Current mortgage and refinance rates for December 2020

Current Jumbo Mortgage Rates

Rates as of Friday, December 04, 2020 at 6:30 AM

Current Government Loan Rates

Rates as of Friday, December 04, 2020 at 6:30 AM

Mortgage refinancing is becoming more expensive

Refinancing your mortgage is now a little more expensive. In a surprise announcement in mid-August, mortgage giants Fannie Mae and Freddie Mac announced they would add a 0.5 percent fee on all refinancings that close after Dec. 1 and after. Because about two-thirds of conforming mortgages eventually get sold to those companies, most lenders are now pricing the fee into their refi quotes.

Take this new fee into consideration when finding your break-even point on a refinance, but keep in mind the fee is baked into the rate you get. That’s the point when you recoup the costs from refinancing and start saving. The fee won’t apply to mortgages below $125,000, or to jumbo mortgages or some government-subsidized loans.

You may be able to skip this fee if you work with a lender that holds the loans it originates in its own portfolio.

What you should know about the biggest national banks

In addition to comparing mortgage rates, you can compare lenders to find a match for your needs and preferences, such as the ability to apply for a loan online, the availability of certain loan products and terms, and whether there are fees or opportunities to save. To help you know your options, below, Bankrate has listed the biggest large-bank lenders in the U.S., based on originations in 2019, and important information about each. Keep in mind that in addition to banks, you can find mortgage offers from credit unions and independent institutions, as well.

Wells Fargo

Overview: Wells Fargo Home Mortgage, a division of Wells Fargo, is one of the largest lenders in the U.S. As a full-service lender headquartered in San Francisco, California, it offers a wide range of mortgage options. Homebuyers can find conventional, FHA, VA, USDA, jumbo, fixed-rate and adjustable-rate (ARM) mortgages. Refinance and home equity opportunities are available as well.

Mortgages from Wells Fargo are available in all 50 states; however, it doesn't have branch locations in Hawaii, Indiana, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Missouri, New Hampshire, Ohio, Oklahoma, Vermont or West Virginia. The application process can be started online or via phone.

What to know:

• Wells Fargo Home Mortgage is a large, full-service lender originating loans nationwide.
• The bank has online application submission and tracking.
• The bank offers a broad range of loan types, including refinance and home equity loans, as well as first-time homebuyer loan programs and education.
• The bank accepts down payments as low as 3 percent on fixed-rate mortgages.

Keep in mind:

• Branch access isn’t available in 13 states, although loans are available nationwide.
• The bank doesn't offer a completely online process — you must speak with a mortgage representative.

JPMorgan Chase Bank

Overview: As one of the biggest players in the mortgage industry, Chase Home Lending — a division of JPMorgan Chase — is a full-service lender headquartered in New York.

Chase offers a broad selection of homebuying programs, including conventional, FHA, VA and jumbo loans with fixed and adjustable-rate (ARM) options. It also offers rate-and-term refinancing, cash-out refinancing and home equity lines of credit. Loans are available in all 50 states.

One standout feature the lender offers is the Chase Closing Guarantee, which is a program that guarantees an on-time closing (as soon as three weeks after submitting documents) for current customers buying a new home. If the lender isn’t able to close on time, borrowers receive $2,500 cash back. Borrowers can prequalify for a loan online, in person at a branch or over the phone.

What to know:

• JPMorgan Chase Bank is a large, full-service lender originating loans nationwide.
• Borrowers can submit and track documents online.
• The bank offers a broad range of loan types, including refinancing and home equity loans.
• The bank features an on-time closing guarantee.

Keep in mind:

• The bank doesn’t offer brick-and-mortar locations in every state.
• The bank charges rate lock, origination and underwriting fees.
• The bank doesn't offer a completely online process — you must speak with a mortgage representative.

Bank of America

Overview: Bank of America originates loans in all 50 states. The Charlotte, North Carolina-based lender is one of largest in the U.S. and offers conventional, FHA, VA, jumbo, low-down payment, fixed-rate and adjustable-rate (ARM) loans. It also offers rate-and-term and cash-out refinance options. Home equity lines of credit are available as well.

Borrowers can apply entirely online, via phone or in person at a branch. Lending specialists are available to answer borrower questions at any time during the process.

