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Apache is functioning normally

Purchase credit scores hit their highest mark since 2000, and lock volumes pulled back, with both trends signaling persistent affordability and inventory pressures are unlikely to subside in the near term, according to Black Knight

Purchase locks fell 11% between late March and mid May, a period typically considered prime spring buying season, at the same time interest rates resumed their climb, according to the data and analytics provider’s April Mortgage Monitor report. The latest numbers mark a turnaround from earlier in the year when momentum from falling rates pushed locks higher. The trailing three-week volume is now 38% below its mark from the same week last year and 34% lower than in 2018 and 2019.

At the same time, higher credit scores for purchases point to tightening standards that may leave hopeful buyers on the outside looking in — a situation that has plagued the housing industry for months. 

“In a sense, the gridlocked housing market has been feeding on itself,” said Andy Walden, Black Knight’s vice president of enterprise research, in a press release. “While elevated interest rates continue to weigh on both affordability and demand, they’re simultaneously constricting supply as well, as would-be sellers who locked in ultralow rates early in the pandemic continue to sit on the sidelines.”

The sluggishness marking the 2023 season thus far has also been widely observed in the past several months by other housing researchers, including the Federal Housing Finance Agency, who reported similar first-quarter trends this week. 

While price growth has cooled considerably from the highs of 12 months ago — now flat on a year-over-year basis according to Black Knight —  its data also showed prices rising again for the fourth straight month, up 0.46% in April. A decrease in for-sale inventory across 95% of markets this year is managing to keep prices elevated, even as sales volume also drops. 

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“The combination of lower supply and demand in April led to both slowing sales and firming prices,” Walden said. The recent movement in housing prices also means home equity values have recovered more than 60% of the value lost late last year, Black Knight said.

“Amidst all of this, we’re also beginning to see clear signs of tightening credit availability,” Walden said. Average credit scores for purchase locks jumped by an average of seven points since late December, hitting its highest mark since at least 2000. A rise in scores was reported among conforming mortgages, as well as loans guaranteed by the Federal Housing Administration and Department of Veterans Affairs.

The combined impact of rising rates and home prices in recent months means it would take 34.2% of the median household income to make principal and interest payments on a typical for-sale home. The percentage remains much the same as it has over the past three months, but represents a small improvement from the 36.8% required last fall immediately after interest rates surpassed 7%. 

Four California markets lead the country in lack of affordability based on Black Knight’s data, with Los Angeles leading the list. A median priced home in the City of Angels would require 65% of typical household income to make monthly payments. San Diego, San Jose and San Francisco followed at 57.4%, 55.2% and 53.9%, respectively.

Source: nationalmortgagenews.com

Apache is functioning normally

Demand for mortgages declined for the second consecutive week, led by a dip in purchase mortgage applications — despite rates on a downward trend.

The market composite index, a measure of mortgage loan application volume, decreased 1.7% for the week ending July 8, according to the Mortgage Bankers Association (MBA). The refinance index rose 2% from a week earlier and the purchase index dropped 4%.

“Purchase applications for both conventional and government loans continue to be weaker due to the combination of much higher mortgage rates and the worsening economic outlook,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.

Freddie Mac PMMS showed purchase mortgage rates dropped 40 basis points to 5.3% last week. Rates during the previous two weeks dropped by half a percent but were still well above the 30-year purchase rate of 2.9% from the same period in 2021. 

The trade group estimates the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) remained at 5.74%, unchanged from the previous week. Jumbo mortgage loans (greater than $647,200) dipped to 5.25% from 5.28%. 

After reaching a record average purchase loan size of $460,000 in March 2022, the figure declined to $415,000 last week led by the potential moderation of home price growth and weaker purchase activity at the upper end of the market, Kan added. 

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The refi share of total applications rose to 30.8% last week, largely due to an uptick in conventional and Federal Housing Administration (FHA) refinances. The overall refi index remained 5% below the average level reported in June, according to the MBA.

“With the 30-year fixed rate 265 basis points higher than a year ago, refinance applications are expected to remain depressed,” said Kan. 

In a separate projection made by the MBA in June, of the $2.4 trillion origination volume forecast for 2022, about $730 billion is expected to come from refis. About $2.3 trillion, more than 40% of the $4 trillion origination volume, came from refis in 2021. 

