Mortgage industry insights

Last call for super-low mortgage rates?

At its latest meeting, the Federal Reserve signaled that it's about to cut the amount of bonds it buys each month, and that it also could begin to raise interest rates as early as next year.

The mortgage market interpreted that news as the beginning of the end of super-cheap mortgage rates. In the week after the Fed’s Sept. 22 meeting, the average rate on a 30-year mortgage jumped 12 basis points, to 3.17 percent, according to Bankrate’s national survey of lenders.

Will this latest run-up in rates last? No one knows that answer for certain. But housing economists and market watchers generally agree that a variety of factors -- including inflation, the economic recovery and the Fed’s pace of bond buying -- are lining up to nudge rates higher.

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.

“It’s more likely that rates will go up than down,” says Isaac Hacamo, an assistant professor of finance at Indiana University’s Kelley School of Business. “If you haven’t refinanced in the past few years, I would do it now.”

>>Read more about how mortgage rates could rise & what to do now

Today's average mortgage and refinance rates by loan type

Lenders nationwide provide weekday mortgage rates to our comprehensive national survey to bring you the most current rates available. Here you can see the latest marketplace average rates for a wide variety of purchase loans. The interest rate table below is updated daily to give you the most current purchase rates when choosing a home loan. APRs and rates are based on no existing relationship or automatic payments. For these averages, the customer profile includes a 740 FICO score and a single family residence. To learn more, see understanding Bankrate's rate averages.

• Purchase
• Refinance

Product	Interest Rate	APR
30-Year Fixed Rate	3.140%	3.300%
20-Year Fixed Rate	3.020%	3.170%
15-Year Fixed Rate	2.440%	2.670%
7/1 ARM	2.850%	3.980%
5/1 ARM	2.760%	4.070%
10/1 ARM	3.090%	4.040%
30-Year Fixed-Rate FHA	2.650%	3.530%
30-Year Fixed-Rate VA	2.750%	2.920%
30-Year Fixed-Rate Jumbo	3.130%	3.220%
15-Year Fixed-Rate Jumbo	2.430%	2.500%
7/1 ARM Jumbo	3.000%	4.010%
5/1 ARM Jumbo	2.800%	4.050%

Product	Interest Rate	APR
30-Year Fixed Rate	3.130%	3.250%
20-Year Fixed Rate	3.010%	3.130%
15-Year Fixed Rate	2.440%	2.600%
7/1 ARM	2.860%	4.000%
5/1 ARM	2.690%	3.980%
10/1 ARM	3.090%	4.080%
30-Year Fixed-Rate FHA	2.700%	3.580%
30-Year Fixed-Rate VA	2.790%	2.990%
30-Year Fixed-Rate Jumbo	3.130%	3.190%
15-Year Fixed-Rate Jumbo	2.430%	2.490%
7/1 ARM Jumbo	2.890%	3.920%
5/1 ARM Jumbo	2.670%	3.690%

Rates as of Thursday, October 28, 2021 at 6:30 AM

How mortgage rates are determined

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

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.

 

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.

Mortgage process FAQs

What are mortgage requirements and qualifications?

To land a conventional loan, you’ll generally need solid credit and a steady paycheck. Qualification gets a bit tricky for borrowers who are self-employed. Down payments are another area of confusion. You’ll get the best deal with 20 percent down, but there are many programs that allow you to put down much less — as little as 3 percent for some conventional loans, and nothing down for VA loans.

What credit score is needed to buy a house

Your credit history is one of the primary indicators a lender will look at. To get the best rate on a conventional loan, you’ll need good credit — 740 or higher. However, that doesn’t mean you’re out of luck if you have spotty credit. You still can get a loan, but other costs will be higher. FHA and VA loans are available to borrowers with credit scores below 700 — but both programs carry additional fees.

How my credit score affects my rate

For conventional loans, your credit score is the most important factor determining your rate. If your score is below 740, your rate will rise. For FHA and VA loans, your credit score won’t affect your rate, but taking one of these loans does boost your overall costs. Both programs carry steep add-ons in the form of funding fees or mortgage insurance.

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.

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.

What to know about mortgage rate locks?

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?

MMost 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.

 

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.

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.

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

 

General 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

Different types of mortgages

There are many different types of mortgagestypes 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.

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.

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.

What are mortgage points?

Mortgge 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.

 

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.

Written by: Jeff Ostrowski, senior mortgage reporter for Bankrate

Jeff Ostrowski covers mortgages and the housing market. Before joining Bankrate in 2020, he wrote about real estate and the economy for the Palm Beach Post and the South Florida Business Journal.

Read more from Jeff Ostrowski

Reviewed by: Greg McBride, chief financial analyst for Bankrate

Greg McBride, CFA, is Senior Vice President, Chief Financial Analyst, for Bankrate.com. He leads a team responsible for researching financial products, providing analysis, and advice on personal finance to a vast consumer audience.

Read more from Greg McBride