Millennials race to refi on lower mortgage rates, shrink closing times
Millennial homeowners took advantage of April's drop in mortgage rates by quickly securing refinance loans, which closed faster than purchases for the first time since March 2016, according to Ellie Mae.
The average 30-year note rate fell to 4.61% in April from 4.75% in March, prompting the share of refinance loans closed to bump up to 15% from 11% over the same period.
As millennials raced to refi, closing times for the loan type declined to 36 days compared to 38 for purchase loans. Across all loan types, the average time to close on a mortgage reached 39 days, the shortest overall time since February 2015.
"The significant drop in time to close shows homebuyers were motivated to close refinances while rates were low, and that millennials are showing increased maturity as a homeowning demographic," Joe Tyrrell, Ellie's EVP of strategy and technology, said in a press release. "On top of external factors, an increased investment in technology by many lenders is creating a more efficient mortgage process."
By product type, conventional mortgages were 69% of the loans closed by millennials in April. Loans backed by the Federal Housing Administration accounted for 26%, and Department of Veterans Affairs and other loans represented 2% and 3%, respectively.
"Millennial homebuyers continue to show a strong preference for conventional loans. There's an opportunity to educate millennials on alternate loan types, including FHA loans, which allow for smaller down payments, making homeownership more accessible," Tyrrell said.
"There is no one-type-fits-all loan, so it's vital that all borrowers have a firm understanding of the various loan options available and communicate with their lender to make the decision that is right for them."
Regarding credit scores, the average millennial FICO in April was 721, up slightly from 720 from the prior month.