What is a mortgage?
Most people don't have the cash to simply buy a house. Instead, they use a mortgage, which is a loan to buy a home. After making a down payment of anywhere from 3% to 25%, they get amortgageto cover the remaining costs of purchasing the home.
Amortgageis set up so you pay off the loan over a specified period called the term. The most popular term is 30 years. Each payment includes a combination of principal and interest, as well as property taxes, and, if needed, mortgage insurance. (Homeowners insurance may be included, or the homeowner may pay the insurer directly.) Principal is the original amount of money you borrowed while interest is what you're being charged to borrow the money.
» MORE:Estimate your monthly mortgage payment
How do mortgage rates work?
The mortgage rate a lender offers you is determined by a mix of factors that are specific to you and larger forces that are beyond your control.
Lenders will have a base rate that takes the big stuff into account and gives them some profit. They adjust that base rate up or down for individual borrowers depending on perceived risk. If you seem like a safe bet to a lender, you're more likely to be offered a lower interest rate.
Factors you can change:
Yourcredit score. Mortgage lenders use credit scores to evaluate risk. Higher scores are seen as safer. In other words, the lender is more confident that you'll successfully make your mortgage payments.
Yourdown payment. Paying a larger percentage of the home's price upfront reduces the amount you're borrowing and makes you seem less risky to lenders. You can calculate yourloan-to-value ratioto check this out. A LTV of 80% or more is considered high.
Yourloan type. The kind of loan you're applying for can influence the mortgage rate you're offered. For example, jumbo loans tend to have higher interest rates.
How you're using the home. Mortgages for primary residences — a place you're actually going to live — generally get lower interest rates than home loans for vacation properties,second homesor investment properties.
Forces you can't control:
The U.S. economy. Sure, this means Wall Street, but non-market forces (for example, elections) can also influence mortgage rates. Changes in inflation and unemployment rates tend to put pressure on interest rates.
The global economy. What's happening around the world will influence U.S. markets. Global political worries can move mortgage rates lower. Good news may push rates higher.
TheFederal Reserve. The nation’s central bank attempts to guide the economy with the twin goals of encouraging job growth while keeping inflation under control. Decisions made by the Federal Open Market Committee to raise or cut short-term interest rates can sometimes cause lenders to raise or cut mortgage rates.
» MORE:What determines mortgage rates?
How (and why) to compare mortgage rates
Mortgage rates like the ones you see on this page are sample rates. In this case, they're the averages of rates from multiple lenders, which are provided to NerdWallet by Zillow. They let you know about where mortgage rates stand today, but they might not reflect the rate you'll be offered.
When you look at an individual lender's website and see mortgage rates, those are also sample rates. To generate those rates, the lender will use a bunch of assumptions about their “sample” borrower, including credit score, location and down payment amount. Sample rates also sometimes includediscount points, which are optional fees borrowers can pay to lower the interest rate. Including discount points will make a lender's rates appear lower.
To see more personalized rates, you'll need to provide some information about you and about the home you want to buy. For example, at the top of this page, you can enter your ZIP code to start comparing rates. On the next page, you can adjust your approximate credit score, the amount you're looking to spend, your down payment amount and the loan term to see rate quotes that better reflect your individual situation.
Whether you're looking at sample rates on lenders' websites or comparing personalized rates here, you'll notice that interest rates vary. This is one reason why it's important toshop aroundwhen you're looking for a mortgage lender. Fractions of a percentage might not seem like they'd make a big difference, but you aren't just shaving a few bucks off your monthly mortgage payment, you're also lowering the total amount of interest you'll pay over the life of the loan.
It's a good idea to apply formortgage preapprovalfrom at least three lenders. With a preapproval, the lenders verify some of the details of your finances, so both the rates offered and the amount you'reable to borrowwill be real numbers. Each lender will provide you with aLoan Estimate. These standardized forms make it easy to compare interest rates as well as lender fees.
When you're comparing rates, you'll usually see two numbers — the interest rate and the APR. The APR, orannual percentage rate, is usually the higher of the two because it takes into account both the interest rate and the other costs associated with the loan (like those lender fees). Because of this, APR is usually considered a more accurate measure of the cost of borrowing.
» MORE FOR CANADIAN READERS: Best mortgage rates in Canada
FAQs
Weekly national mortgage interest rate trends
If you're in the market for a mortgage refinance, today's current average 30-year refinance interest rate is 7.36%, increasing 7 basis points from a week ago. Meanwhile, today's national 15-year refinance interest rate is 6.84%, rising 5 basis points over the last week.
What is the 30 year mortgage rate right now? ›
Current mortgage and refinance interest rates
| Product | Interest Rate | APR |
|---|
| 30-Year Fixed Rate | 7.34% | 7.39% |
| 20-Year Fixed Rate | 7.19% | 7.25% |
| 15-Year Fixed Rate | 6.80% | 6.87% |
| 10-Year Fixed Rate | 6.77% | 6.85% |
5 more rowsIn its April Mortgage Finance Forecast, the Mortgage Bankers Association predicts that mortgage rates will fall from 6.8% in the first quarter of 2024 to 6.4% by the fourth quarter. The industry group expects rates will fall below the 6% threshold in the fourth quarter of 2025.