What to know:

• Bank of America provides an entirely online mortgage process.
• The bank offers low-down payment options and guidance for first-time homebuyers.
• Current customers may qualify for an origination fee reduction of $200 to $600.
• The bank features transparent interest rates for various mortgage products on its website.

Keep in mind:

• The bank charges origination fees and other closing costs.
• The bank doesn't offer USDA or renovation loans.
• Origination fee discounts are only available to Bank of America Preferred Rewards clients.

U.S. Bank

Overview: U.S. Bank is the fifth-largest bank in the nation and also one of the biggest originators of mortgage loans. Based out of Minneapolis, Minnesota, U.S. Bank provides home loans to borrowers in all 50 states, with a large selection of loan products. Borrowers can choose from fixed- and adjustable-rate financing on conventional, FHA, VA, jumbo, investment property and new construction and lot loans.

U.S. Bank also offers traditional, cash-out and streamline refinance options, as well as home equity loans and home equity lines of credit (HELOCs). Borrowers can prequalify and apply completely online, by phone or in person at a branch.

What to know:

• U.S. Bank is a large, full-service lender originating loans nationwide.
• The bank allows borrowers to apply completely online.
• The bank offers an extensive range of mortgage, refinance and home equity products.

Keep in mind:

• The bank doesn’t offer personalized rates online.
• Loan officers are only available in 40 states.
• The bank may charge closing costs on home loans.

Flagstar Bank

Overview: Based out of Troy, Michigan, Flagstar Bank is a subsidiary of Flagstar Bancorp. This large full-service lender offers a broad selection of purchase, refinance and home equity options to borrowers nationwide. The bank's mortgage division operates online and in brick and mortar locations.

Home loan options available through Flagstar include fixed-rate, adjustable-rate, conventional, FHA, VA, USDA, HFA, jumbo, high balance and multiple property loans. It also provides refinance and home equity loans. Borrowers can start their application online, in person at a branch or by phone.

What to know:

• Flagstar Bank is a large, full-service lender originating loans nationwide.
• The bank allows borrowers to apply online, as well as track and manage payments online.
• The bank offers a wide range of loan options, including refinance and home equity loans.

Keep in mind:

• The bank only has branches in certain states.
• The bank may charge closing costs between 2 percent and 5 percent of the purchase price.
• The bank doesn't offer a completely online process — you must speak with a mortgage representative.

The Bankrate guide to mortgages

By Jeff Ostrowski

What is a mortgage?

A mortgage is a type of loan designed for buying a home. Mortgage loans allow buyers to break up their payments over a set number of years, paying an agreed amount of interest. Mortgages are also legal documents that allow the home seller to claim the property if the buyer doesn’t make their payments. It also protects the buyer by forbidding the seller from taking the property while regular payments are being made. In this way, mortgages protect both the seller and the buyer.

How does a mortgage work?

A mortgage is a home loan that uses your house as collateral. There are many types of mortgages, from government-backed loans designed for people who meet certain criteria like veterans (VA loans) or first-time homebuyers (FHA loans) to privately-owned loans.

Repayment options also vary. The most common mortgage requires the borrower to pay it back over 30 years, but there are also 20- and 15-year mortgages.

Mortgages come with interest, which can be charged at either a fixed or adjustable rate. Fixed-rate mortgages lock in the interest rate you qualify for so it never changes over the life of your loan. Adjustable-rate mortgages start with one rate but may move up or down at set intervals as interest rates in the market change. So in a rising-rate environment, your interest rate will also rise.

What is the difference between APR and interest rate?

The difference between APR and interest rate is that the APR (annual percentage rate) is the total cost of the loan including interest rate and all fees. The interest rate is just the amount of interest the lender will charge you for the loan, not including any of the administrative costs. The APR is a more accurate picture of how much the loan will cost you.

What are the different types of mortgages?

There are three main types of mortgages: conventional, government-insured, and jumbo loans, also known as non-conforming mortgages.

