Most people know that when applying for a mortgage, a great credit score will open up more opportunities for a borrower and better options when it comes to rates. Recently, mortgages are being approved at an unusually quick rate, thanks to borrowers boasting some of the highest credit scores ever. Since mortgages are being boosted by a small segment of borrowers, loan performance is doing better than it probably ever has.
Purchase mortgage originations in the second quarter of 2015 were up fifteen percent compared to 2014. In June, purchase loan volume swelled to some of the highest numbers since 2007. Investors with plenty of cash on hand are swapping places with mortgage dependent borrowers. Cash sales accounted for just thirty percent of total home sales in July, representing a drop of over thirty percent compared to the same period last year. It’s the lowest it has been in nine years.
Borrowers with FICO scores higher than 700 are largely the ones behind the mortgage application surge. For borrowers with lower scores, activity hasn’t changed as much and is slightly less than it was a year ago. Only twenty percent of purchase originations over the past three months are the result of borrowers with credit scores below 700, the lowest level in over a decade.