Mortgage Closing Times Get Faster as Refi Demand Weakens
The number of days required to close a mortgage shrank in August to the shortest period in over a year, according to ICE Mortgage Technology.
It took an average of 46 days to get a mortgage that month, measuring all types of home loans, according to a report released on Tuesday. That’s the shortest period since May 2020 when it was 45 days.
Closing times are getting faster as a deluge of applications prompted by record-low interest rates begins to subside. The volume of applications for mortgage refinancings dropped to a three-month low in August’s last week as home loan rates rose, according to data from the Mortgage Bankers Association.
In August, conventional loans eligible for backing by Fannie Mae and Freddie Mac had the fastest closing time at 45 days, down from 47 days in July, the report said.
Mortgages backed by the Federal Housing Administration took an average of 51 days to close, and home loans backed by the Veterans Administration took an average of 52 days, the report said. Both types of home loans matched the closing times seen in the prior month.
Closing rates measuring the share of all loan applications that were funded rose to 78.4% in August, up from 77.2% in July, the report said.
The average FICO score on all closed loans rose to 741 in August, rising from the 740 in July that was the lowest since February 2020, according to ICE Mortgage Technology data.
Mortgage lending rose to a record $4.1 trillion in 2020, according to MBA data. This year, lenders are on track to fund $3.7 trillion, which would be the third-highest level ever recorded, according to MBA data.
The refinancing share rose to 71% in 2021's first quarter, the highest in eight years, MBA said. It dropped to 56% in the second quarter, 55% in the third quarter, and will likely fall to 40% in the last three months of the year, according to an MBA forecast.
Lending for home purchases rose to $460 billion in the second quarter, the highest on record, before decreasing to $417 billion in the third quarter, the MBA said.
Purchase volume is likely to fall to $406 billion in the last three months of the year, the MBA forecast said.