment is 5%, but could also increase based on your credit scores.
FHA Loans
FHA loans are insured by the Federal Housing Administration. For an FHA loan, the minimum credit score requirement is just 580 with a down payment of 3.5%. It’s possible to qualify for an FHA loan with a FICO score as low as 500, but you’ll need a 10% down payment.
Different mortgage lenders have different credit score requirements depending on how much risk they’re willing to take on a loan. Furthermore, you may be required to pay private mortgage insurance for the life of the loan, depending on the size of your down payment.
VA Loans
For VA loans, the U.S. Department of Veterans Affairs has no minimum credit score requirements. However, most VA loan lenders require a minimum credit score of 620. However, some will allow a credit score as low as 580.
USDA Loans
For qualified buyers purchasing a home in designated rural areas, there is no set minimum credit score from the USDA. However, a credit score of at least 640 is recommended.
What factors determine your credit score?
It’s crucial to know what factors affect credit scores so you can plan the most effective way to build or protect your credit.
Payment history: This is perhaps the most important factor, as it accounts for 35% of your overall credit score. Payment history includes whether you have paid your bills on time in the past and any negative marks, such as late payments, collections, or bankruptcies.
Credit utilization: This accounts for 30% of your credit score and refers to how much of your available credit you are using. A high credit utilization ratio could hurt your credit score, while a low one can help.
Length of credit history: This factor accounts for 15% of your credit score and is a measure of how long you have been using credit. Generally, the longer your credit history, the better your credit score will be.
Credit mix: This factor accounts for 10% of your credit score and refers to the types of credit you are using. A good credit mix includes a variety of different types of credit, such as credit cards, student loans, mortgages, etc.
New credit: This factor accounts for the remaining 10% of your credit score and refers to how often you are applying for new credit. Applying for too much new credit in a short period of time can hurt your credit score.
See also: Does Buying a House Hurt Your Credit?
Average Credit Score
The average credit score for buying a home is 680-739. However, those who have a “good” credit score of 740 and higher will be offered the best mortgage rates.
It’s important to check your credit score to know where you stand. However, your credit score alone doesn’t determine whether you’ll be approved. Mortgage lenders also look at your employment history, how much debt you have, and your down payment amount.
For example, buyers with higher credit scores could be eligible to put down as little as 3.5% of the mortgage loan amount with an FHA loan.
However, those with a lower credit score, may be required to pay as much as 10% since mortgage lenders consider them to be more at-risk for defaulting on the loan.
See also: Which Credit Scores Do Mortgage Lenders Use?
More Options for First-Time Homebuyers & Low-Income Borrowers
You can also explore newer mortgage programs available for homebuyers with low to moderate-income. The Freddie Mac Home Possible mortgage, for example, allows you to purchase a home with a down payment of just 3%. Fannie Mae also offers a 3% down payment option with the HomeReady loan, as long as you have a credit score of at least 620.
What else do you need to get approved?
In addition to your credit scores, your mortgage lender looks at a few other factors to approve your home loan. They’ll review your employment situation to make sure you have a steady income to make your monthly mortgage payments.
You’ll most likely need to submit pay stubs, bank statements, W-2s, and sometimes even a verification of employment form. If you’re serious about purchasing a home, start setting these documents aside in a safe place so you have them ready to give to your lender when the time comes.
Not only does the lender look at your debt-to-income ratio and other financials, but they’ll also check out the actual home you’re purchasing. Some types of home loans require the house to be in a certain condition, which can take rehabilitation projects off the table.
Before making an offer, check with your lender on what types of properties you can consider. That allows you to avoid making an offer you can’t follow through on. The property’s appraisal also needs to come in at or above the amount of the loan because a lender cannot loan more than the appraisal value.
Can you get a mortgage with bad credit?
You can still get a mortgage even if you have bad credit, although you’re likely to pay a much higher interest rate to compensate for the increased risk to the lender.
Government-backed loans, like FHA loans, specifically cater to borrowers with lower credit scores. But even if you’re not certain that you’ll qualify, it’s worth offering some extra security to your lender.
For example, you might give a larger down payment or set aside extra cash reserves to show the lender you have the money to repay the mortgage loan. Or you might give proof that you’ve consistently paid your rent on time for an extended period.
Check Out Our Top Picks for 2023:
Best Mortgage Loans for Bad Credit
You could also try writing a letter to explain your credit situation. This can be done, especially if it’s due to an extenuating circumstance like emergency medical bills. Be upfront in asking your lender what you can do to qualify for a loan, even if you might not meet the usual underwriting standards right away.
If you’ve had a bankruptcy or foreclosure in your past, there are a few rules that you simply can’t get around. The exact specifics depend on your loan type.