What are current mortgage rates near me? ›
Today's 30-year fixed mortgage rates
- Conventional fixed-rate loans. Term. 7.125% ...
- Conforming adjustable-rate mortgage (ARM) loans. Term. 7.000% ...
- Jumbo adjustable-rate mortgage (ARM) loans. Term.
- Federal Housing Administration (FHA) loans. Term. 6.750% ...
- Veterans Affairs (VA) loans. Term. 30-year.
- Jumbo loans. Term. 7.125%
Lawrence Yun, chief economist at the National Association of Realtors, even told CNBC that he doesn't think mortgage rates will reach the 3% range again in his lifetime.
Who has the cheapest mortgage rates right now? ›
Best USDA mortgage rates
- Home Point Financial, 4.19%
- Freedom Mortgage, 4.21%
- Flagstar Bank, 4.28%
- Caliber Home Loans, 4.46%
- U.S. Bank, 4.54%
- AmeriHome Mortgage Company, 4.61%
- Pennymac, 4.67%
- NewRez, 4.68%
Yes, to some degree, mortgage interest rates are negotiable. Mortgage lenders have some flexibility when it comes to the rates they offer. However, in many cases getting a lower rate on your loan will come with a price, such as paying “points” to get a lower rate.
What was the lowest 30-year mortgage rate in history? ›
The average 30-year fixed rate reached an all-time record low of 2.65% in January 2021 before surging to 7.79% in October 2023, according to Freddie Mac.
How to get the lowest mortgage rate? ›
8 steps to get the best mortgage rates
- Improve your credit score. ...
- Build a steady employment record. ...
- Save up for a down payment. ...
- Understand your debt-to-income ratio. ...
- Check out different mortgage loan types and terms. ...
- Consider paying mortgage points. ...
- Compare offers from multiple mortgage lenders. ...
- Lock in your mortgage rate.
It's generally a good idea to lock in your mortgage rate with your lender of choice once you've gone under contract on a home, since there's no way to definitively know which direction interest rates are headed. That way, your monthly payments won't go up if rates rise during the closing process.
While McBride had expected mortgage rates to fall to 5.75 percent by late 2024, the new economic reality means they're likely to hover in the range of 6.25 percent to 6.4 percent by the end of the year, he says.
What will the mortgage rate be in 2024? ›
Expert predictions for mortgage rates in 2024
In Fannie Mae's latest rate forecast, the government-sponsored enterprise said it expects 30-year fixed rates to end 2024 at 6.4%.
What bank has the best interest rate right now? ›
10 best savings accounts of May 2024
| Account type | Best for: | APY |
|---|
| Varo High-Yield Savings Account | Balances below $5,000 | 5.00% |
| Credit Karma Money Save | Increased FDIC coverage | 5.10% |
| TAB Bank: TAB Save | Multiple account types with great rates | 5.27% |
| Newtek Bank High-Yield Savings | Those who want a well-established industry name | 5.25% |
6 more rowsBuying Mortgage Discount Points
For example, if you are offered a 6 percent interest rate on a $100,000 loan, you can pay one point ($1,000) to get a 5.75 percent interest rate instead. You can buy down your interest rate by up to 1.0 percent to reduce your interest costs and get a lower payment.
What is the future of the mortgage rate? ›
The 30-year mortgage rate will end 2024 at 6.4%, up from 5.9% in the previous forecast. The average mortgage rate will remain at 6.7% in Q2. National Association of Realtors chief economist Lawrence Yun. “The budget deficit remains high, and the various inflation metrics remain above the comfort level.
Is 4% a good mortgage rate? ›
Currently, a 4% mortgage rate would be considered low. If that question was asked at the beginning of 2022—when 30-year mortgage rates for conforming loans was 3.77%–instead of the end of 2022—when the same mortgage rates were 7.06%—the answer would have been, yes, a 4% mortgage rate is high.
Is 5.5 a good mortgage interest rate? ›
But there is a tipping point, recent reports found: Homeowners are nearly twice as willing to sell their home if their mortgage rate is 5% or higher, according to Zillow, and 71% of prospective homebuyers who plan to purchase their next home with a mortgage said they would not accept a rate above 5.5% — that is the “ ...
Is 2.75 a good 30-year mortgage rate? ›
Buying a home at a low 2.75% rate is fantastic by today's standards. But when you experience buyer's regret and want to sell, you have to deal with current mortgage rates, which are closer to 7%. You might feel stuck if you can't afford to cough up the cash for an outright purchase.
Is a 6.25 interest rate good? ›
Borrowers interested in saving the most on interest should consider 10-year terms, as 6.25% is today's lowest interest rate. Homebuyers who would rather have a smaller monthly payment should instead consider 30-year terms, as 7.625% is the lowest rate of the two longer terms.
