Mortgage industry insights

Last call for super-low mortgage rates?

Following through on a move it had telegraphed in September, the Federal Reserve in early November said it would slow its pace of buying Treasury bonds and mortgage-backed securities. The “taper,” as it's known by economists, sets the stage for higher mortgage rates.

However, mortgage rates are unlikely to spike as a result of the taper. Instead, the Fed’s changing stance sets the stage for a gradual rise in rates. The Mortgage Bankers Association expects the average mortgage rate on a 30-year mortgage to reach 3.5 percent by mid-2022 and 4 percent by late 2022.

For the millions of homeowners who have yet to lock in historically low interest rates by refinancing, that money-saving opportunity soon might fade away.

>> Read more about how mortgage rates could rise as the FED begins to taper & what to do now

Weekly mortgage interest rate trends

3-month trend	30-Year Fixed Rates	15-Year Fixed Rates	10-Year Fixed Rates	5/1 ARM Rates
12/3/2021	3.22%	2.54%	2.51%	2.74%
11/26/2021	3.18%	2.52%	2.49%	2.74%
11/19/2021	3.20%	2.51%	2.51%	2.74%
11/12/2021	3.07%	2.40%	2.38%	2.74%
11/5/2021	3.17%	2.48%	2.43%	2.77%
10/29/2021	3.14%	2.44%	2.42%	2.76%
10/22/2021	3.18%	2.46%	2.42%	2.80%
10/15/2021	3.20%	2.43%	2.38%	2.80%
10/8/2021	3.13%	2.39%	2.32%	2.79%
10/1/2021	3.18%	2.45%	2.40%	2.79%
9/24/2021	3.03%	2.30%	2.30%	2.79%
9/17/2021	3.02%	2.31%	2.31%	2.79%
9/10/2021	3.04%	2.32%	2.27%	2.80%
9/3/2021	3.03%	2.32%	2.33%	2.80%
8/27/2021	3.03%	2.33%	2.38%	2.80%
8/20/2021	3.02%	2.31%	2.33%	2.80%

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.

>> Read more about how the Federal Reserve affects mortgage rates

Why compare mortgage rates?

Shopping around for quotes from multiple lenders is one of Bankrate’s most crucial pieces of advice for every mortgage applicant. When you shop, it’s important to think about not just the interest rate you’re being quoted, but also all the other terms of the loan. Be sure to compare APRs, which include many additional costs of the mortgage not shown in the interest rate. Keep in mind that some institutions may have lower closing costs than others, or your current bank may extend you a special offer. There’s always some variability between lenders on both rates and terms, so make sure you understand the full picture of each offer, and think about what will suit your situation best.

How do I find and compare current mortgage rates?

Step 1: Determine what mortgage is right for you

When finding current mortgage rates, the first step is to decide what type of mortgage best suits your goals and budget. Most borrowers opt for 30-year mortgages, but that’s not the only choice. Typically, 15-year mortgages have lower rates but larger monthly payments than the more popular 30-year mortgage. 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 change over the life of your loan.

>> Read more about different types of mortgages

Step 2: Compare mortgage rates

Once you decide which mortgage type fits your needs, you can begin comparing current mortgage options. There’s only one way to be sure you are getting the best available rate, and that’s to shop as many lenders as possible. Aim for a minimum of three lenders. Look at online lenders, brick-and-mortar institutions and the banks or credit unions you do business with. Mortgage brokers may also offer good rates and terms.

Bankrate’s rate tables are updated throughout the day and contain up-to-date interest rates, APRs, upfront fees and monthly payments for the amount you choose. At the top of the page, you can select what kind of mortgage rates you would like to see and you will be taken to our rate table to compare rates. Use the rate table by filling in your own information to familiarize yourself with the mortgage rates that are currently available, then compare them to decide which option best suits your financial needs. Keep in mind that these are average rates for comparison shopping. Your exact rate will depend on multiple factors, including your credit score, the size of your loan, the location of your house and the term of your mortgage.

Bankrate’s mortgage calculator can help you estimate your monthly mortgage payment based on a variety of factors that you choose. You can input various home prices, down payments, loan terms and interest rates to see how your monthly payment changes.The monthly payment estimates show principal and interest based on current mortgage rates, property taxes and homeowners insurance. You can also factor in your credit score range, ZIP code and HOA fees to give you a more precise payment estimate.