However, in general, you have to wait for a predetermined “seasoning period” after the bankruptcy or foreclosure has been discharged before you can get approved for a home loan.
For bankruptcies, the seasoning period is typically between two and four years. For foreclosures, you’ll need to wait between three and seven years.
Can a cosigner help you qualify for a mortgage?
Home buyers with a low credit score may want to consider getting a cosigner to help with their mortgage application.
If you can get someone who has a good credit score (such as a family member) to sign the loan with you, it will strengthen your loan application. Just remember that your cosigner is equally accountable as you are for repaying the loan.
If you fail to make loan payments and your account goes into delinquency or even foreclosure, it will affect the cosigner’s credit.
If you decide to take on a cosigner to get approved, make sure that person understands the responsibility and risk that goes into the decision. It obviously takes a close relationship for this kind of situation to work out, so make sure you choose your cosigner wisely.
What if you don’t have any credit at all?
Building credit from scratch is challenging, but it can be done. Adding a cosigner to the mortgage loan application works for people with no credit as well as for those with poor credit. Another option is to start using a credit card responsibly.
Start with a secured card and make your monthly payment in full each month to build credit. Or ask a close relative if you can be added as an authorized user on one of their credit cards.
You can agree not to spend anything (or make quick payments if you do). This simple step will add that credit card’s entire length of use to your credit report.
You can also show your lender that you’ve regularly paid other bills on time, like your cell phone, utilities, or rent. Another method is to make a bigger down payment to compensate for your lack of credit. Talk to your lender to see what else you can provide to make the loan work.
How can you improve your credit to qualify for a mortgage?
There are several ways you can improve your credit score; just realize that it won’t happen overnight.
Order Copies of Your Credit Report
Get started by ordering copies of your credit report. This way, you can get an idea of everything a lender would see when reviewing your loan application.
First, check to make sure that all the information is 100% accurate. From there, look at where there are weaknesses on your report. Is the amount of debt you owe really high?
Lower Your Credit Utilization
Attempt to re-work your budget to pay off your credit card balances and other debt. This will lower your credit utilization ratio and ultimately increase your credit score.
Is your available line of credit minimal? Ask an existing creditor to extend your maximum amount on one of your current credit cards. This will also lower your credit utilization.
Get Negative Items Removed From Your Credit Report
If you have numerous negative marks on your report and feel overwhelmed, you might consider hiring a credit repair company.
Take a look at our list of top ranked credit repair companies in your area to find a reputable one to work with. They’ll take the lead in disputing negative accounts with the credit bureaus and getting them removed from your credit history. Once that happens, you’ll automatically see your credit score increase.
Even if you don’t have the bare minimum credit score to qualify for a mortgage, there are many ways to buy a house. From getting the right loan to improving your credit score, you’ll be able to quickly put yourself on the path to homeownership.
Lower mortgage rates have brought increased mortgage demand. Total home loan applications increased 0.3% for the week ending Nov. 24 compared to the previous week, according to data from the Mortgage Bankers Association (MBA).
Mortgage rates for the 30-year fixed loan averaged 7.29% as of Nov. 22, falling 15 basis points in one week, according to Freddie Mac‘s Primary Mortgage Market Survey. Over the past six weeks, mortgage rates have fallen by more than 50 basis points.
“The purchase market remains depressed because of the ongoing, low supply of existing homes on the market,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. “Similarly, refinance activity will likely be muted for some time, even with the recent decline in rates, as many borrowers locked in much lower rates in 2020 and 2021.”
The decline in mortgage rates spurred a small increase in purchase applications last week; they ticked up 5% on a seasonally adjusted basis from the prior week. However, activity was 20% lower than a year ago on an unadjusted basis. Meanwhile, refinance activity slumped, decreasing 9% from the previous week. However, it was 1% higher than the same week a year ago. The refinance share of mortgage activity fell to 30.6% of total applications, down from 32.4% the previous week.
The adjustable-rate mortgage (ARM) share of activity decreased to 8.1% of total applications.
The share of Federal Housing Administration (FHA) loan activity decreased to 13.5%, down from 14.8% the week prior. The share of Department of Veterans Affairs (VA) loan activity was 12.6%, down from 11.3% over the previous week, while the share of U.S. Department of Agriculture (USDA) loan activity rose to 0.5%, up from 0.4% last week.
On Tuesday, the FHFA announced that its new baseline conforming loan limit for mortgages backed by Fannie Mae and Freddie Mac in 2024 will be $766,550, up 5.5% compared to the current limit of $726,200.
