June 30th, 2020 12:44 PM by Jackie A. Graves
Virtually anytime you borrow money, there’s a cost for the privilege. That’s no different for mortgage loans, which you rely on during the home buying process. Mortgage rates are generally lower than interest rates from other types of debt.
If you're a first-time homebuyer or you simply want to better meet your financial goals, here’s what you need to know about mortgage rates.
What are current mortgage rates today?
Mortgage rates are changing constantly based on housing market conditions where you live and by the lender, but it’s possible to get an average rate and payment based on the U.S. market data as a whole.
As of June 18, there have been record-low mortgage rates. The average rate for a 30-year fixed mortgage is 3.13 percent, according to Freddie Mac, and a 15-year fixed mortgage has a 2.58 percent average.
Based on the current mortgage and refinance rates, it's likely now is a good time for you to refinance. To see how much you could save on monthly payments today, crunch the numbers and compare rates using Credible's free online tool.
Of course, that doesn’t mean that’s the rate borrowers can expect when applying for a mortgage. Your interest rate will largely depend on your credit history and income.
How to get the lowest mortgage rate possible
Because mortgage loans are much longer than most loan types, you’ll still end up paying tens or even hundreds of thousands of dollars in interest despite low mortgage rates.
As such, it’s crucial to work to qualify for the lowest rates possible. See what kind of rates you qualify for today through Credible.
Even just a slight decrease can help boost your savings account. For example, in our previous example, an $898.09 monthly payment over 30 years amounts to $323,312.40 in payments, including $123,312.40 in interest.
If you could qualify for a 3.25 percent rate instead, your monthly payment would be $870.41, and you’d pay $113,348.55 in interest—almost $10,000 less.
Here are some tips on how to qualify for low-interest rates:
Also, keep in mind that mortgage rates and mortgage refinance rates may or may not be similar, depending on market conditions. But if you don’t qualify for the rate you want now, or you see a mortgage rate drop down the road, you can secure a mortgage refinance later to get a lower one.
To ensure you’re getting the best rate, though, work on your credit, pay down debt, bolster your savings account, and compare rates with Credible.
Understanding different types of mortgage rates
Buying a house with a 30-year mortgage loan is a major financial commitment, not only for you but also for lenders. As a result, you can expect to pay interest in exchange for financing.
Home loan rates are presented in their annualized form, and they’re used to help amortize the loan.
For example, if you have a $200,000 loan with a 30-year repayment plan and a 3.5 percent interest rate, you could use a cost calculator to determine your monthly mortgage payment, which would be $898.09.
WHAT ARE THE CLOSING COSTS FOR SELLING A HOME?
There are a couple of types of mortgage rates you may come across as you research your options:
In most cases, a fixed-rate mortgage may be a better option because it provides more certainty. If, however, you don’t expect to be in your new home for longer than an ARM’s fixed period, you could save more money with that option.
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