The bottom line: Be sure to look at the APR, not just the interest rate when deciding the best mortgage rate for you. 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 do I choose a mortgage lender?

Mortgage lenders come in all shapes and sizes, from online companies to 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 where your savings account or checking account is.

And if your credit is a bit tarnished, many lenders offer loans with lower down payment and credit requirements through the FHA. Veterans will find VA mortgages especially attractive.

>> Read more about finding the best mortgage lender

Top 5 Bankrate Mortgage Lenders

• Better Mortgage Corporation: Best online lender
• Interfirst Mortgage Company: Best non-bank lender
• AmeriSave Mortgage Corporation: Best for refinancing
• Cardinal Financial Company: Best for low-credit score borrowers
• Fairway Independent Mortgage Corporation: Best for first-time homebuyers

Methodology

Bankrate helps thousands of borrowers find mortgage and refinance lenders every day. To determine the top mortgage lenders, we analyzed proprietary data across more than 150 lenders to assess which on our platform received the most inquiries within a three-month period. We then assigned superlatives based on factors such as fees, products offered, convenience and other criteria. These top lenders are updatedregularly.

Better Mortgage Company: Best online lender

Better.com (Better Mortgage) is an online mortgage lender offering a range of loan products in the majority of states in the U.S, and one of Bankrate’s best mortgage lenders overall.

Strengths: Better.com can save you time and money with three-minute preapprovals and 21-day closings, on average, and no lender fees. If you get a more competitive mortgage rate from another lender, you can also take advantage of the Better Price Guarantee, in which Better.com either matches that rate or gives you $100. The lender offers seven-days-a-week support by phone, as well, if you need it.

Weaknesses: If you’re looking for a VA loan or USDA loan, you’ll have to search elsewhere; Better.com currently doesn’t offer these loan types. Although the Better Price Guarantee can help you get a lower rate, it’s only available if you apply online directly through the lender.

>> Read Bankrate's full Better Mortgage review

Interfirst Mortgage Company: Best non-bank lender

Interfirst Mortgage Company (Chicago Mortgage Solutions LLC) is a combo-direct mortgage lender, wholesale lender (meaning it works with mortgage brokers) and correspondent lender.

Strengths: Interfirst has an A- rating from the Better Business Bureau and high marks from borrowers on Bankrate and elsewhere. Plus, with its multiple business channels, the lender can offer several loan options for many types of borrowers.

Weaknesses: Interfirst isn’t licensed in every state, and if you’re trying to compare mortgage rates, you might have a harder time, since this lender doesn’t showcase rates publicly on its website.

>> Read Bankrate's full Interfirst Mortgage Company review

AmeriSave Mortgage Corporation: Best for refinancing

AmeriSave Mortgage Corporation is an online mortgage lender, available in every state except New York, offering an array of loan products. Along with conventional loans and refinancing, the lender also offers government loans, and is one of Bankrate’s best FHA lenders in 2021.

Strengths: Like other online mortgage lenders, AmeriSave Mortgage Corporation has some of the most competitive rates out there, and about half of consumers have had their loans closed in 25 days. The lender also doesn’t charge a separate origination fee.

Weaknesses: You’ll still need to pay a flat $500 fee.

>> Read Bankrate's full AmeriSave Mortgage Corporation review

Cardinal Financial Company: Best for low-credit score borrowers

Cardinal Financial Company, which also does business as Sebonic Financial, is a national mortgage lender that offers both an in-person and online experience and a wide variety of loan products.

Strengths: Borrowers have a range of options with Cardinal Financial, with the lender able to accept credit scores as low as 620 for a conventional loan, 660 for a jumbo loan, 580 for an FHA or USDA loan and 550 for a VA loan. The lender also offers speedy preapprovals, and some borrowers have been able to close in as little as seven days (although the average is 30).

Weaknesses: Cardinal Financial’s current mortgage rates and fees aren’t listed publicly on its website, so you’ll need to consult with a loan officer for specifics pertaining to your situation.

>> Read Bankrate's full Cardinal Financial Company review

Fairway Independent Mortgage Corporation: Best for first-time homebuyers

With more than 700 branches, Fairway Independent Mortgage Corporation can offer an in-person experience to both first-time and repeat homebuyers across the U.S.

