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Mortgage trends favorable for homebuying clients

Whipsawing financial markets notwithstanding, financial advisors should be able to deliver encouraging news to clients looking to take out a mortgage as homebuying season approaches, according to Ellie Mae’s January Originations Insights Report.

With mortgage rates at their lowest level in 10 months, a number of trends giving clues for what to expect from originations this year and how a lender's product mix will evolve. According to Ellie Mae, those indications are trending northward.

Here's a look at seven charts that show where mortgage lending is headed in 2019, characterized by evolving traits in originations.

The data is derived from Ellie's January Originations Insights Report, based on loans closed on its loan origination system in January. Closing rates are calculated on a 90-day cycle.

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Rates on the rise
The 30-year note rate increased almost every month last year until dropping a bit at the start of 2019. While rates are expected to rise again this year, they should move relatively sideways, according to Fannie Mae.
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Purchase takeover
Growth in mortgage rates typically translates to a number of refi candidates falling off, as seen in the shrinking share of refis year-over-year in January. The 10-percentage-point drop in refinances shifted the purchase share of loans from 55% to 65% compared to this same period a year ago.
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Sticking to the script
The mixture of different types of loans remained relatively unchanged in January from a year ago. The government-sponsored enterprise share of loans ticked down a percentage point, which was made up by a percentage point increase in the share of Department of Veterans Affairs loans. Shares of all other loan types held steady on an annual basis.
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ARMing up
Like the 30-year note rate, the adjustable-rate mortgage percentage rose year-over-year in January, though its growth was more pronounced. The ARM percentage increased from 5.5% in January 2018 to 8.6% at the start of this year. It did drop on a monthly basis from 9.2% in December.
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Strong candidates
More than two-thirds of all loans closed for a home purchase had a FICO score over 700, compared to 66% for refinance loans. Concerning purchase mortgages, 34.3% of borrowers had scores between 750 and 799.
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Always be closing
Closing rates grew stronger at the start of the year for all loan types. Overall, the closing rate increased from 70.9% to 75% on an annual basis, and was up from 71.4% in December. The 75% closing rate for GSE loans in particular was the highest of all loan types.
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Taking a day
Loan closing times overall were one day longer in January than the 44 days it took to close on a mortgage a year ago. But when broken down, the average closing time for a refinance dropped from 40 days to 38. Purchase loan closing times grew from 47 days to 49, probably because the demand for these types of mortgages has also increased.