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While we try our best to get your the best rates, we cannot guarantee that they are always accurate. Casaplorer assumes no liability and provides no warranty for the accuracy of the information presented, and will not be held responsible for any damages resulting from its use. Rates shown are for informational purposes only and may differ by zipcode, county, and state. Estimated payments do not include taxes and insurance. Some state and county maximum loan amount restrictions may apply. Casaplorer is not endorsed or sponsored by any mortgage lender or government agency. For information regarding any of these rates, please contact the relevant mortgage lender.

What You Should Know

  • Your mortgage rate determines the amount of interest you will pay on your mortgage
  • Your mortgage rate is affected by the economy and your financial situation
  • To find the lowest mortgage rate, you need to compare what different lenders offer for your specific financial attributes
  • There are fixed mortgage rates that stay unchanged throughout the life of the loan and adjustable mortgage rates that fluctuate depending on a benchmark index
  • 30-year mortgages usually have lower monthly mortgage payments than 15-year mortgages, but the mortgage rate charged and interest paid over time is higher than for a 15-year mortgage
  • A mortgage rate lock is a guarantee the lender provides to the borrower to keep the mortgage rate unchanged for a typical period of 30 to 45 days
  • The amount you can borrow on a mortgage depends mostly on your income, debt, and credit score
  • The main reason borrowers choose to refinance is to take advantage of lower interest rates

Factors That Affect Your Mortgage Rate

Credit Score

Lenders use your credit score to see how reliable you are in paying what you owe back. The higher your credit score, the more reliable you are perceived to be. That is why lenders tend to offer better mortgage rates and loan terms to borrowers with a higher credit score.

Down Payment

Lenders generally require borrowers to put at least a 20% down payment. They do this because when you have more stake in the property, there is usually less risk for the lender. Generally, the higher the down payment you put, the lower the mortgage rate that you will get. However, you can also put less than a 20% down payment, but you would have to pay mortgage insurance which would increase your monthly payments. The down payment is also related to the Loan-to-Value ratio. The higher the down payment, the lower the loan-to-value ratio and the better the mortgage rate you will get.

Loan Term

Mortgages can have different terms. The term is the period during which the borrower will repay the loan. Generally, the longer the mortgage term, the higher the interest rate. This is because longer term loans present a higher risk for lenders, as well as higher costs to maintain them.

Fixed vs. Adjustable Rate

If you have a fixed interest rate, your mortgage rate will not change throughout the life of the loan. This is sometimes preferred by borrowers who do not want to run the risk of getting a higher interest rate in the future. There is also the option of adjustable interest rate, which normally stays fixed for a period of time, after which it fluctuates depending on a benchmark index, such as theprime rate.

Loan Type

Mortgage loans are separated into different categories. There are conventional loans,FHA, VA, and USDA loans. Your mortgage rate can vary depending on which type of loan you are applying for. Typically, conventional loans have slightly higher interest rates than the other types of loans. This is because FHA, VA, and USDA loans are backed by different government departments, which makes them less risky for lenders to give out. They can therefore offer you a lower interest rate.

What Type of Mortgage Should I Get?

There are two broad categories of mortgages: conventional mortgages and non-conventional mortgages. The main difference between the two is that conventional mortgages are not backed by government agencies, while non-conventional mortgages are. Because of this, conventional mortgages normally have stricter financial requirements than non-conventional ones.

ConventionalFHAVAUSDA
Who Can Apply?AnyoneAnyoneMilitary service members/veterans or their spousesLow-income earning individuals living in rural areas
Min. Credit Score620500No minimumNo minimum
Min. Down Payment3% - 20% 3.5%No minimumNo minimum
Mortgage Insurance0.4% - 2.25% annually1.75% upfront + 0.45%-1.05% annuallyNo Insurance1% upfront + 0.35% annually
Max. DTI ratio50%43%41%41%
Loan Term10,15, 20, or 30 years15 or 30 years15 or 30 years15 or 30 years

You need to compare the benefits and costs of the different options you qualify for in order to choose the type of mortgage that gives you the best deal. While non-conventional loans have lower down payment requirements, they come with hefty mortgage insurance payments. On the other hand, while conventional loans might require you to build your credit score before applying, they can provide you with more flexibility in loan term structures, down payment options and property types the mortgage can be used for.

