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Mortgage rates are starting the week higher. New borrowers applying for a 30-year fixed-rate mortgage will see rates averaging 4.216%. Those interested in a 15-year fixed-rate loan can expect an average rate of 3.226%, while those shopping for a 5/1 adjustable-rate mortgage will see rates averaging 2.856%.
Refinance borrowers can also expect higher rates today. The 30-year refi loan has an average rate of 4.285%, while the 15-year rate is at 3.294% and the 5/1 ARM is at 2.906%.
Money’s daily mortgage rates reflect what a borrower with a 20% down payment and a 700 credit score — roughly the national average score — might pay if he or she applied for a home loan right now. Each day’s rates are based on the average rate 8,000 lenders offered to applicants the previous business day. Freddie Mac’s weekly rates will generally be lower, since they measure rates offered to borrowers with higher credit scores.
Looking for a loan? Check out Money’s lists of the best mortgage lenders and best refinance lenders.
The advantages of a 30-year fixed-rate mortgage are its predictable interest rate, long payback time and relatively low monthly payments. All of these features make the 30-year the most popular mortgage in America. The trade-off is that the interest rate will be higher compared to a shorter-term loan, making its overall costs higher as well.
A 15-year fixed-rate mortgage will have a lower interest rate compared to a 30-year loan. The lower rate, combined with the shorter payback time, means you’ll pay less in overall costs. This loan may not fit everyone’s budget, however, because the monthly payments will be higher than those of an equivalent 30-year loan.
Some borrowers opt for an adjustable-rate mortgage. ARMs will start with a low, fixed, introductory interest rate that will eventually become adjustable. When this happens, the rate will periodically adjust based on market conditions. A 5/1 ARM, for example, will have a fixed rate for five years and then adjust on a yearly basis. While the introductory rate is usually low, there is a risk that the interest could increase significantly after it becomes adjustable.
The average rates for FHA, VA and jumbo loans are:
The average refinance rates for 30-year loans, 15-year loans and ARMs are:
Mortgage rates sank through 2020. Millions of homeowners responded to low mortgage rates by refinancing existing loans and taking out new ones. Many people bought homes they may not have been able to afford if rates were higher. In January 2021, rates briefly dropped to the lowest levels on record, but trended slightly higher through the rest of the year.
Looking ahead, experts believe interest rates will rise more in 2022, but also modestly. Factors that could influence rates include continued economic improvement and more gains in the labor market. The Federal Reserve has also begun tapering its purchase of mortgage-backed securities and said it anticipates raising the federal funds rate three times in 2022 to combat rising inflation beginning as soon as March.
While mortgage rates are likely to rise, experts say the increase won’t happen overnight and it won’t be a dramatic jump. Rates should stay near historically low levels through the first half of the year, rising slightly later in the year. Even with rising rates, it will still be a favorable time to finance a new home or refinance a mortgage.
Factors that influence mortgage rates include:
There is no universal mortgage rate that all borrowers receive. Qualifying for the lowest mortgage rates takes a little bit of work and will depend on both personal financial factors and market conditions.
Check your credit score and credit report. Errors or other red flags may be dragging your credit score down. Borrowers with the highest credit scores are the ones who will get the best rates, so checking your credit report before you start the house-hunting process is key. Taking steps to fix errors will help you raise your score. If you have high credit card balances, paying them down can also provide a quick boost.
Save up money for a sizeable down payment. This will lower your loan-to-value ratio, which means how much of the home’s price the lender has to finance. A lower LTV usually translates to a lower mortgage rate. Lenders also like to see money that has been saved in an account for at least 60 days. It tells the lender you have the money to finance the home purchase.
Shop around for the best rate. Don’t settle for the first interest rate that a lender offers you. Check with at least three different lenders to see who offers the lowest interest. Also consider different types of lenders, such as credit unions and online lenders in addition to traditional banks.
Also. take time to find out about different loan types. While the 30-year fixed-rate mortgage is the most common type of mortgage, consider a shorter-term loan like a 15-year loan or an adjustable-rate mortgage. These types of loans often come with a lower rate than a conventional 30-year mortgage. Compare the costs of all to see which one best fits your needs and financial situation. Government loans — such as those backed by the Federal Housing Authority, the Department of Veterans Affairs and the Department of Agriculture — can be more affordable options for those who qualify.
Finally, lock in your rate. Locking your rate once you’ve found the right rate, loan product and lender will help guarantee your mortgage rate won’t increase before you close on the loan.
Money’s daily mortgage rates show the average rate offered by over 8,000 lenders across the United States the most recent business day rates are available for. Today, we are showing rates for Friday, February 4, 2022. Our rates reflect what a typical borrower with a 700 credit score might expect to pay for a home loan right now. These rates were offered to people putting 20% down and include discount points.
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