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Pent-up demand from the pandemic, low interest rates, and a shortage of properties have created a booming housing market with near record levels of refinance activity. While typical home values have increased by 15% from a year ago, the housing market is expected to stay hot in many cities through the end of the year and into next. According to the most recent loan-level mortgage data from the Home Mortgage Disclosure Act, there were 12.1 million mortgage loan applications approved in 2020 with an overall approval rate of 83.6%.
Mortgage loan approval rates vary by purpose of the loan. Refinancing applications for conventional, single-family loans without a cash-out option, had the highest approval rate, at 86.9%. Home purchase loans had a nearly identical approval rate at 86.3%, and cash-out refinancing applications were just slightly less likely to be approved, with an approval rate of 84.9%. In comparison to these types of loans, home improvement loans were the least likely to be approved—just 61% of home improvement loans were approved in 2020.