Compare current mortgage rates
|Type of loan||Buy||Refinancing|
|30 years fixed||3.14%||3.32%|
|Fixed FHA 30 years||3.06%||3.23%|
|Fixed VA 30 years||3.03%||3.29%|
|30-year fixed jumbo||3.42%||3.70%|
|Fixed over 20 years||2.99%||3.22%|
|Fixed over 15 years||2.41%||2.61%|
|15-year fixed jumbo||3.02%||3.28%|
|Fixed over 10 years||2.26%||2.53%|
|Jumbo arm 7/1||2.55%||3.03%|
|Jumbo arm 7/6||2.63%||2.90%|
|Jumbo arm 5/1||2.45%||2.81%|
|Jumbo arm 5/6||2.56%||2.84%|
Frequently Asked Questions
By: Sarah Li Cain
What is a mortgage rate?
A mortgage rate is the amount of interest determined by a lender to charge on a mortgage. These rates can be fixed – that is, the rate is set based on a benchmark rate – for the term of the borrower’s mortgage term or variable based on the terms of the mortgage loan and current rates. The rate is one of the key factors for borrowers when looking for mortgage finance options as it will affect their monthly payments and the amount they will pay over the life of the loan.
How are mortgage rates set?
Mortgage rates are set based on a few factors, including economic forces. For example, lenders look at the prime rate – the lowest rate offered by banks for lending – which typically follows the trends set by the Federal Reserve’s fed funds rate. It’s usually a few percentage points.
The yield on 10-year treasury bills can also reveal market trends. If bond yields rise, mortgage rates tend to rise, and vice versa. The 10-year Treasury yield is generally the best standard for judging mortgage rates. This is because many mortgages are refinanced or paid off after 10 years, even though the standard is a 30-year loan.
The factors that the borrower can control are his credit rating and the amount of the down payment. Since lenders determine rates based on the risk they can take, borrowers who are less creditworthy or have a lower down payment may be offered higher rates. In other words, the lower the risk, the lower the rate for the borrower.
Does the Federal Reserve set mortgage rates?
Although the Federal Reserve does not set mortgage rates, it indirectly influences the rate. The Federal Reserve helps guide the economy by controlling inflation and encouraging growth. This means that decisions made by the Federal Open Market Committee to raise or lower short-term interest rates may cause lenders to raise or lower theirs.
What is a good mortgage rate?
A good mortgage rate will depend on the borrower. Lenders will advertise the lowest rate offered, but yours will depend on factors like your credit history, income, other debts, and down payment. For example, a good mortgage rate for someone with a low credit score tends to be higher than for someone with a higher credit score.
It is important to understand what will affect your individual rate and to work on optimizing your finances so that you can benefit from the most competitive rate based on your financial situation.
Do different types of mortgages have different rates?
Mortgage rates can be different depending on the type. For example, fixed rate mortgages tend to be higher than variable rate mortgages. However, variable rate mortgages tend to have lower rates for a predetermined period of time and then fluctuate as they adjust to current market conditions.
Are the interest rates and the APR the same?
Interest rates and APR are not the same. An annual percentage rate (APR) reflects the additional charges associated with your mortgage, which includes interest. The interest rate reflects the cost that homeowners pay to borrow money. These fees include charges like setup fees and discount points, which is why the APR is usually higher than the interest rate.
How can I benefit from better mortgage rates?
Qualifying for better mortgage rates can save you tens of thousands of dollars over the life of the loan. Here are some ways to make sure you find the most competitive rate possible:
- Increase your credit score: A borrower’s credit rating is a major factor in determining mortgage rates. The higher the credit score, the more likely the borrower is to get a lower rate. It’s a good idea to look at your credit score to see how you can improve it, whether that’s by making payments on time or disputing errors on your credit report.
- Increase your deposit: Most lenders offer lower mortgage rates for those making a larger down payment. It will depend on the type of mortgage you are applying for, but sometimes a reduction of at least 20% could get you more attractive rates.
- Reduce your debt ratio: Also called DTI, your debt-to-income ratio looks at your total monthly debt and divides it by your gross income. Usually, lenders don’t want a DTI of 43% or more, as this may indicate that you may be having difficulty meeting your monthly obligations as a borrower. The lower your DTI, the less risky you will appear to the lender, which will translate into a lower interest rate.
How Much Mortgage Can I Afford?
Typically, homeowners can afford a mortgage that is two to two and a half times their gross annual income. For example, if you earn $ 80,000 a year, you can afford a mortgage of $ 160,000 to $ 200,000. Keep in mind that this is a general guideline and you need to look at additional factors to determine how much you can afford, such as your lifestyle.
First, your lender will determine what they think you can afford based on your income, debts, assets, and liabilities. However, you need to figure out how much you’re willing to spend, your current expenses – most experts recommend spending no more than 28% of your gross income on housing costs. Lenders will also look at your DTI, which means the higher your DTI, the less likely you are to afford a larger mortgage.
Remember to include other costs outside of your mortgage, which includes all applicable HOA fees, home insurance, property taxes, and home maintenance costs. Using a mortgage calculator can be helpful in this situation to help you understand how easily you can afford a mortgage payment.
What are mortgage points?
Also known as discount points, these are one-time fees or prepaid interest that borrowers buy to lower the interest rate on their mortgage. Each point of discount costs one percent of your mortgage amount, or $ 1,000 for every $ 100,000, and will lower the rate by a quarter of a percent, or 0.25. For example, if the interest rate is 4%, purchasing a mortgage point will reduce the rate to 3.75%.
How much do I need for a down payment?
The minimum you will need will depend on the type of mortgage. Many lenders require a minimum of 5% to 20%, while others like those backed by the government require at least 3.5%. The VA loan is the exception with no down payment conditions.
As a general rule, the larger your down payment, the lower your rate can be. Homeowners who deposit at least 20 percent will be able to save the most.
The national averages cited above were calculated based on the lowest rate offered by over 200 of the country’s major lenders, assuming a loan-to-value ratio (LTV) of 80% and an applicant with a credit score. FICO in the 700-760 interval. The resulting rates are representative of what clients should expect to see when receiving actual quotes from lenders based on their qualifications, which may differ from the advertised submission rates.
For our state’s best rate card, the lowest rate currently offered by a surveyed lender in that state is listed, assuming the same parameters of an 80% LTV and a credit score between 700. and 760.
These mortgage rates are for informational purposes only. Rates may change daily and are subject to change without notice. Loans above a certain threshold may have different loan terms, and the products used in our calculations may not be available in all states. Loan rates used do not include tax or insurance premium amounts. The terms of the individual lender will apply.