Mortgage borrowing ticked upward in the short Thanksgiving week, as subsiding rates helped bring home buyers to market, the Mortgage Bankers Association said.
The MBA’s Market Composite Index, which measures weekly application activity based on surveys of the trade group’s members, inched up a seasonally adjusted 0.3% for the period ending Nov. 24. Activity climbed upward for the fourth straight week but still finished 15.4% lower year over year. Data was adjusted to account for the Thanksgiving holiday.
The slight increase in applications was driven by greater purchase applications, but refinance applications fell over the week, according to Joel Kan, MBA vice president and deputy chief economist.
“Rates have declined more than 50 basis points over the past six weeks, which has helped to spur a small increase in purchase applications,” he said in a press release.
The contract 30-year fixed-mortgage rate average for loans with conforming balances slid down to 7.37% from 7.41% in the previous survey. Points used to help bring down the rate increased to 0.64 from 0.62 for 80% loan-to-value ratio mortgages. The conforming rate hit
But the 30-year jumbo average among MBA lenders increased 3 basis points to 7.54% compared to 7.51% a week earlier. Borrower points also rose to 0.81 from 0.79.
As most rates headed lower, the seasonally adjusted Purchase Index picked up for the fourth consecutive week, climbing up 4.7%, but volumes landed 21.6% below levels of a year ago. Still, the increase in purchase mortgage activity corresponds to trends real estate agents reported seeing this year, according to a recent survey from Assurance IQ. Low existing inventory, though, has served to cap the rate of growth.
Heading in the other direction, the Refinance Index declined for the first time in four weeks, dipping 8.9% from seven days earlier. Despite the drop, refinance volumes saw a slight annual increase, edging up by 0.7% from a year ago when they plummeted to their lowest mark since 2000.
The weekly pullback in refinance applications led their share relative to total activity to shrink to 30.6%, down from 32.4% seven days earlier.
Government-sponsored loan applications, meanwhile, fell by only a fraction, with purchases up, but refinances down. The share of federally-backed applications also came in mostly flat, but borrower interest across sponsors varied. Mortgages guaranteed by the Federal Housing Administration garnered 13.5% of activity, falling from 14.8% a week earlier. But countering the slowdown in FHA loans was growth in the portion of applications coming through the Department of Veterans Affairs, which represented 12.6% of volume, rising from 11.3%. The slice of applications backed by the U.S. Department of Agriculture remained at 0.4% week over week.
The contract interest rate for the 30-year FHA-backed home loan decreased by a single basis point compared to the prior survey, falling to 7.18% from 7.19%. Borrowers typically used 0.81 in points, climbing from 0.79 a week earlier.
The 15-year fixed rate average also saw a 1 basis point decline, falling to 6.88% from 6.89%. Points slid to 0.52 compared to 0.76 for 80% LTV loans.
The average of the 5/1 adjustable-rate mortgage, which starts fixed before becoming variable after 60 months, took a 17 basis point decline to 6.59% from 6.76%. Points used by borrowers retreated to 0.76 from 0.82 a week earlier. Following a surge in ARM interest earlier this fall, the share of adjustable-rate mortgages has tempered in November, accounting for 8.1% of applications last week versus 8.3% in the prior survey.
(U.S. Senate) —Following efforts from U.S. Senator Jon Tester demanding the Department of Veterans Affairs (VA) take immediate action to protect thousands of veterans and servicemembers using VA home loans facing foreclosure through no fault of their own, VA is stopping foreclosures for six months to ensure these veterans and servicemembers can stay in their homes.
“I’m encouraged to see VA answering my call to quickly address this crisis facing our men and women who risked their lives serving this country and were facing foreclosure through no fault of their own,” said Tester, Chairman of the Senate Veterans’ Affairs Committee. “This pause will help ensure our veterans, servicemembers, and their families can remain in their homes and get their payments back on track while VA works on a long-term solution. While this is a good start, the Department still has work to do and I’ll keep holding it accountable in delivering for our men and women using their earned VA home loan benefit.”
Veterans and servicemembers with VA home loans who faced financial difficulties during the COVID-19 pandemic used forbearance to pause their mortgage payments without penalty and remain in their homes. While VA previously offered solutions to help borrowers exit forbearance and get back on track with their payments, some of those authorities expired when the pandemic ended and left veterans with fewer options to bring their mortgages current. These limited options have left thousands of veterans and servicemembers who took forbearance vulnerable to losing their homes.
To ensure these veterans and servicemembers can stay in their homes, VA is pausing foreclosures of VA home loans through May 31, 2024. It is also extending the COVID-19 Refund Modification program through May 31, 2024 to allow veterans to access a zero-interest, deferred-payment loan from the Department to cover missed payments and modify their existing VA loan to achieve affordable monthly payments for the duration of this extension.