Conventional mortgages are offered and insured by private lending institutions. There are two subsets of conventional mortgages: conforming and non-conforming mortgages.

Conforming loans:

  • Meet the requirements set by Fannie Mae and Freddie Mac
  • Have a borrowing limit that depends on county
  • Minimum credit score requirement of 620

Non-conforming/ Jumbo loans:

  • Do not meet the requirements set by Fannie Mae and Freddie Mac
  • No borrowing limit
  • Minimum credit score requirement of 700

Non-conventional loans are backed by various departments of the U.S. government. They mainly consist of FHA, VA, and USDA loans. These loans have looser financial requirements given that they are government-backed. However, you also have to be part of a certain demographic to be eligible for most of these loans.

  • FHA Loans → Aimed at low-income earners, individuals who have not yet built their credit score or have been bankrupt in the past
  • VA Loans → For U.S. military service members or veterans and their spouses
  • USDA Loans → For low-income earning individuals living in rural areas

Guide to Mortgage Rates

What is a mortgage rate?

A mortgage rate is the rate of interest that is charged by the lender when you take out a mortgage. If you borrow money to buy a house, you are expected to pay the lender more than what you borrow, in return for the benefit of using the lender’s money. How much more you pay on top of what you borrow is called interest and it is decided by the mortgage rate.

There are two types of mortgage rates:

Fixed Mortgage Rates

  • Stay unchanged for a specific period of time
  • Are usually slightly higher than adjustable interest rates
  • Provide you with more certainty in terms of how much you will pay monthly

Adjustable Mortgage Rates

  • Fluctuate as they are based on a benchmark index, such as the Prime rate
  • Are usually lower than fixed mortgage rates initially

What affects my mortgage rate?

Mortgage rates are generally determined by:

  1. Market economic factors such as the rate of economic growth
  2. The borrower’s personal financial attributes, such as their credit score

There is not much one can do about the economic factors as they are out of our control, however, one can increase their creditworthiness to get a lower mortgage rate. The lender offers lower rates to borrowers who prove to be less likely to default on their loan and this likelihood is determined by factors such as their Loan-to-value ratio, their credit score, their debt-to-income ratio, and more.

How long is a mortgage rate locked for?

A mortgage rate lock is an agreement between the lender and the borrower where the lender agrees to keep the mortgage rate fixed for a period of time. With interest rates changing continuously, this agreement serves as a guarantee the lender provides to keep your interest rate unchanged until a certain date. How long a mortgage rate stays locked for typically varies by lender. However, this period is usually 30 to 45 days free of charge for most lenders.

Interest rates fluctuate all the time so the rate you got when you first applied for the loan will probably be different from the mortgage rate at closing. They can rise, fall or stay the same. It is important to know what this means for you if you decide to lock in your mortgage rate.

Interest rates ↑ → Your mortgage rate doesn’t change → You benefit by locking in a lower interest rate

Interest rates ↓ → Your mortgage rate doesn’t change → You can’t take advantage of the lower rates ☹

The unchanged mortgage rate brings the borrower some certainty and peace of mind since they won’t have to worry about rising interest rates and will be more confident in predicting their monthly mortgage payments.

Moreover, if you believe that the closing process will take more time, you might have to request an extended option of the mortgage rate lock for which you will have to pay a fee. For those lenders that charge for a mortgage rate lock altogether, it usually costs between 0.25% - 0.5% of the loan amount to lock in your rate for 60 days or less and 0.06% - 0.375% to extend it.

Which lender offers the best mortgage rates?

While the first thing most borrowers look for is low mortgage rates, lenders should not only be compared by this standard. Sometimes, a lender might offer lower rates, but higher origination and closing costs. This means that when looking for a lender, you need to take other things into account apart from their mortgage rates. The Annual Percentage Rate can be a more accurate point of comparison as it includes other fees that add to the cost of the loan.

