Overall, mortgage applications dropped by about 1% last month. But that’s not a bad thing for markets and not surprising; historically, mortgage applications vary from season to season, and when you account for seasonal variables, mortgage applications actually rose .2% the week ending August 21, 2015.
So what accounts for the rise in mortgage applications? According to World Property Journal, the answer is simple: government backed mortgages.
FHA Loan Applications on the Rise
The Fair Housing Administration (FHA) was established to help lower income families purchase a home they could not otherwise afford. An FHA mortgage is an insurance backed home loan that is provided by a FHA-approved lender.
In August, the FHA purchase index rose by a seasonally adjusted 5.6%, far outpacing overall mortgage applications for the month.
VA Mortgage Applications Soaring as Well
Similarly, a VA mortgage is available to qualified veterans, and guaranteed by the Veteran’s Administration.
In August, numerous veterans took advantage of this program in hopes of purchasing a home. Accounting for seasonal adjustments, the VA purchase index rose by 5.2%, far outpacing applications overall.
What Does This Mean for Real Estate Markets?
Even as it remains difficult for people with lower credit scores to get a mortgage, applicants are taking advantage of government mortgage programs to buy a home.
Government backed mortgages traditionally help boost mortgage application rates by broadening the field of people who qualify for a home loan, which certainly was the case in August.
Why Should You Care?
If you are a real estate professional, it’s important to understand changes in the real estate market, and how people are accomplishing their goal of homeownership. And as a borrower, it’s important to know how people are qualifying for a mortgage, and that real estate markets are healthy and improving.
Knowing that government backed mortgage programs are a primary driving force in the current housing market is important information for real estate professionals and borrowers alike.