This move follows efforts from Tester last week pushing the Department to take immediate action to address this looming crisis facing thousands of veterans and servicemembers who used their VA home loan guarantee benefits and are now at-risk of losing their homes through no fault of their own. In a letter to VA Secretary McDonough, Tester urged VA to swiftly take action to ensure veterans and servicemembers don’t lose their homes and are afforded the same protections as those with other federally-backed loans.
In addition to pausing foreclosures and extending the COVID-19 Refund Modification program, VA is continuing its efforts to launch the Department’s newest home retention option, the VA Servicing Purchase Program. This new loss mitigation solution will help more veterans lower their payments and remain in their homes.
If you are a veteran who is struggling to make your VA home loan payment, visit www.va.gov/housing-assistance or call 877-827-3702 for assistance.
Mortgage activity picked up for a third straight week, with growth observed among first-time buyers, the Mortgage Bankers Association said
The MBA’s Market Composite Index, a measure of weekly application volumes based on surveys of trade groups members, climbed up a seasonally adjusted 3% for the seven-day period ending Nov. 17. The latest increase comes after similar rises of 2.8% and 2.5% earlier this month. Despite the recent upswing, applications still were 16.3% lower compared to the same week in 2022.
“Mortgage applications increased to their highest level in six weeks, but remain at very low levels,” said Joel Kan, MBA vice president and deputy chief economist, in a press release.
Applications have headed upward over the past few weeks as interest rates began easing. A better-than-expected October inflation report alleviated some economic angst, with data pointing to a softening economy, according to Kan.
Following the release of the inflation report, the 30-year fixed conforming average among MBA lenders finished last week at 7.41%, taking a 20 basis point dive compared to 7.61% in the previous survey. Points used by borrowers to pay down the interest rate dropped to 0.62 from 0.67 for 80% loan-to-value ratio applications.
The effect of lower rates contributed to a seasonally adjusted 3.9% jump in the Purchase Index week over week, with both conventional and government volumes increasing. But with limited inventory still suppressing demand, activity remained 20.6% below year-ago levels.
Still, recent trends show glimmers of potential momentum in the home buying market. Pending sales over the past month based off of Redfin’s analysis of listings rose to its highest point in almost a year. Existing-home sales also ticked up on a monthly basis in October, according to the National Association of Realtors, despite remaining at historical lows.
Much of the recent growth is driven by first-time buyers, according to the MBA. “The average loan size on a purchase application was $403,600, the lowest since January 2023. This is consistent with other sources of home sales data showing a gradually increasing first-time home buyer share,” Kan said.
Purchase loans guaranteed by the Federal Housing Administration, which are frequently used for starter homes, surged a seasonally adjusted 6.7%.
The MBA’s reported mean purchase amount declined 0.7% from the prior week’s $406,600, and with the exception of 2023’s first application survey, has remained above the $400,000 mark all year. The average refinance-application size also clocked in at its lowest this year, inching down 2.3% to $241,200 from $247,000 a week earlier. The overall average across all applications, likewise, fell to its lowest mark since January, finishing at $351,000, 1.3% lower from $355,700 seven days earlier.
Meanwhile, the MBA’s Refinance Index edged up 1.6% but sat 3.7% lower on an annual basis. The share of refinances relative to total activity grew to 32.4% from 31.9% the previous week.
Led by growth in FHA-backed purchases last week, the share of government-market lending grew correspondingly. Loans guaranteed by the FHA garnered 14.8% of all applications compared to 14.4% a week earlier. The volume of mortgages taken through the Department of Veterans Affairs saw a more muted increase, inching up to 11.3% of activity from 11.2%. Applications sponsored by the U.S. Department of Agriculture pulled back to a 0.4% share from 0.5% the week prior.
Similar to the conforming 30-year rate, all other fixed averages tracked by the MBA decreased last week. The contract rate of the 30-year jumbo loan dropped 14 basis points to 7.51% from 7.65% in the previous survey. Borrower points decreased to 0.62 from 0.67.
The contract average of the 30-year FHA-guaranteed mortgage saw a 17 basis point decline, descending to 7.19% from 7.36% week over week. Points also dropped down to 0.69 from 0.75 for 80% LTV-ratio loans.
The 15-year fixed-rate mortgage averaged 6.89% compared to 6.94% seven days earlier, while points used decreased to 0.76 from one in the prior survey period.
The 30-year fixed-contract 5/1 adjustable-rate mortgage recorded the only rise in the survey, jumping 11 basis points to an average of 6.76% from 6.65%. Points also increased to 0.82 from 0.72.