Using the mortgage’s annual percentage rate (APR) can make it easier to compare rates with different lenders. APR includes closing costs, discount points, and other fees, which makes it much more useful compared to looking at just the plain mortgage interest rate. A lender might have a deceptively low interest rate, but when looking at APR, their added fees might make it a not-so-attractive option.

Mortgage rates are quite personal and highly correlated to the borrower’s profile. The rate you get from a particular lender will depend on several factors relating to your financial situation, such as the down payment you can afford to make, your debt-to-income ratio, and your credit score. Therefore, even though on average, a particular lender might offer lower mortgage rates, that might not be the case for you. You would have to shop around for mortgage rates and compare which lender offers the lowest rate depending on your individual circumstances.

How does the Fed rate affect mortgage rates?

The Fed rate affects the mortgage rates indirectly. Adjustable interest rates tend to move in the same direction as the Fed rate. When the Fed rate increases, it causes the mortgage rate to increase as well and vice versa. However, the mortgage rate won’t always lag behind changes in the Fed rate. Mortgage lenders can often increase mortgage rates in anticipation of expected increases in the Fed rate. It is important to note that fixed interest rates are generally not affected by the movements in the Fed rate. They typically follow the 10-year Treasury yield.

The Federal reserve rate is the rate at which banks and other financial institutions borrow and lend to one another overnight to meet required reserve levels. The Fed rate is decided by the Federal Open Market Committee, which through various monetary policies can raise or cut the Fed rate to meet certain economic goals. A higher Fed rate means that it is more expensive for banks to borrow from one another. In this case, banks pass these costs on to the consumers by raising the interest rates on their loans.

Will mortgage rates go up?

With the recovery of the economy from the COVID-19 pandemic, it is expected for mortgage rates to go up. The bigger the overall growth of the U.S. economy in terms of jobs, consumer spending, etc., the higher the interest rates will go.

Among other factors, mortgage rates have been low so far because of the monetary policy from the Federal Open Market Committee (FOMC). The FOMC has kept interest rates low by having a Fed rate benchmark of 0% and by investing billions of dollars in Mortgage-Backed Securities (MBS).

Mortgage FAQ

Should I Get a 30-year or 15-year Mortgage?

Most homebuyers choose to go with the 30-year mortgage term because of the lower monthly mortgage payments that it offers. Some homebuyers choose a 15-year mortgage term because they don’t want to pay a lot in interest over time. Depending on your specific financial situation and future goals, one or the other can prove to be more beneficial.

ProsCons
30-Year Mortgage
Can use funds for other purposes
Less risk of default
Higher interest rates
Builds home equity slowly
More interest paid overall
15-Year Mortgage
Lower interest rates
Builds home equity quickly
Less interest paid overall
Higher monthly payment
Fewer funds left for other expenses
More risk of default

With a shorter-term mortgage such as a 15-year mortgage, the monthly payment will be higher for the same loan amount than with a 30-year mortgage because the amount you owe will be distributed throughout a shorter period of time, making your monthly payments larger. However, overall, a borrower ends up paying more with a 30-year mortgage than a 15-year one because of a large number of interest payments made. Moreover, to account for the risk that a 30-year mortgage carries and its costs, lenders usually charge a higher interest rate for longer-term mortgages.

With a lower monthly payment, 30-year mortgages allow homebuyers to either save a portion of their money or use it for other purposes. Meanwhile, with a 15-year mortgage, more of the homebuyers’ funds are tied into the mortgage payments, leaving less room for other expenses or savings during the life of the loan.

Click to compare 30 Year vs. 15 Year mortgages.

Can I deduct my mortgage payments from my income tax?

Yes, you can deduct the interest of your mortgage payments if you itemize your deductions. This means that when you file your income tax, you can include mortgage interest payments as expenses during the year, which will lower your net annual income and will in turn lower your tax liability. Discount points purchased can also be included in this in the year in which you pay for them. However, if you choose to take standard deductions you will not be able to deduct your interest.

There are certain rules on how much interest you can deduct, depending on the size of your loan and when you got it.

  • If you bought a house before December 15, 2017 → You can deduct interest paid on the first $1 million of your home loan
  • If you bought a house after December 15, 2017 → You can deduct interest paid only on the first $750,000 of your home loan
  • You need to itemize your tax return to be able to claim mortgage interest payment deductions
  • No deductions can be made for any other costs including principal payments, homeowners’ insurance, title insurance, down payment, or closing costs

What credit score do I need to get a mortgage?