The FHA share of total applications decreased to 11.7% from the previous week’s 12%. The United States Department of Agriculture (USDA) share also declined to 0.5% from the week prior’s 0.6%. The Veterans Affairs (VA) share of total applications slightly rose to 11.2% from 11.1%.

The share of adjustable-rate mortgages (ARM) applications also rose, accounting for 9.6%. According to the MBA, the average interest rate for a 5/1 ARM increased to 4.71% from 4.62% a week prior. 

The survey, conducted weekly since 1990, covers 75% of all U.S. retail residential mortgage applications.

Source: housingwire.com

Apache is functioning normally

Weakening economic outlook, high inflation and affordability challenges took a toll on buyer demand, leading to a drop in both purchase and refi applications last week, according to the Mortgage Bankers Association (MBA).

The market composite index, a measure of mortgage loan application volume, declined 6.3% for the week ending July 15, the MBA said. The refinance index dipped 4% from the previous week, falling to a 22-year low, and the purchase index decreased 7%.

“Mortgage applications declined for the third week in a row, reaching the lowest level since 2000,” Joel Kan, associate vice president of economic and industry forecasting at MBA. “The decline in recent purchase applications aligns with slower homebuilding activity due to reduced buyer traffic and ongoing building material shortages and higher costs.”

New U.S. home building activity fell 2% to a seasonally adjusted annual rate of 1.56 million units in June, marking a nine-month low since September 2021, according to the U.S. Department of Commerce. Permits for future homebuilding fell 0.6%, to a rate of 1.69 million units, also the lowest since September. 

While the refinance share of all mortgage activity slightly increased from 30.8% the previous week to 31.4% of total applications, the refi index was 80% lower than the same week a year ago.

“With most mortgage rates more than two percentage points higher than a year ago, demand for refinances continues to plummet,” Kan said.

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Mortgage rates have been volatile in recent weeks, following the Federal Reserve‘s interest rate hike of 75 basis points last month. After falling 40 bps two weeks ago to 5.30%, purchase mortgage rates climbed back last week to 5.5%, according to the latest Freddie Mac PMMS. A year ago at this time, 30-year fixed-rate purchase rates were at 2.88%.  

The trade group estimates the average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) rose to 5.82%, from the previous week’s 5.74%. Jumbo mortgage loans (greater than $647,200) also increased to 5.31% from 5.25%. 

The Federal Housing Administration‘s (FHA) share of total applications rose to 12.4% from the previous week’s 11.7%. The United States Department of Agriculture‘s (USDA) share also increased to 0.6% from the week prior’s 0.5%. Meanwhile, the Veterans Affairs‘ (VA) share of total applications fell to 10.6% from 11.2%.

The share of adjustable-rate mortgages (ARM) applications also declined, accounting for 9.5%. According to the MBA, the average interest rate for a 5/1 ARM decreased to 4.6% from 4.71% a week prior. 

The survey, conducted weekly since 1990, covers 75% of all U.S. retail residential mortgage applications.

Source: housingwire.com

Apache is functioning normally

Applications to buy new construction homes dropped 12% year over year in June due to higher mortgage rates and economic uncertainty, according to the latest builder application survey from the Mortgage Bankers Association (MBA). Month over month, application volume dipped by 10%. 

New residential construction and permitting activity weakened from March through May, which reduced the number of homes available for home buyers, according to survey results.

MBA estimates about 620,000 new single-family homes were sold in June at a seasonally adjusted annual rate, marking a 15% drop, or more than 100,000 homes, compared to May. 

“Higher mortgage rates and heightened economic uncertainty cooled borrower demand in June, leading to new-home purchase applications declining to the lowest level since April 2020,” said Joel Kan, associate vice president of economic and industry forecasting at the MBA.

Mortgage rates have been volatile in recent weeks, following the Federal Reserve‘s interest rate hike of 75 basis points last month. After falling 40 bps two weeks ago to 5.30%, purchase mortgage rates climbed back last week to 5.5%, according to the latest Freddie Mac PMMS.

The average loan size dropped to $426,966 in June from May’s $430,855, MBA said. 