But as borrowers received some affordability relief thanks to the pullback in fixed rates over the past month, the share of ARMs shrank again to 8.3% of activity from 8.8%. Interest in ARMs typically rise and fall alongside fixed-rate movements. Four weeks ago, adjustable-rate mortgages approached 11% of volume.
The Department of Veterans Affairs announced that it is pausing foreclosures on VA-backed loans and extending pandemic protections for veterans facing difficulties paying their mortgages.
Officials said Friday that the department will contact mortgage services to pause VA foreclosures and extend the COVID-19 Refund Modification program through May 31, 2024, to ensure that veterans are able to stay in their homes.
The move follows a report Nov. 11 by National Public Radio that found veterans who used the mortgage forbearance program authorized by Congress early in the pandemic were at risk of losing their homes after the VA ended a Partial Claim Payment program that would have allowed them to defer their missed payments to the back of their loan period.
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Instead, when the program ended, they received bills from their mortgage companies for the total payments missed, meaning they faced paying large sums to keep their existing low-interest mortgages or refinancing under today’s rates, which are double what they were in January 2022.
According to the NPR report, roughly 6,000 VA homeowners are in the foreclosure process. Another 34,000 are delinquent.
The VA has called for mortgage services to pause foreclosures and will “work with servicers on workable home retention solutions for veterans,” according to a department statement.
The extension of the COVID-19 Refund Modification program will allow veterans to obtain zero-interest, deferred-payment loans from the VA to cover missed payments and modify their existing VA-guaranteed loans to create an affordable monthly payment structure.
VA officials said they are establishing a VA Servicing Purchase program that will allow the department to purchase defaulted VA loans from mortgage companies, modify them, and then put them in the VA’s direct loan portfolio.
“This will empower us to work with veterans experiencing severe financial hardship to adjust their loans — and their monthly payments — so they can keep their homes,” VA officials said in the statement.
The majority of loans described as “VA home loans” are actually VA-backed loans, in which the department guarantees a portion of the loan, ensuring that if a veteran homeowner goes into foreclosure, the lender will recoup some or all of its losses.
The benefits for veterans include better loan terms, such as a more favorable interest rate or smaller to no down payment. According to the department, nearly 90% of all VA-backed home loans are made without a down payment.
Following the NPR report, Senate Democrats Sherrod Brown of Ohio, Tim Kaine of Virginia, Jack Reed of Rhode Island, and Jon Tester of Montana wrote to VA Secretary Denis McDonough calling for a pause and urging him to extend the COVID-era refund program.
“With each additional day that passes, risks mount for borrowers who are facing foreclosure while they wait for a solution from VA. Without this pause, thousands of veterans and service members could needlessly lose their homes,” the senators wrote. “This was never the intent of Congress.”
Tester, who serves as chairman of the Senate Veterans Affairs Committee, released a statement Monday praising the VA for its fast response.
“I’m encouraged to see VA answering my call to quickly address this crisis facing our men and women who risked their lives serving this country and were facing foreclosure through no fault of their own,” Tester wrote in a statement. “This pause will help ensure our veterans, service members, and their families can remain in their homes and get their payments back on track while VA works on a long-term solution.”
VA officials said any veteran struggling with making their mortgage payments should check out the department’s housing assistance website or call 877-827-3702.
Mortgage applications rose to their highest level in six weeks after the 30-year fixed mortgage rate fell to 7.44% last week.
Total home loan applications increased 3% for the week ending Nov. 17 compared to the previous week, according to data from the Mortgage Bankers Association (MBA).
Mortgage rates for the 30-year fixed loan averaged 7.44%, falling 6 basis points in one week, according to Freddie Mac‘s Primary Mortgage Market Survey.
On a seasonally adjusted basis, purchase applications rose by nearly 4% over the week, with increases in both conventional and government purchase loan demand.
The average loan size on a purchase application was $403,600, the lowest since January 2023. Joel Kan, MBA’s vice president and deputy chief economist, said this corroborates with other sources of home-sales data pointing to a rising share of first-time homebuyers entering the market.
Meanwhile, refinance applications rose slightly by 1.6% last week but remained subdued. The adjustable-rate mortgage (ARM) share of activity fell to 8.3% of total applications, down from 8.8% the previous week.
The share of Federal Housing Administration (FHA) loan activity increased to 14.8% of all applications, down from 14.4% the week prior. The share of Department of Veterans Affairs (VA) loan activity was 11.3%, up from 11.2% over the previous week, while the share of U.S. Department of Agriculture (USDA) loan activity fell to 0.4% from 0.5% week over week.