Housing Mortgage Rates

How are mortgage interest rates determined?

Mortgage interest rates are largely influenced by economic factors, such as inflation, economic growth indicators, Federal Reserve policies, the housing market and the bond market. Consumers, in many ways, have little to do with the average interest rates lenders offer.

However, borrowers can improve their chances of getting the best mortgage rate available by working toward an excellent credit score, making sure income is well-documented and keeping debt-to-income ratios low.

Borrowers with excellent credit scores will get the best rates. You can boost your credit score by lowering the amount of debt you have, making sure your accounts are in good standing and paying your monthly bills on time.

Calculate how much you can afford

On November 19, 2019, according to Refimadness’s latest survey of the nation’s largest mortgage lenders, the benchmark 30-year fixed mortgage rate is 3.72 percent with an APR of 3.84 percent. The average 15-year fixed mortgage rate is 3.15 percent with an APR of 3.35 percent. The 5/1 adjustable-rate mortgage (ARM) rate is 4.01 percent with an APR of 7.10 percent.

Refimadness brings together a comprehensive national survey of mortgage lenders to help you find the most competitive interest rate. The interest rate table below is updated daily, Monday through Friday, to give you the most current purchase rates when choosing a home loan.

Although rate shopping can be time-consuming, it’s well worth the effort. Freddie Mac released a report showing that consumers who don’t shop for a mortgage with multiple lenders are leaving money on the table. For example, a homebuyer who wants to borrow $250,000, can save:

 

• An average of $1,435, over the life of the loan, with one extra rate quote, or
• An average of $2,914, over the life of the loan, with five extra rate quotes

The more you shop around, the more you stand to save.

Today’s Mortgage Interest Rates for Purchase

 

Product	Interest Rate	APR
30-Year Fixed Rate	3.72%	3.84%
20-Year Fixed Rate	3.65%	3.81%
15-Year Fixed Rate	3.15%	3.35%
5/1 ARM Rate	4.01%	7.10%
5/1 ARM Jumbo Rate	3.84%	6.96%
7/1 ARM Rate	3.95%	6.35%
7/1 ARM Jumbo Rate	3.82%	6.22%
10/1 ARM Rate	4.02%	5.78%
30-Year VA Rate	3.32%	3.39%
30-Year FHA Rate	3.25%	3.32%
30-Year Fixed Jumbo Rate	4.07%	4.18%
15-Year Fixed Jumbo Rate	3.85%	4.05%

Refimadness collects rate information directly from lenders every day, so consumers have reliable and current data, which is essential in comparing rates and finding the right mortgage for you.

Wells Fargo Mortgage Rates

Bank of America Mortgage Rates

Product	Interest Rate	APR
30-Year Fixed Rate	3.625%	3.821%
15-Year Fixed Rate	2.875%	3.229%
5/1 ARM	2.750%	3.907%

Quicken Loans Mortgage Rates

Product	Interest Rate	APR
30-Year Fixed Rate	3.990%	4.247%
15-Year Fixed Rate	3.500%	3.967%
5/1 ARM	3.750%	4.412%

 

What is a mortgage?

A mortgage is another word for a home loan. When you get a mortgage, your lender uses the property as collateral. The lender will take a lien on the property’s title until you repay the debt, at which point they will release their hold on the title. Mortgage lenders primarily make their money through interest on the loan. The amount of interest charged is commensurate with the risk the lender takes. For example, people with a larger down payment usually qualify for a lower interest rate since the lender is fronting less of the total value of the house.

 

How does a mortgage work?

In a mortgage agreement, a borrower agrees to a set length of time to repay the money, at a certain interest rate and under specific terms, and makes payments in equal monthly installments.

In a typical mortgage, the lender gives the homebuyer 30 years to pay back the loan, but there are mortgages with shorter and longer terms. Homebuyers who want to reduce the amount of interest they pay over the life of their loan can make extra payments each year or put more money (above their minimum mortgage payment) toward their principal each month.

 

What is the difference between APR and interest rate?

The annual percentage rate, or APR, includes the interest rate and other borrowing costs, such as mortgage insurance and other loan fees, and is expressed as a percentage. It gives you a better overall idea of the loan’s true borrowing costs. The interest rate is a fee a lender charges you to borrow the principal loan amount. It can be variable or fixed, but it’s always expressed as an annual percentage rate.

When you’re shopping for lenders, make sure you get the APR as well as the interest rate. You can ask lenders for a rate sheet, which should break down all the mortgage fees. Costs differ among lenders, so getting a low interest rate and a low APR is a win-win for borrowers. When in doubt, it’s best to go with the APR as a more complete picture of the cost of the loan.

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 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 2019, the maximum conforming loan limit for single-family homes in most of the U.S. is $484,350, 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.

 

How long do you repay a mortgage?

Mortgages come in various repayment terms, including fixed-rate loans of 10, 15, 20, 30 or 40 years. Another option is an adjustable-rate mortgage, or ARM, which has an initial, fixed-rate interest period of three, five, seven or 10 years. After the initial time frame, an ARM resets and interest rates can go up or down for the remaining life of the loan. ARMs come in various terms, with the 30-year being the most popular.