Conventional mortgages

• Fixed-rate mortgages: A fixed-rate mortgage has an interest rate that doesn’t change throughout the life of the loan. In that way, borrowers are not exposed to rate fluctuations. For example, if you have a fixed-rate mortgage with a 4.5 percent interest rate and prevailing rates shoot up to 6 percent the next week, year or decade, your interest rate is locked in, so you don’t ever have to worry about paying more. Of course if rates fall, you’ll be stuck with your higher rate. Keep in mind, fixed-rate only refers to the rates, but there are many types of fixed-rate mortgages, such as 15-year fixed rate, jumbo fixed-rate and 30-year fixed rate mortgages.
• Adjustable-rate mortgages: Adjustable-rate mortgages, or ARMs, have an initial fixed-rate period during which the interest rate doesn't change, followed by a longer period during which the rate may change at preset intervals. Unlike a fixed-rate mortgage, ARMs are affected by market fluctuations. So if rates drop, your mortgage payments will drop. However, the reverse is also true — when rates rise, your monthly payments will also rise. Generally, interest rates are lower to start than with fixed-rate mortgages, but since they’re not locked in to a set rate, you won't be able to predict future monthly payments. ARMs come with an interest rate cap above which your loan can not rise.

Government-insured mortgages

• FHA loans, VA loans, USDA loans: Government-insured or government-backed loans are backed by three agencies: the Federal Housing Administration (FHA loans), the U.S. Department of Agriculture (USDA loans) and the U.S. Department of Veterans Affairs (VA loans). The U.S. government isn’t a mortgage lender, but it sets the basic guidelines for each loan type offered through private lenders. Government-backed loans can be good options for first-time homebuyers as well as folks who have a lower down payment or smaller budget as the requirements are usually looser than mortgages not secured by the government, these are known as conventional mortgages.

Non-conforming mortgages

• Jumbo mortgages: Jumbo mortgages are conventional loans that have non-conforming loan limits. This means the home prices exceed federal loan limits. For 2020, the maximum conforming loan limit for single-family homes in most of the U.S. is $510,400, according to the Federal Housing Finance Agency. Jumbo loans are more common in higher-cost areas and generally require more in-depth documentation to qualify.

What is the best mortgage loan type for me?

The best mortgage type depends on your budget and financial goals. Some people want lower monthly payments, even if that means paying more in interest over the life of the loan; in that case, a 30-year mortgage is likely the best option. Whereas others might be able to afford bigger monthly payments and want to minimize the amount of interest they pay, which would make the 15-year mortgage a better choice.

As far as interest rates, a fixed-rate is usually the best choice for folks who plan on staying in their home longer than a few years. Because adjustable-rate mortgages (or ARMs) usually have a lower interest rate to begin with, people who are going to sell their house within a couple years (or before they expose themselves to higher interest rates) might choose that option.

How much can I borrow for a mortgage?

The amount you can borrow depends on a variety of factors, including how much you’re qualified for (depending on your income, among other factors) as well as what type of loan you have. Conforming mortgages have limits while jumbo loans allow borrowers to exceed those limits. It’s a good idea to figure out your budget before you start shopping for a house, so check out Bankrate’s "how much house can I afford?" calculator.

What is a discount point?

Discount points help homebuyers reduce their monthly mortgage payments and interest rates. A discount point is most often paid before the start of the loan period, usually during the closing process. It's a type of prepaid interest made on the loan.

The cost of a point depends on the value of the borrowed money, but it's generally 1 percent of the total amount borrowed to buy the home. You can read more about discount points here.  

FHA mortgage lenders are making fewer loans to the riskiest borrowers

Federal Housing Administration mortgages offer forgiving standards for down payments and credit scores, making FHA loans a lifeline for buyers trying to squeeze into an increasingly unaffordable housing market.

However, the coronavirus recession has hit FHA borrowers hard -- and that means lenders are tightening the availability of FHA loans.

As of mid-2020, a record 15.7 percent of FHA borrowers were behind on their mortgage payments, according to the Mortgage Bankers Association. By contrast, the delinquency rate for conventional loans stood at just 6.7 percent.

FHA loans let borrowers put down as little as 3.5 percent. Borrowers who take conventional loans -- those backed by mortgage giants Fannie Mae and Freddie Mac -- typically make down payments of 20 percent or pay private mortgage insurance with smaller down payments.

And FHA loans are available to borrowers with credit scores as low as 580, although the average credit score for FHA borrowers is about 100 points north of that mark.

FHA lenders loosened their lending requirements in 2018 and 2019. Since the pandemic, however, FHA lenders have grown stricter.

