Home prices have significantly jumped over the past year, forcing home buyers to borrow more to keep up. The average mortgage purchase application reached $411,400, the highest since February, according to the Mortgage Bankers Association. The average loan for a new home rose to $377,000 last month, a record high.
Home prices are climbing at their fastest pace in more than 15 years. While low mortgage rates are helping to offset some of those higher prices for successful buyers, mortgage rates are predicted to head up soon. The 30-year fixed-rate mortgage averaged 3% this week, up from 2.94% the week prior, according to Freddie Mac.
“We’ve seen very red-hot house-price appreciation across the country—double digits nationally,” says Len Kiefer, deputy chief economist at Freddie Mac. “That puts pressure on loan sizes because, to purchase a home at a higher price, you’re going to need to borrow more money.” Also, more homeowners have been upsizing since the beginning of the pandemic.
But to get these larger mortgages, borrowers will need stellar credit to qualify, Odeta Kushi, deputy chief economist at First American, a title insurance company, told MarketPlace. The median credit score for applicants for new mortgages was 788 in the first quarter of this year, up from 773 a year earlier.