With housing affordability being challenged in a higher mortgage rate environment, fewer homebuyers jumped into the market in the third quarter.
Buyers that did manage to purchase homes made higher down payments as home-price growth remained stubbornly elevated in Q3, according to a new report from LenderLogix. The firm is a provider of mortgage point-of-sale and automation software for banks, credit unions, independent mortgage banks and brokers.
The average of preapproved borrowers per loan officer fell by 11.6% to just over 24 in Q3, down from 28 in Q2, LenderLogix found. Meanwhile, the average preapproval loan amount in Q3 decreased slightly by 2.5% to $295,312 compared to Q2’s average loan amount of $302,836.
However, the average sales price stayed nearly the same, dipping to $345,031 in Q3, down from $348,348 the previous quarter. Borrowers, however, are putting more money down at the closing table. The average down payment size was 14.5% in Q3, up from 13% the previous period.
Conventional loans remained the most popular loan type for preapproved borrowers, with its share at 75% in Q3, up from 71% in Q2. FHA loan preapproval shares fell to 19% compared to 22% in Q2.
“Overall, Q3 showed higher down payments, with fewer home shoppers in the market than last quarter, which makes sense given that it is continually getting more expensive for consumers to purchase a home,” said LenderLogix co-founder and CEO Patrick O’Brien.
Of the borrowers using LenderLogix’s QuickQual preappoval platform, the average number of days between preapproval and loan submission increased incrementally to 89.8 days in Q3, up from 89.3 days in Q2.
The most prolonged duration between preapproval and loan application rose to 1,274 days in Q3, up notably from 994 days in Q2.
While the increased length between preapproval and loan submission did not dissuade borrowers in Q2, conversions from borrowers using QuickQual declined from 58% in Q2 to 53% in Q3.
“Though there may be fewer buyers and the road to purchase longer than anyone would like, there is still business out there for lenders to capture, and proactive, ongoing communication and education will be key to prospect retention and conversion,” O’Brien said.