A Bankrate review of FHA data shows that FHA lenders now turn away applicants with the rockiest credit histories. In 2018 and 2019, nearly two-thirds of FHA loans went to borrowers with credit scores below 680. This year, that share fell to 58 percent.

Finding the best rate

How do I find the best mortgage rate?

The first step in getting the best mortgage rate is to decide what type of mortgage best suits your goals and budget. Typically, 15-year mortgages have lower rates but larger monthly payments than the more popular 30-year mortgage. Similarly, adjustable rate mortgages usually have lower rates to begin with, but the downside is that you’re not locked into that rate, so it can rise over the life of your loan.

Once you’ve determined what type of loan works for you, you should shop around. With so many lenders to choose from, borrowers should solicit quotes from multiple lenders to get the best rate. Be sure to look at the APR, not just the interest rate. The APR is the total cost of the loan (which includes the interest rate and other fees). Some lenders might have the same interest rate but different APRs, which means you’ll be charged different fees.

How are mortgage rates set?

It’s not an exact science, but mortgage rates are influenced by a variety of factors, including Federal Reserve policy, Treasury bond interest rates, supply and demand in the housing market and even inflation. Lending institutions have a range of rates they offer each day, but the specific interest quoted to any single borrower is determined partly by the applicant’s personal financial situation.

When is the right time to get a mortgage?

The right time to get a mortgage is when your budget allows for it. Some people wonder if waiting for rates to drop is a good idea, but experts say it’s not. There are a variety of factors that influence mortgage rates, so there's no way to accurately predict if rates will rise or fall. Now is an especially good time to get a mortgage thanks to low rates. Keep in mind though: demand for home loans is high, so the process may take longer than usual.

How do I find personalized mortgage rates?

The only way to get a personalized mortgage rate is to apply for a mortgage. The good news is that most lenders don’t charge application fees and applying with multiple lenders (to see who offers the best rate) won’t negatively affect your credit score.

Lenders consider your credit score, income, debt-to-income ratio and, sometimes, assets when determining what mortgage rate you’ll get. Lenders give high-risk borrowers (those with low credit scores, high debt-to-income ratio) higher interest rates to offset their exposure. Borrowers with a strong credit profile are more likely to get a lower mortgage rate.

How do I choose a mortgage lender?

Mortgage lenders come in all shapes and sizes, from online companies to old-fashioned brick-and-mortar banks — and some are a mix of both. Decide what type of service and access you want from a lender and balance that with how competitive their rates are. You might decide that getting the lowest rate is the most important feature for you, while others might go with a slightly higher rate because they can apply in person, for example.

Some banks offer discounts to existing customers, so you might be able to save money by getting a loan at the same place where your savings or checking account is.

How does the Federal Reserve affect mortgage rates?

Variable rates usually move in the same direction as the federal funds rate, so adjustable-rate mortgages would be affected. The federal funds rate, however, doesn’t directly affect long-term rates, which include financial products like 30-year fixed-rate mortgages; those tend to move with the 10-year Treasury yield.

What is a mortgage rate lock?

A mortgage rate lock freezes the interest rate. The lender guarantees (with a few exceptions) that the mortgage rate offered to a borrower will remain available to that borrower for a stated period of time. With a lock, the borrower doesn’t have to worry if rates go up between the time they submit an offer and when they close on the home.

Do you already own a home and want to refinance?

Refinancing your mortgage can be a good financial move if you lock in a lower rate. However, there are upfront costs associated with refinancing, such as appraisals, underwriting fees and taxes, so you’ll want to be sure the savings outpace the refinance price tag in a reasonable amount of time, say 18 to 24 months.

Learn more about refinance rates here.

Home repair loans

Maybe you’re looking to buy a fixer-upper, or refinance your mortgage or tap your home equity to fund repairs on the home you already have. If so, there are some loan options out there tailored just for you.

203(k) mortgages and similar products are designed to let you buy a house and finance necessary repairs under a single loan umbrella. There are specific kinds of work these loans have to be used to cover, so make sure your project fits the requirements.

You can also do a cash-out refinance of your existing mortgage, open a home equity line of credit (HELOC) or take out a home equity loan to pay for renovations. On top of all those options, there’s also personal loans, though those usually come with higher interest rates.

Check out Bankrate’s guide to paying for repairs and 203(k) mortgages for more information.