Understanding Today's Mortgage Rates
What are mortgage rates?
Your mortgage rate is the amount of interest you’ll pay on your home loan annually. It’s expressed as a percentage of your loan balance. Depending on what type of mortgage you choose, home loan interest rates may stay the same or fluctuate based on market conditions. Several factors go into determining your interest rates, such as your credit score, your debt-to-income ratio, and loan amount. That’s why the average mortgage rates you see on the internet may not reflect the rate you're able to secure. Still, knowing what average mortgage rates are can help you figure out if you’re getting a good deal from your lender or if you need to look elsewhere.What are the mortgage rates today?
| Mortgage type | Interest rate | APR | | ----------------------------------------------------------------- | ------------- | ------ | | 30-year fixed rate | 3.47% | 3.54% | | 15-year fixed rate | 2.87 % | 2.99% | | 7/1 ARM | 3.23% | 3.23% | | 5/1 ARM | 3.16% | 3.21% | | 3/1 ARM | 3.95% | 3.36 % | *Data sourced from Zillow. Verified as of 05/14/2020. Bank mortgage rates are always changing and can be different from day-to-day. They may also vary by lender. So to get the most accurate and up-to-date rates, make sure you check your lender’s website.What impacts mortgage rates?
Several factors influence mortgage interest rates, but not all of them are under your control. Inflation affects rates because lenders have to charge enough interest to turn a profit. Job growth and the state of the economy also come into play. In a hot housing market, when demand for mortgages is high, interest rates tend to rise. And the Federal Reserve’s decision to cut or raise the benchmark federal funds rate could also impact what interest rate you receive when you apply for a mortgage. Although some of those factors are out of your hands, there are many things you can do to qualify for better rates. Raising your credit score and getting your debt-to-income ratio under control will help you qualify for the best terms. Making a larger down payment can also reduce your interest rate and eliminate private mortgage insurance, saving you even more money. Mortgages with shorter terms also come with lower interest rates. So, if you choose a 15-year mortgage over the standard 30 years, you could save thousands. (Although those savings come at the cost of a much higher monthly payment.)What are the different mortgage types?
Another factor that influences your mortgage rate is loan type. Certain mortgages — like jumbo loans — tend to have higher interest rates because lenders take on more risk by issuing them. Here are some of the most common mortgage types and how their rates compare:- Fixed-rate mortgages have the same interest rate for the whole life of the loan, which makes it easy to budget for your monthly payment.
- Adjustable-rate mortgages have interest rates that change over time based on market conditions. Most adjustable-rate loans have a fixed-rate period that lasts for several years and then adjusts annually. They usually start with lower rates than conventional mortgages, but often end up costing you more in the long run.
- Government-issued mortgages are insured by the government, which means your lender will be reimbursed if you default on your loan. Because government loans are guaranteed and present less of a risk for lenders, they’re often easier to qualify for and come with better rates and terms than conventional mortgages. Examples of government-issued mortgages include VA, FHA, and USDA loans.
- Jumbo mortgages don’t adhere to loan limits and other guidelines set by government-sponsored entities like Fannie Mae and Freddie Mac. They enable you to borrow more than the limits if you want a more expensive home but do come with higher interest rates to account for the increased risk.
