Housing Application Volume Improves Amidst Greater Credit Availability

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The Federal Savings Bank comments on two recent reports from The Mortgage Bankers Association.

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With the increase in credit availability, The Federal Savings Bank expects first-time home buyers have a better chance of applying for and receiving the loans they need to secure houses

With analysts predicting that 2015 will be a strong year for the housing market, The Federal Savings Bank is pleased to know that there are several indicators that show first-time home buyers and other house hunters are more likely to enter the market.

Mortgage applications rose 0.1 percent in the week ended Feb. 27 and declined just -1.3% for the week ending on March 6th. Applications are showing ever improve strength from its dismal early February readings due to improved credit availability, according to the Mortgage Bankers Association. In addition to the increase in application volume from the previous week, the MBA noted that the refinance index gained 1 percent.

Home Sales, Inventory Levels Solid
In January, sales of new single-family homes were steady with housing inventory improving to a five-year high. The U.S. Department of Commerce said new-home sales in January decreased 0.2 percent to reach 481,000 units from the previous month. However, January sales experienced a 5.3 percent year-over-year gain from January 2014.

With greater supply on the market, The Federal Savings Bank knows house hunters have more choices, and first-time home buyers specifically are less likely to be squeezed out of the market compared to the past. While the market has been tough for first-time home buyers, who have had to deal with low inventory, potential bidding wars and high credit standards, 2015 marks a huge change with new lending requirements and a more affordable housing market.

While home sales decreased on a monthly basis, employment numbers are better, and housing prices have slowed, which could increase housing affordability among first-time home buyers.

Effects of Better Credit Availability
Mortgage credit availability improved in February, increasing buyer opportunities to purchase a homes, the MBA said. The mortgage credit availability index rose to 118.6 in February, up 0.7 percent, suggesting credit is loosening.

With the increase in credit availability, The Federal Savings Bank expects first-time home buyers have a better chance of applying for and receiving the loans they need to secure houses. One of the biggest obstacles home buyers may have with purchasing a home is saving enough money for a down payment. As lenders understand this issue, loan providers have decreased requirements for down payments.

Late in 2014, Freddie Mac announced it would allow down payments as low as 3 percent. Fannie Mae also said it will have a program to let home buyers put down a lower percentage of the purchase price of a home, which could give buyers more incentive to look for homes. In addition, the MBA said the interest rate for 30-year fixed-rate mortgages for loans less and more than $417,000 dropped, making borrowing costs lower.

"Credit availability improved marginally in February, led by further increases in jumbo loan programs and additional take-up of Fannie Mae's 97 LTV program," said Mike Fratantoni, chief economist for MBA.

With greater credit availability, first-time home buyers looking to apply for home loans can contact The Federal Savings Bank, a veteran owned bank, to learn more about mortgages.

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Giorgio Urbano Ferrero
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