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Conventional loans accounted for 73.7% of loan applications. Federal Housing Administration (FHA) loans made up 15%, Veterans Affairs (VA) loans were 10.7% of total applications and Rural Housing Service (RHS) and United States Department of Agriculture (USDA) loans contributed 0.5%. 

The survey tracks application volume from mortgage subsidiaries of homebuilders across the country. Using this data, MBA provides an early estimate of new home sales volumes at the national, state and metro level. 

Source: housingwire.com

Apache is functioning normally

Mortgage volumes fell for a third straight week after interest rates surged to their highest level since November, the Mortgage Bankers Association said.

The MBA’s Market Composite Index, a measure of weekly loan application activity based on surveys of the trade group’s members, dropped a seasonally adjusted 3.7% for the seven-day period ending May 26. Compared to the same week last year, volumes were 36% lower, with economic pressure continuing to weigh on both consumers and lenders.

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“Mortgage rates for conforming-balance 30-year loans were being quoted above 7% by some lenders last week, and the weekly average at 6.9% reached the highest level since last November,” said Mike Fratantoni, MBA’s senior vice president and chief economist, in a press release. 

“Application volumes for both purchase and refinance loans decreased last week due to these higher rates,” he said.

The 30-year rate for loans under the conforming balance of $726,200 finished 22 basis points higher than the prior week’s average of 6.69%. Meanwhile, borrowers typically used 0.83 points, up from 0.66, for 80% loan-to-value ratio loans.

The 30-year fixed-contract jumbo rate made a similar large upward leap to an average of 6.78% compared to 6.57% a week earlier, Points also increased to 0.76 from 0.57. 

Businesses and potential borrowers hoping for relief from high interest rates, which have remained above 6% for most of the last eight months, won’t likely find it in the foreseeable future, according to Fratantoni. While debt-ceiling worries applied upward pressure in May, other factors are playing a large role in keeping them elevated.

“Inflation is still running too high, and recent economic data is beginning to convince investors that the Federal Reserve will not be cutting rates anytime soon,” Fratantoni said. After the May meeting of the Federal Open Market Committee, Chair Jerome Powell suggested the central bank could pause federal rate hikes in future meetings to assess the results of its policies, leading some in the mortgage industry to hope that cuts would occur later in 2023. But some analysts are already warning the economy is running hot enough that additional economic tightening should be in the cards instead.

The uncertainty surrounding rates has contributed to the slow pace of the housing market this year. The MBA’s seasonally adjusted Purchase Index fell for a third straight week, down 2.5% from volumes reported seven days earlier. On a year-over-year basis, purchase applications finished 31.1% lower, as a lack of available inventory also continues to limit activity. 

The Refinance Index took an even larger drop of 6.9% from the previous survey. With most eligible homeowners already sitting on interest rates below current levels, refinance volumes came in 45.1% below their level during the same week in 2022. The share of refinances in relation to total mortgage activity also shrank to 26.7% from 27.4% seven days earlier.

Meanwhile, average loan sizes decreased across the board, with the overall mean application amount landing at an average of $391,000, down 0.7% from the prior week’s $393,600. Average purchase sizes inched down 0.6% to $439,400 from $442,000, while the typical refinance amount was $258,400, sliding down 2.5% from the previous week’s $265,100.

The seasonally adjusted Government Index came in 4.4% lower from the prior week’s survey, while federally backed loans accounted for a smaller portion of applications relative to total activity. Federal Housing Administration-guaranteed loans managed to increase to a 12.7% share, edging up from 12.5% seven days earlier. Their small rise was offset by the shrinking slice of applications backed by the Department of Veterans Affairs, which made up 12.1% of all new activity, compared to 12.5% the previous week. The share of mortgages sponsored by the U.S. Department of Agriculture remained unchanged at 0.5%.

As it did for conforming and jumbo loans, the average contract rate of the 30-year FHA-backed mortgage also shot up to its highest level in months, finishing 29 basis points higher last week at 6.85%, compared to 6.56% seven days earlier. The use of borrower points for 80% LTV loans inched up to 1.26 from 1.24.  

Meanwhile, the contract average rate of the 15-year fixed mortgage came in at 6.41%, up from 6.15% the previous week. Points increased to 0.84 from 0.72.

