Today’s mortgage rates can have a huge impact on how much you pay for your home. Where a competitive mortgage rate can help you lower your monthly housing payment, overpaying for a home loan can leave you paying more interest than you should.
Fortunately, mortgage rates today are considerably lower than they were just a few years ago. This means you have the potential to lock in an exceptional mortgage rate right now, and this is true whether you are buying a home or refinancing a home loan you already have.
Ready to secure the best mortgage interest rates out there? Read on to learn what average mortgage interest rates look like right now, factors that impact rates, and how to make sure you qualify.
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So you want to buy a home. Do you know how much you can afford?
Here’s an important question you’ve probably been asking yourself: How do you know if you’re getting the best mortgage interest rates?
Generally speaking, you can gauge whether you’re getting a good deal by comparing today’s mortgage rates across the most competitive providers. Meanwhile, you can check with government agencies to find out the average mortgage rates nationwide. According to the Federal Reserve Bank of St. Louis, the average mortgage interest rate for a 30-year, fixed-rate home loan worked out to 2.86% as of September 21, 2021
Note that mortgage interest rates are based on factors such as the prime rate, meaning they can fluctuate over time along with market conditions. Also be aware that you may qualify for a lower (or higher) mortgage interest rate based on factors like your credit score, where you live, and the type of mortgage you apply for.
Generally speaking, you’ll want to check mortgage rates with at least three or four of the best home loan providers to find the best deal. By shopping around, you can compare lenders based on the mortgage rates they offer, closing costs they want to charge, and other factors that can help sweeten the deal.
The type of mortgage you choose can play a significant role in the mortgage rates you’re eligible for. While longer mortgages tend to charge higher rates, you may be able to secure the lowest possible interest rate if you choose a home loan with a shorter repayment timeline.
Likewise, variable interest rate loans that are based on market rates may offer lower initial rates right now versus fixed rate loans.
What are the types of mortgages most consumers choose from? Consider the following types of home loans before you apply:
While an array of factors go into determining your mortgage interest rate, your credit score is one of the biggest details lenders look at. Where a higher credit score and longer credit history can help you secure the lowest mortgage rates on the market today, it’s likely you’ll be stuck paying a higher rate if your credit is poor or just “okay.”
How much of a difference can your credit score make? According to myFICO.com, excellent credit can easily save you tens of thousands of dollars.
The myFICO.com loan savings calculator shows how much a mortgage will cost you, plus potential interest rates, based on your credit score rating and where you live. We used the calculator to show the average interest rate nationally for someone in each credit score range. We also use the chart below to show how much interest someone would pay on a $300,000 home loan based on market rates.
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A low credit score can negatively impact your mortgage application and interest rate.
The good news is that credit repair companies, such as Credit Saint, may be able to help you increase your credit score in within a few months!
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The chart shows the current APR based on credit score, the monthly payment (PI), and the total interest paid for a 30-year, fixed-rate mortgage for $300,000.FICO Score Current APR Monthly Payment (Principal and Interest) Total Interest Paid 620 to 639 4.158% $1,460 $225,494 640-659 3.612% $1,366 $191,746 660-679 3.182% $1,294 $166,002 680-699 2.968% $1,260 $153,471 700-759 2.791% $1,231 $143,249 760-850 2.569% $1,196 $130,615
The chart shows the current APR based on credit score, the monthly payment (PI), and the total interest paid for a 15-year, fixed-rate mortgage for $300,000.FICO Score Current APR Monthly Payment (Principal and Interest) Total Interest Paid 620 to 639 3.495% $2,144 $85,904 640-659 2.949 % $2,064 $71,591 660-679 2.519% $2,003 $60,549 680-699 2.305 % $1,973 $55,130 700-759 2.128% $1,948 $50,687 760-850 1.906% $1,918 $45,162
While mortgage interest rates always have the potential to go up or down over time, it seems very likely mortgage rates are at or nearing the bottom right now. This is based on the fact that historical mortgage rates have been higher for decades, and that there’s not much room to drop from where we’re at.
How much were mortgage rates in the past? According to the Federal Reserve Bank of St. Louis, mortgage rates surged the highest in 1981, when the average interest rate for a 30-year, fixed rate mortgage was well over 18%. Rates have dropped dramatically since then, making now an excellent time to take out a new home loan or refinance a home loan you already have.
Getting the best mortgage rates isn’t rocket science, but you may have to put in a little upfront work. From improving your credit to paying down other debts, here are the most important steps you can take to get the best mortgage rates out there today.
While on the hunt for the lowest mortgage rates, you should also make sure you have a general idea of how much house you can afford. While this part of the process can be quite tricky, there are several rules of thumb you can keep in mind.
For example, there’s the “29/41 rule.” This rule states that your housing payment (including principal, interest, taxes, and insurance) should make up no more than 29 percent of your gross income, and that your total debts should make up no more than 41 percent of your income.
With this rule, a couple with a gross monthly income of $10,000 (or $120,000 per year) would make sure their mortgage payment was no more than $2,900 and that their total debts were no more than $4,100 per month.
Meanwhile, someone with a gross monthly income of $5,000 (or $60,000 per year) would make sure their mortgage payment was no more than $1,450 and that their total debts were no more than $2,050 per month.
This rule is just one standard to keep in mind, but you should note that mortgage lenders may be willing to lend you more than you are comfortable with. At the end of the day, only you know the monthly payment amount you can easily keep up. Make sure to run the numbers, take a look at your budget, and have a feel for how much you can afford.
Today’s mortgage rates can vary based on your credit score, where you live, and plenty of other factors. However, the Federal Reserve Bank of St. Louis reports the average mortgage interest rate for a 30-year, fixed-rate home loan worked out to 2.86% as of September 21, 2021.
There are plenty of excellent mortgage lenders in operation today. Some of the best companies to check out include Quicken Loans, Rocket Mortgage, Veterans United, loanDepot, and Credible.
According to Rocket Mortgage, consumers with credit scores of 620 are most likely to qualify for a mortgage. However, FHA home loans are available for consumers with credit scores as low as 580. The same standard applies for most VA home loans.
FHA home loans let you purchase a home with a down payment as low as 3.5%. However, most conventional loans require a down payment of 5% to 15%. To secure the lowest mortgage rates, and to be able to drop private mortgage insurance (PMI), you should save up a down payment of at least 20%.