Mortgages with shorter terms usually have lower interest rates and larger monthly payments. By choosing a mortgage with shorter terms, you’ll slash the amount of interest you pay over the life of your loan. For example, on a $250,000 mortgage with a 4 percent interest rate, here’s the total interest borrowers will pay depending on their terms:

• 15-year mortgage: $82,860
• 30-year mortgage: $179,673

At the same time, those with 15-year mortgages would pay $1,849.22 per month and those with 30-year mortgages would pay $640 per month, or $1,193.54. It’s up to the home buyer to make a budget that fits their cash flow. For some, investing that extra money would likely provide a larger return than putting it toward a mortgage with a low interest rate, whereas others might want to be free of debt faster and expand cash flow.

 

What is the best mortgage loan type for me?

The mortgage you choose depends on a variety of factors, including your credit history and score, debt-to-income ratio, down payment amount and employment history. It also depends on how long you play to stay in the home, what type of property you’re interested in, and if you meet the lender’s borrowing requirements.

Narrowing your loan choices can be difficult. Here’s a list of pros and cons of each of the options mentioned earlier to help you decide.

	Who it’s best for	Pros	Cons
Fixed-rate mortgages	Borrowers who want predictable, stable payments at the same interest rate for the life of the loan.	Rates and payments remain constant, despite interest rate changes. Budgeting is easier since payments stay the same throughout the life of the loan.	Interest payments tend to be higher than the initial rate of adjustable rate mortgages, or ARMs.
Adjustable-rate mortgages	Borrowers who don’t plan to stay in a home for more than a few years, so they get the advantage of lower upfront interest rates without the risk of higher rates down the road.	Feature lower rates and payments early in the loan term. May qualify for more house because payments are lower (initially). If rates drop, so will your interest rates.	Loan is exposed to market fluctuations, so your interest can rise over time.
Conventional mortgages	Borrowers with strong credit, a stable income and employment history, and a down payment of at least 3 percent.	Can be used for a primary home, second home or investment property. Overall borrowing costs tend to be lower than other loan types. There are fewer restrictions on the types of homes you can buy than with government-backed loans. PMI is cancellable once you’ve gained 20 percent equity. Put as little as 3 percent down for agency loans.	Minimum FICO score of 620. Debt-to-income ratio of 45 to 50 percent. PMI typically required if your down payment is less than 20 percent. Significant documentation required to verify income, assets, down payment and employment.
Government-insured mortgages	Borrowers who have low cash savings, less-than-stellar credit or can’t qualify for a conventional loan. VA loans tend to offer the best terms and most flexibility compared to other loan types for military borrowers.	More relaxed credit and income requirements. A large down payment is not required. Open to repeat and first-time buyers.	Mandatory mortgage insurance premiums that cannot be canceled on some loans. Higher overall borrowing costs. May require more documentation to prove eligibility.
Jumbo mortgages	Affluent borrowers purchasing a high-end home who also have good to excellent credit, high incomes and a substantial down payment.	Borrow more money to buy a home in an expensive area. Interest rates tend to be competitive with other conventional loans.	Down payment of at least 10 to 20 percent is needed. Minimum FICO score of 660, but average is typically 700 or higher. Maximum DTI ratio of 45 percent. Must have significant assets (10 percent of the loan amount) in cash or savings accounts.

Whether it’s a conventional, FHA, or VA loan, find out which mortgage is the best for you.

When is the right time to get a mortgage?

This varies by each individual. How much of a down payment do you have saved? Are you ready to stay in one place for a number of years? Can you take on and afford the expenses of home ownership, from the fixed monthly costs to the unexpected like suddenly needing a new HVAC system?

The first step in getting a mortgage is to get pre-approved, and it’s best to do this before you start looking at homes. A preapproval might reveal you need to work on credit issues or pay down debt, so it’s best to speak to a lender as early as possible to identify — and resolve — potential obstacles.

 

How much can I borrow for a mortgage?

The maximum loan amount will vary depending on your income, the type of mortgage you choose, federal loan limits and the specific down payment requirements for the type of mortgage you want. For example, VA and USDA loans allow you to finance 100 percent of the home’s purchase price, while FHA loans require 3.5 percent down and conventional loans require at least 3 percent down.

 

How do I find the best mortgage rate?

To find the best mortgage rate, shop around with at least three different lenders to compare products and rates. The more you shop for rates, the better the odds you’ll get the best one. Don’t limit yourself geographically either–a lender in a far-off state who operates over the internet may be able to give you a better deal than your neighborhood bank.

Typically, the higher your credit score and the less debt you have as a percentage of your income, the more competitive the interest rates lenders can offer.

 

How do I choose a mortgage lender?

Bankrate’s dynamic mortgage rate tables allow you to browse for rates in a couple ways. First, you can input your data, such as zip code, mortgage amount, credit score and loan type (mortgage or refinance), to get customized results that closely match your profile. Or you can simply look at all the lender rates without including any personal data.

Each lender profile includes important consumer information such as customer reviews, as well as interest rates, APR and upfront costs. You can select a few lenders you like to get a side-by-side comparison. You’ll also be able to get basic lender information, including contacts and their history, by clicking on their name.

Before you choose a lender, make sure you understand all of their upfront costs. This is a personal decision buyers should make after careful consideration. Keep in mind that some of these costs may be negotiable.

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.