October 28, 2016

Sunny Days Better Your Chances for a Loan?

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Sunny Days Better Your Chances for a Loan?

If the weather forecast calls for clouds or rain, tell your home buyers they may want to wait for a sunny day before they apply for a mortgage.

A new study reveals an unusual correlation between the weather and mortgage approvals. Cleveland Fed researchers scoured data from the National Oceanic and Atmospheric Administration of more than 2,000 U.S. counties from 1998 to 2010 for the study.

Read more: Mortgage Rates Fall, Loan Demand Soars 9%

The study suggests a positive sentiment emerges in sunny weather, which leads to higher credit approvals. On the other hand, rainy days make lenders more tight with the credit. 

That said, the sun didn’t appear, at least at a surface level, to fire up applications that much, but researchers say the percentages are noteworthy. “Sunny sentiment” was found to boost credit application approvals by 0.80 percent. On overcast days, approvals dropped by 1.41 percent, the study found.

“A rough estimate of the extra credit approved on one perfectly sunny day relative to one fully overcast day is about $150 million nationwide or $91,000 per county-day,” researchers note. “Sentiment has a stronger effect on the approvals of applications by low-income and medium-income households, which require more judgment. In contrast, the effect of sentiment disappears when the decision is clear-cut and when pre-approvals are common – namely, for high-quality applications from households earning over $100,000 per year.”

But lenders shouldn’t get too giddy on sunny days with credit. Researchers also found that loans approved on sunny days saw a significantly higher number of defaults.

Source: “Mortgages Are More Likely to Be Approved When It’s Sunny, Research Finds,”® (Feb. 10, 2016)