The required credit score largely depends on the type of mortgage you are applying for. For a typical conventional mortgage, the credit score required is at least 620. However, jumbo loans usually require a higher credit score of 700 to account for the risk of lending above the limit of $822,375. Non-conventional mortgages, on the other hand, have lower credit score requirements. FHA-lenders ask for a credit score of 500 for a minimum down payment of 10% and a credit score of 580 for a minimum down payment of 3.5%. VA loans and USDA loans have no minimum credit score requirements.

Type of LoanCredit score required
ConformingAt least 620
JumboAt least 700
FHA500 for a minimum down payment of 10% 580 for a minimum down payment of 3.5%
VANo minimum credit score requirement
USDANo minimum credit score requirement

Conventional loans are offered by private lending institutions and are not backed by government agencies. Since they are not backed, the lenders assume a higher level of risk when giving out these loans. Therefore, conventional loans have stricter financial requirements including a higher credit score.

Non-conventional loans are backed by different departments of the U.S. government. There are three types of non-conventional loans: FHA loans, VA loans, and USDA loans. Approved lenders find it less risky to give out these loans since they are insured by the government, meaning that the lender is protected in the case that the borrower defaults on the loan.

Therefore, if you haven’t had the chance to build your creditworthiness yet and have a low credit score, non-conventional loans might be the right choice for you. While non-conventional loans have lower credit score requirements, you will need to be part of certain groups in order to be eligible. This includes low and medium-income households for FHA loans, rural areas for USDA loans, and veterans and active service members for VA loans.

How much can I borrow for a mortgage?

Generally, how much you can borrow will depend on several factors such as your income, your mortgage term, current monthly debt payments, and type of loan. These and other factors will determine how much a lender will be willing to lend you. However, the real question is not how much you can borrow but rather how much you can afford.

Factors that affect your borrowing limit:

  • Credit History → Lenders will check your credit history to determine how reliable you are in paying back debts. Good credit history will have a positive impact on your borrowing capacity..
  • Debt-to-Income Ratio → A lower DTI ratio leaves more room for borrowing. Your DTI ratio is determined by your income and the monthly payments you have to make to cover other debts such as student loans, car loans, and any minimum credit card payments.
  • Down Payment → The amount you put down affects your Loan-to-Value ratio. The bigger the down payment, the lower your LTV ratio. A low LTV ratio indicates that you are a less risky borrower which has a positive effect on how much lenders are willing to lend you..
  • Loan Type → Conforming loans have a borrowing limit that depends on the county you are located in. To borrow an amount above the limit, you would have to apply for a jumbo loan.

To figure out how much you can afford to borrow, you will first need to start by creating a forecasted budget. By adding up your monthly sources of income and your expenses, you can determine how much money you can pay monthly to cover mortgage payments and other costs associated with being a homeowner. Depending on the term of the loan, the down payment, and the expected interest rate, you can determine how much you would be able to borrow through a mortgage.

What is a discount point?

A discount point is a form of prepaid interest available to the borrowers for a certain fee. Basically, a borrower can purchase discount points to reduce the interest rate on their mortgage. One discount point usually costs 1% of the whole loan amount. Thus, if you have a loan of $300,000, one discount point would cost you $3,000. Typically, one discount point will reduce your mortgage rate by approximately 0.125% to 0.25% depending on the lender, the type of loan, and current interest rates.

Let's look at a $300,000 mortgage with a term length of 30 years. The current interest rate is 3%. Your mortgage lender offers 1 discount point for $3,000 for a reduction in your mortgage rate to 2.75%.

Over the 30 year life of your mortgage, the 1 discount point can save you $14,432 in interest saved. The break-even period is 6 years. This means that if you sell your home before 6 years are up, you would have paid more for the discount point than what you have saved in interest. Having the mortgage for more than 6 years means that the discount point would save you more in interest compared to the cost of the discount point.

Discount points can be a very effective tool to lower the cost of your mortgage by decreasing your interest payments. There are a few things to remember before considering purchasing discount points.

