"Although total purchase application volume was little changed, conventional purchase applications were at the highest level since July," said Michael Fratantoni, chief economist for the MBA. "On the other hand, government application volume fell for the week, with declines in purchase applications for FHA, VA, and Rural Housing Service loans."
While the average interest rate for government loans is slightly lower than those for conventional loans, FHA insurance premiums, as well as average credit scores, have increased and are sidelining some lower-income borrowers. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.33 percent from 4.39 percent for 80 percent loan-to-value ratio (LTV) loans.
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Anemic mortgage application volumes are not surprising, given that signed contracts to buy existing homes fell in August and are down from a year ago, according to a report from the National Association of Realtors Monday. Realtors blame an exodus of investors from the housing market for the shortfall in sales.