Strengths: TIf you’ve never taken out a mortgage before, Fairway has an extensive glossary of mortgage terms you can read up on, several mortgage calculators and a homebuyer guide with a checklist, dos and don’ts and more. The lender also offers first-time homebuyer-friendly loans, including FHA loans, and a mobile app, FairwayNow, where you can send direct messages and track your loan status.

Weaknesses: You’ll have to talk to a loan officer to find out rates and fees; these aren’t available readily on Fairway’s website.

>> Read Bankrate's Fairway Independent Mortgage Corporation review

How to get a mortgage

It is important to prepare for the mortgage application process to ensure you get the best rate and monthly payments within your budget.

Here are quick steps to prepare for a mortgage:

1. Build your credit
2. Set a limit on what you can afford
3. Set savings aside for both down payment and expected monthly payments
4. Research the best type of mortgage for you
5. Get preapproved
6. See multiple houses within your budget
7. Apply for a mortgage loan
8. Get approved!
9. Close on your new house

>> Read more about the mortgage process in our how to get a mortgage guide

You should also make sure you are ready to be a home-buyer. While it is advantageous to get a mortgage when rates are low, first ensure that it makes sense for your budget and long term financial goals. Rates will also vary by lender and other factors such as down payment and credit score.

>> Read more about buying a house in 2021.

How much mortgage can I afford?

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.

Different types of mortgages

There are many different types of mortgages and it’s important to understand your options so you can select the loan that’s best for you: conventional, government-insured, and jumbo loans, also known as non-conforming mortgages.

Conventional mortgages

These are loans that ultimately are bought by Fannie Mae or Freddie Mac, the big investors that play an important role in the lending market.

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 3.5 percent interest rate and prevailing rates shoot up to 5 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. The requirements are usually looser than those for mortgages not secured by the government. These are known as conventional mortgages. The interest rates on FHA, VA and USDA loans are similar to conventional mortgages, but fees and other costs are higher.

Non-conforming mortgages

Jumbo mortgages

Jumbo mortgages are loans that exceed federal loan limits for conforming loan values. For 2021, the maximum conforming loan limit for single-family homes in most of the U.S. is $548,250, 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. Jumbo loans can be a bit more expensive than conforming loans.

>> Read more about different types of mortgages

What factors determine my mortgage rate?

Lenders consider these factors when pricing your interest rate:

• Credit score
• Down payment
• Property location
• Loan amount/closing costs
• Loan type
• Loan term
• Interest rate type

Your credit score is the most important driver of your mortgage rate. Lenders have settled on this three-digit score as the most reliable predictor of whether you’ll make prompt payments. The higher your score, the less risk you pose -- and the lower rate you’ll pay.

Lenders also look at the amount of your down payment. For instance, if you put 20 percent down, you’re viewed as a lower risk, and you might get a lower rate than someone who’s financing nearly all of their home purchase. From the lender’s viewpoint, the more skin the borrower has in the game, the more likely the mortgage will be repaid on time and in full. (That’s also why lenders require you to pay private mortgage insurance with less than 20 percent down.)

Rolling additional closing costs into the loan affects your mortgage rate as well. With these costs added to what you owe, you’ll typically pay a higher interest rate than someone who pays those fees upfront. Borrowers might also pay higher rates for jumbo loans -- mortgages above the limits for conforming mortgages.

The type of mortgage you choose including the loan term and the interest type may also affect your rate. You’ll pay lower interest rates for 15-year mortgages than for 30-year loans because of the shorter time horizon--paying off the loan faster means less risk for the lender.. Adjustable-rate mortgages, which have largely disappeared as fixed rates have plumbed new lows, come with lower initial rates, but when the loan resets, usually annually or every six months, rates can fluctuate with the market for the remainder of the loan term.

What is the best credit score to get a mortgage?

Lenders reserve their most competitive rates to borrowers with excellent credit scores -- usually 740 or higher. However, you don’t need spotless credit to qualify for a mortgage. Loans insured by the Federal Housing Administration, or FHA, have a minimum credit score requirement of 580, although you’ll probably need a score of 620 or higher to qualify. (While FHA loans offer competitive rates, the fees are steep.)

To score the best deal, work to boost your credit score above 740. While you can get a mortgage with poor or bad credit, your interest rate and terms may not be as favorable.