As fixed interest rates headed higher across categories tracked by the MBA last week, ARMs went in the other direction. The contract average of the 5/1 adjustable-rate mortgage fell 34 basis points to 5.39% from 5.73%, while points decreased to 0.46 from 1.19.

The decrease helped lift the share of adjustable-rate mortgage applications up to 6.8% from 6.7% of loan activity a week earlier. The mortgages remain at a fixed rate for a five-year term before adjusting to market levels. 

Source: nationalmortgagenews.com

Apache is functioning normally

Demand for mortgage loans increased last week as a troubling economic outlook led to a decline in rates, according to the Mortgage Bankers Association (MBA).

The market composite index, a measure of mortgage loan application volume, increased 1.15% for the week ending July 29, after falling for four consecutive weeks to the lowest level in more than two decades. 

The refinance index rose 1.45% last week compared to the previous week. Meanwhile, the purchase index grew 0.97% in the same period. 

However, compared to one year ago, borrower demand is weak. The MBA data indicates that, in comparison to the same week in 2021, the market index fell 62%. The refi index was down 82.6% in the same period, and the purchase index was 15.8% than this time last year.

“Mortgage rates declined last week following another announcement of tighter monetary policy from the Federal Reserve, with the likelihood of more rate hikes to come,” Joel Kan, MBA’s associate vice president of economic and industry forecasting, said in a statement. “Treasury yields dropped as a result, as investors continue to expect a weaker macroeconomic environment in the coming months.”

The Fed raised the federal funds rate by another 75 basis points, to 2.25%-2.50%, on July 27, bringing more concerns about a recession in the U.S. economy. 

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Consequently, purchase mortgage rates dropped to 5.30% last week, from 5.54% in the previous week, according to the PMMS survey from Freddie Mac. 

The MBA’s estimate also shows that rates are falling. The average contract 30-year fixed-rate mortgage for conforming loans ($647,200 or less) decreased to 5.43%, from the previous week’s 5.74%, the largest weekly decline since 2020. Jumbo mortgage loans (greater than $647,200) went from 5.32% to 5.06% in the same period. 

“Lower mortgage rates, combined with signs of more inventory coming to the market, could lead to a rebound in purchase activity,” Kan said. 

According to the Black Knight’s monthly mortgage monitor report, June had the record-low home price appreciation and the largest single-month increase of for-sale inventory in 12 years, showing a cool down in the housing market. 

The MBA data shows the refinance share of all mortgage activity remained almost the same, from 30.7% the previous week to 30.8% of total applications this week. 

The Federal Housing Administration’s (FHA) share of total applications fell 11.9% from the previous week’s 12.1%. The Veterans Affairs’s (V.A.) share of applications increased to 10.8%, from 10.6% and the United States Department of Agriculture’s (USDA) share held steady at 0.6%. 

The share of adjustable-rate mortgages (ARM) applications declined from 9.1% to 8.4%. According to the MBA, the average interest rate for a 5/1 ARM decreased to 4.55% from 4.67% a week prior. 

The survey, conducted weekly since 1990, covers 75% of all U.S. retail, residential mortgage applications.

Source: housingwire.com

Apache is functioning normally

A less-than-stellar credit score doesn’t automatically disqualify you from refinancing your mortgage. Fortunately, there are several options to refinance your mortgage with a bad credit score. 

Here’s what you need to know about lender credit standards and the steps you can take to refinance with a lower credit score.

What Credit Score Is Needed to Refinance?

Every lender has a different set of criteria for credit scores and refinancing. To refinance a conventional mortgage, most lenders look for a credit score of at least 620. 

Some government programs may require a credit score of at least 580 and some may have no minimum at all. 

For example, most Federal Housing Administration (FHA) loans require a credit score of at least 580. The Department of Veterans Affairs (VA) doesn’t set a minimum credit score.

As a general rule of thumb, the higher your credit score, the more likely you are to qualify for a mortgage refinance. 

However, your credit score isn’t the only determining factor. If you have a higher debt-to-income (DTI) ratio and loan-to-value (LTV) ratio and minimal cash on hand, the credit score requirement may increase. 

How to Refinance a Mortgage with a Bad Credit Score

It may be possible to refinance your mortgage with a bad credit score, without needing to improve your credit profile first. You should explore all of your refinancing options to find the one that makes the most sense for your situation. 

