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May 2024 » thefivestar.com 59 May 2024 J O U R N A L rate, they understand that the cash flows may be temporary. Discount points can minimize a loan's prepayment risk by lowering the interest rate, reducing the consumer's motivation to refinance. Because discount points add another layer of complication, customers would need to obtain offers from numerous lenders with either the same interest rate or the same number of discount points to determine which offer is the best fit for their scenario. Borrowers who choose a loan only based on the interest rate may unintentionally pay more discount points than necessary. Even when consumers understand how discount points function, most borrowers only profit from them if they keep their mortgage for long enough to make the monthly savings from the lower interest rate exceed the initial expenses. This is sometimes referred to as extending the mortgage's "break-even period," which may be roughly calculated by dividing the cost of the discount points by the bor- rower's monthly savings. Borrowers with a long-term mortgage and cash on hand may benefit from paying discount points. However, discount points are less effective for cash-strapped borrowers and those planning to refinance or relocate soon. Overall, 2022 and 2023 saw re- cord-breaking interest rates, forcing borrowers to respond swiftly. As a result, borrowers were more likely to pay discount points, with cash-out refinance borrowers being the most likely to pay discount points and paying more of them than other borrowers. In addition to responding to the high interest rate environment, many lenders may use discount points to ensure that borrowers are eligible for a mortgage. NEW FHA HOME PURCHASE APPS RISE IN MARCH T he latest Builder Application Sur- vey (BAS) issued by the Mortgage Bankers Association (MBA) for March 2024 shows that mortgage applica- tions for new home purchases increased 6.2% compared to a year ago. MBA's Build- er Application Survey tracks application volume from mortgage subsidiaries of home builders across the country. Month over month, compared to February 2024, new home purchase apps increased by just 1%. This change does not include any adjustment for typical seasonal patterns. Despite the slight month-over-month uptick, the FHA share of applications rose in March, reaching 26.4%, compared to a 24% average for the prior 12 months. An increase in the FHA share of new purchase apps indicates that the market is experi- encing more first-time home buyer activity. HUD and the Census Bureau reported that privately–owned housing starts in March 2024 were at a seasonally adjusted annual rate of 1,321,000—14.7% below the revised February 2024 estimate of 1,549,000 and 4.3% below the March 2023 rate of 1,380,000. Single-family housing starts in March were at a rate of 1,022,000—12.4% below the revised February figure of 1,167,000. In addition to the previously men- tioned FHA share of loan apps, by product type, conventional loans comprised 63% of loan applications, RHS/USDA loans com- prised just 0.3%, and VA loans amounted to just 10.4%. The average loan size for new homes decreased from $405,719 in Febru- ary to $405,400 in March.