  • There is generally a limit on how many discount points you can buy. This means that lenders won’t let you prepay your entire interest upfront leading to a zero interest rate.
  • In a refinance, you can rollover the cost of your discount points into the new loan balance
  • Discount points are tax-deductible in the year in which you pay for them.
  • You have to determine if buying discount points would result in greater overall interest savings for you. If you buy discount points, you need to make sure that you are going to at least break even on the amount you pay by the interest that you will save throughout the years.

How can I get a mortgage pre-approval?

To get a mortgage pre-approval, you basically have to apply for a mortgage. In order to get pre-approved, you will need to submit a number of documents to the lender so they can assess your income and ability to pay back the loan. These documents will provide information on:

  • Identification
  • Employment verification
  • Proof of income
  • Proof of assets
  • Credit history
  • Debt-to-income ratio

The mortgage pre-approval letter usually expires in 60-90 days, therefore, if you haven’t decided on a home yet, you might need to get a renewal of your mortgage pre-approval. You can get a renewal by providing your lender with your latest financial and credit information.

A mortgage pre-approval is the process that lets you find out how much you can borrow through a mortgage. The lenders do this by conducting a thorough check on the client’s credit history, income, and assets. It is important to get a mortgage pre-approval as soon as you start your homebuying process. The mortgage pre-approval also helps your real estate agent have a better understanding of your finances and what house price range you can afford. Moreover, it helps borrowers make stronger offers when looking for houses since they can show proof to home sellers that they are serious about their offers.

It is important to note that a mortgage pre-approval is different from a pre-qualification. A pre-qualification is just the first step where the lender estimates how much you will be able to borrow based only on the information you provide, meaning that the lender won’t thoroughly assess your financial situation. Therefore, a pre-qualification does not provide certainty that you will be able to borrow the said amount.

When Should I Refinance?

Most people choose to refinance their mortgages in order to take advantage of lower mortgage rates. However, there are several other reasons why someone would choose to refinance their mortgages, such as to convert from an ARM to a Fixed-rate Mortgage, change the loan term, remove their mortgage insurance or tap into their home’s equity through a cash-out refinance.

  1. Lower mortgage rates - When current interest rates are low, and you are stuck in a higher interest rate loan agreement, you might consider refinancing your loan to lower the interest rate. This can make a huge difference in your future monthly payments.
  2. Converting from ARM to Fixed rate - When you have reason to believe that interest rates are going to increase in the near future, you might find it beneficial to switch from an adjustable-rate mortgage to a fixed-rate mortgage through a refinance.
  3. Changing the loan term - If you currently have a 15-year mortgage and are noticing that you cannot afford its large monthly mortgage payments, you can choose to convert to a 30-year mortgage. On the other hand, if you want to pay less in interest overall and have the necessary funds, you can convert from a 30-year mortgage to a 15-year one.
  4. Removing mortgage insurance - The only way that you can remove the mortgage insurance for an FHA loan is through a mortgage refinance. Therefore, when you reach 20% equity in your home with an FHA loan, it would be a good idea to refinance. On the contrary, you can simply stop paying your private mortgage insurance for conventional loans, when you reach a Loan-to-Value ratio of 78%.
  5. Cash-out Refinance - A cash-out refinance allows you to borrow from your home-equity using a new larger mortgage. How much more you can borrow depends on how much home equity you own at the time.

A mortgage pre-approval is the process that lets you find out how much you can borrow through a mortgage. The lenders do this by conducting a thorough check on the client’s credit history, income, and assets. It is important to get a mortgage pre-approval as soon as you start your homebuying process. The mortgage pre-approval also helps your real estate agent have a better understanding of your finances and what house price range you can afford. Moreover, it helps borrowers make stronger offers when looking for houses since they can show proof to home sellers that they are serious about their offers.

It is important to note that a mortgage pre-approval is different from a pre-qualification. A pre-qualification is just the first step where the lender estimates how much you will be able to borrow based only on the information you provide, meaning that the lender won’t thoroughly assess your financial situation. Therefore, a pre-qualification does not provide certainty that you will be able to borrow the said amount.