Homebuyers rushing to beat new FHA credit score and downpayment requirements may have helped push demand for purchase loans last week to their highest level since the expiration of the federal homebuyer tax credits, the Mortgage Bankers Association said in releasing its Weekly Mortgage Applications Survey.
Applications for purchase loans jumped a seasonally adjusted 9.3 percent during the week ending Oct. 1, thanks largely to a 17.2 percent increase in applications for FHA-backed loans, the MBA said. Applications for conventional loans were also up 3.6 percent from the previous week.
Under changes announced in July, FHA borrowers assigned case numbers after Oct. 4 will need a 580 FICO score in order to purchase a home with the minimum 3.5 percent downpayment.
Borrowers with scores between 500-579 must make downpayments of at least 10 percent to qualify for the government-backed mortgage insurance program, and those with scores below 500 won’t qualify for the program at all, HUD said in a Sept. 3 letter to lenders.
It was the second straight weekly increase in purchase applications, pushing demand to levels not seen since the first week in May. Purchase loan demand was still off 34.7 percent from the same time a year year ago, however.
Demand for refinancings was down 2.5 percent, with applications for refinancing accounting for 78.9 percent of total applications, down from 80.7 percent the previous week.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.25 percent from 4.38 percent, with points decreasing to 1.00 from 1.01 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The 30-year contract rate is the lowest recorded in the survey, with the previous low being the rate observed last week. The effective rate also decreased from last week.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 3.73 percent from 3.77 percent, with points increasing to 1.14 from 1.13 (including the origination fee) for 80 percent LTV loans. The 15-year contract rate is the lowest recorded in the survey, while the previous low was observed last week. The effective rate also decreased from last week.
The average contract interest rate for one-year ARMs increased to 7.11 percent from 7.04 percent, with points increasing to 0.24 from 0.22 (including the origination fee) for 80 percent LTV loans.