>> Read more about what credit score you need to buy a house

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. By capturing points and fees, the APR is a more accurate picture of how much the loan will cost you, and allows you to compare loan offers with differing interest rates and fees.

Here’s what may be included in the APR:

• Interest rate.That’s pretty straightforward and is simply the percentage rate paid over the life of the loan.
• Points.This is an upfront fee the borrower can opt to pay to lower the interest rate of the loan. Each point, which is also known as a discount point, costs 1 percent of the mortgage amount. So, one point on a $300,000 mortgage would cost $3,000 upfront.
• Mortgage broker fees.Brokers can help borrowers find a better rate and terms, but their services must be paid for when the loan closes. This cost is shown in the APR and can vary. The broker's commission typically ranges from 0.50 percent to 2.75 percent of the loan principal.
• Some closing costs, including loan origination fees.But title insurance and prepaid items are not and these costs are considerable. Closing costs typically range from about 2 to 5 percent of the loan amount.

>> Read more about APR vs. interest rate

How do I get the best mortgage rate?

Shopping around is the key to landing the best mortgage rate. Look for a rate that’s equal to or below the average rate for your loan term and product. Compare rates from at least three, and ideally four or more, lenders. This lets you make certain you’re getting competitive offers. Check with a variety of types of lenders -- large banks, credit unions, online lenders, regional banks, direct lenders and mortgage brokers. Bankrate offers a mortgage rates comparison tool to help you find the right rate from a variety of trusted lenders.

Interest rates and terms can vary significantly among lenders depending on how much they want your business and how busy they are processing loans. Many lenders staffed up during the refinancing boom of 2020 and in 2021 are lowering their profit margins to keep enough new mortgages in the pipeline. As online and non-bank lenders take an ever-greater share of the mortgage market, expect to see the deals get even better no matter where interest rates go.

Keep in mind that mortgage rates change daily, even hourly. Rates move with market conditions and can vary by loan type and term. To ensure you’re getting accurate rate quotes, be sure to compare similar loan estimates based on the same term and product.

>> Read more about how to get the best mortgage rate

Mortgage FAQs

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 mortgage holder to (re)claim the property if the buyer doesn’t make their payments. It also protects the buyer by forbidding the mortgage holder from taking the property while regular payments are being made. In this way, mortgages protect both the mortgage holder and the buyer.

>> Read Bankrate's guide to what a mortgage is

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.

When should I lock my mortgage rate?

Most lenders offer a 30- to 45-day rate lock free of charge. This means if the interest rate increases before your loan closes, you get the stated rate. However, if rates fall you won’t benefit unless you restart the loan process, a costly and time-consuming endeavor.

Although some lenders offer a free rate lock for a specified period, after that period they may charge fees for extending the lock.

>> Read more about if you should lock your mortgage rate today

Pros and cons of getting a mortgage vs. renting

Homeownership is synonymous with the American dream, but the housing boom has pushed this goal out of reach of many. Some of the advantages and disadvantages of homeownership:

Pros

• A home is a powerful way to build wealth over time.
• Homeownership provides the certainty of knowing where you’ll live from one year to the next.
• With a fixed-rate mortgage, you know your principal and interest costs won’t change. A landlord can boost your rent when your lease is up.

Cons

• Homeownership is expensive, prohibitively so in some markets.
• Maintenance and repairs are a constant — and costly — reality for homeowners.
• As home values rise, so do insurance premiums and property taxes.

>> Read more about renting vs. buying a home

What are mortgage points?

Mortgage points, also referred to as discount points, help homebuyers reduce their monthly mortgage payments and interest rates. A mortgage 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. Each mortgage point typically lowers in interest rate by 0.25 percent. For example, one point would lower a mortgage rate of 3 percent to 2.75 percent.

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.

>> Read more about mortgage points

Looking 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.

While mortgage rates have risen from the record lows of late 2020 and early 2021, they remain at historically low levels. That means millions of homeowners still could save by refinancing. Reducing your rate isn’t the only reason to refinance. It’s also possible to tap into your home equity to pay for home renovations. Or, if you want to pay down your mortgage more quickly, you can shorten your term to 20, 15 or even 10 years. And because home values have risen sharply, it’s possible that a refinance could free you from paying for private mortgage insurance.

>> Find and compare refinance rates

>> For more information on mortgage refinancing, visit Bankrate’s mortgage refinancing hub.