Mortgage originations are down sharply in 2026. The MBA's Market Composite Index dropped 10.9% in mid-March, followed by another 10.5% decline the following week. Refinance applications have collapsed—down 18.5% one week, then another 15% the next. With 30-year fixed rates hovering around 6.5% and most homeowners locked into sub-4% mortgages from before 2022, the refinance business has effectively disappeared.
But the purchase market is still moving. Inventory is rising, homes are staying on the market longer, and sellers are offering concessions—price cuts averaging 2-3%, closing cost assistance, and rate buydowns. First-time buyers, now with a median age of 40, are entering the market with stronger financial preparation than in previous cycles. The buyers who do move forward in this rate environment tend to be serious, qualified, and ready to close.
For lenders, the question isn't whether there's opportunity—it's how to capture it when every origination counts.
In a competitive market, the lender who qualifies the borrower first often wins the deal. But borrowers in 2026 are shopping carefully—comparing rates across multiple lenders, exploring government-backed programs, and evaluating buydown options. A hard credit pull at the initial inquiry stage creates friction. Borrowers hesitate to trigger a score impact before they've committed to a lender.
Soft credit pulls eliminate that friction. A soft inquiry provides an accurate assessment of the borrower's creditworthiness and affordability range without impacting their credit score. The borrower can explore loan options, compare offers, and understand their buying power—all before formally applying. For the lender, it means capturing the lead, building the relationship, and positioning for full preapproval without losing the borrower to a competitor who offered a no-risk initial consultation.
The mechanics are straightforward: the borrower provides basic financial information (income, debts, down payment savings, employment status) and consents to a soft inquiry. The lender pulls a credit snapshot that includes tradeline history and scoring data but doesn't leave a record on the borrower's credit report. Within minutes, the lender can provide an estimated loan amount, rate range, and monthly payment—enough to move the conversation forward without the commitment pressure of a hard pull.
This approach is particularly effective for first-time buyers, who now represent a significant share of purchase activity and often shop across multiple lenders before committing. A soft pull positions the lender as borrower-friendly and confident in their ability to compete on terms rather than gatekeeping access to pricing information.
As conventional purchase activity slows, government-backed loans are gaining market share. FHA loans surged to 19.7% of originations in recent weeks, up from 15.8% earlier in the year. VA loans have held steady at 15-17% of the market. These programs offer lower effective rates than conventional products and serve borrowers who might otherwise be priced out in a 6.5% environment.
For lenders, expanding into FHA and VA originations isn't just a defensive move—it's an offensive strategy. These loans serve creditworthy borrowers who are actively buying homes but need rate relief or lower down payment requirements. The origination fees are comparable to conventional loans, and the volume can offset declines in refinance and jumbo activity.
VA loans in particular represent a high-quality segment: zero down payment, no PMI, competitive rates (currently 5.39-5.50%), and borrowers with stable employment histories. Lenders who build VA expertise and market aggressively to military and veteran communities can capture share in a segment competitors often overlook.
FHA loans, while carrying slightly higher severe delinquency rates (now 6.1%, up from 5.1%), still represent a significant opportunity when underwritten carefully. The key is pairing FHA origination capability with strong credit evaluation at the front end—which is where soft credit pulls again provide value. A lender can assess FHA eligibility and likely approval terms before the borrower formally applies, reducing fallout and improving close rates.
Rate buydowns—both permanent (via discount points) and temporary (such as 2-1 buydowns)—are expected to increase 20% in 2026 as sellers and builders offer concessions to move inventory. For lenders, this creates an opportunity to differentiate on structuring rather than rate alone.
A lender who can clearly present buydown scenarios—showing the upfront cost, the effective monthly payment, and the break-even timeline—positions as a consultative partner rather than a rate-quote machine. Borrowers who understand the math are more likely to commit, and sellers who see a lender facilitating the transaction are more likely to accept offers that include concessions.
Adjustable-rate mortgages are also gaining traction. ARMs are projected to capture 3-5% additional market share in 2026, driven by borrowers who plan shorter hold periods or expect rates to decline in the next few years. A 5/1 ARM at 5.71-5.97% is materially cheaper than a 30-year fixed at 6.5%, and for a borrower planning a 5-7 year hold, the rate reset risk is manageable.
Lenders who actively market ARMs—and who can explain the rate cap structure, the worst-case scenario, and the refinance optionality—capture borrowers who would otherwise delay purchasing or choose a more expensive fixed product. This is particularly effective in high-cost markets where monthly payment relief is the determining factor in qualification.
In a high-rate environment, every FICO point matters. A borrower at 680 qualifies for materially worse terms than a borrower at 720. The difference in monthly payment can be hundreds of dollars, and for a borderline borrower, it can mean the difference between approval and denial.
Credit score optimization—rapid rescoring that addresses legitimate reporting errors or strategic tradeline management—remains one of the most effective tools for converting marginal applications into approved loans. Score Express, for example, delivers an average 23.9-point FICO® improvement in 72 hours by working directly with credit bureaus to correct inaccuracies or update account statuses that are legitimately resolvable.
For a lender, offering credit optimization as part of the preapproval process is a retention strategy. A borrower who initially doesn't qualify but is told "here's how we can improve your score and get you approved in 72 hours" is far more likely to stay with that lender than shop elsewhere. It also reduces fallout—loans that would otherwise fail at underwriting instead close, preserving the pipeline and improving pull-through rates.
The integration point is simple: run a soft credit pull during initial consultation, identify score optimization opportunities (high utilization, recently paid-off accounts not yet reported, disputes in progress), and present the borrower with a clear path to better terms. This works particularly well for FHA and VA borrowers, who often have thinner credit files and more opportunity for material improvement.
The current market is difficult, but it isn't permanent. Lenders who build systems now—soft pull workflows, government-backed loan expertise, credit optimization capabilities, and structured buydown offerings—will be positioned to scale when rates eventually decline and refinance activity returns.
The lenders who survive and grow in 2026 are the ones who compete on service, speed, and problem-solving rather than rate alone. That means capturing leads early (soft pulls), converting marginal borrowers (credit optimization), serving the segments that are still active (FHA, VA, purchase), and structuring deals creatively (buydowns, ARMs).
Origination volume is down. But market share is up for grabs. The lenders who execute on these strategies will not just survive the current cycle—they'll emerge stronger when the market turns.