1. Chat with Your Existing Mortgage Lender

Talk with your lender about your refinance options with a bad credit score. If you’ve made timely mortgage payments, your lender may be able to work with you even with a bad credit score.

Your lender could offer you a portfolio refinance, which is originated and kept by the lender rather than being sold on the secondary market. Because of this, portfolio refinance loans oftentimes have relaxed qualification standards. 

It’s still a good idea to speak with multiple lenders, apply and compare quotes, even if your current mortgage lender says you’re eligible to refinance. 

2. Use a Cosigner

Another option is to use a friend or family member as a cosigner on your mortgage refinance loan. Your cosigner must be at least 18 years old, have a valid Social Security number, and meet all minimum requirements for the loan.

Keep in mind that the cosigner is taking a major risk and is legally responsible for your debt if you stop making payments. This could also hurt your cosigner’s credit score. 

3. FHA Refinance Programs

The FHA offers several refinance options for homeowners with bad credit. An FHA loan is a mortgage that is backed by the U.S. government and issued by a bank or other approved lender. 

Here are some options:

  • FHA rate-and-term refinance: The FHA rate-and-term refinance requires a credit check and a minimum credit score between 500 and 580, depending on your LTV ratio. You also need to prove that you’ve made 12 consecutive monthly mortgage payments on time.
  • FHA streamline refinance: An FHA streamline refinance has two options: credit qualifying and non-credit qualifying. A non-credit qualifying streamline refinance doesn’t have a minimum credit score but you may pay a higher interest rate. With a credit qualifying streamline refinance, the lender will run a credit check and verify your DTI ratio.
  • FHA cash-out refinance: You can borrow up to 80% of your home’s value with a credit score as low as 500, but some lenders may require a higher score.
  • FHA 203(k) refinance: This is a type of refinancing that enables homeowners to combine renovation expenses into the total amount of the new mortgage. The FHA accepts credit scores as low as 580, although some lenders might require a score of 620 or higher to qualify for a 203(k) refinance loan.

4. VA Refinance

Servicemembers, veterans, or qualifying spouses may qualify for a VA loan backed by the federal government and issued by private lenders. The VA has no minimum credit score requirement, but the lender may require a credit score of 620 or higher. 

There are two VA refinance options:

  • VA streamline refinance: If you’re eligible, you can refinance with bad credit with an Interest Rate Reduction Refinance Loan (IRRRL). The IRRRL must be used to refinance your existing VA-backed home loan and while the VA doesn’t require a new credit check, the lender may be different.
  • VA cash-out refinance: You can use the VA cash-out refinance to tap your home’s equity, but you must meet the VA’s — and the lender’s — credit and income requirements.

5.  USDA Streamlined Assist Refinance

The USDA’s Streamlined Assist program gives current USDA direct and guaranteed home loan borrowers with low or no equity the ability to refinance for a lower interest rate and lower monthly payments. No credit review is required, but you must have made at least 12 consecutive mortgage payments and meet income eligibility standards. 

How to Improve Your Credit Score to Refinance a Mortgage

There are several things you can do to improve your credit score before refinancing your mortgage. 

Raising your credit score by just 20 points can potentially lower your monthly mortgage payments and save you thousands on interest. 

Here are a few options:

  • Check your credit report: You can check your credit report for free once per year with the three major credit bureaus — Experian, Equifax, and TransUnion — to see what’s keeping your credit score so low. You can also check for errors, unauthorized charges, and fraud, which could be lowering your credit score. If you find any issues, you can dispute them with the credit bureau.
  • Pay down debt: Your DTI is another factor that lenders will consider. Try to keep your DTI under 43%.
  • Make payments on time: Your credit score is heavily influenced by your payment history. A single missed payment can significantly lower your credit score. Payment history accounts for 35% of your FICO credit score.
  • Save money: Build your savings to make a larger down payment or keep the extra cash reserves to potentially lower your level of risk to lenders.  

Explore Your Refinance Options with Total Mortgage

Even if you have a low credit score, this doesn’t mean that you are disqualified from refinancing your loan. Consult with a Total Mortgage advisor to explore all your mortgage refinance options. 

Find an expert near you or apply for a refinance loan online!

Source: totalmortgage.com