Mortgage application activity drifted lower again last week, the third straight week of mostly fractional declines. The Mortgage Bankers Association’s Market Composite Index, a measure of application volume, decreased 0.6 percent on a seasonally adjusted basis from one week earlier and 0.1 percent before adjustment.
The Refinance Index declined by 2.0 percent from the previous week and was 5.0 percent lower than the same week one year ago. The refinance share of mortgage activity slipped to 30.3 percent from 30.8 percent the previous week.
The seasonally adjusted Purchase Index ticked down by 0.1 percent week over week but did move 1.0 percent higher on an unadjusted basis. Purchase activity was 13.0 percent lower than during the same week in 2023.
“Mortgage rates moved lower last week, but that did little to ignite overall mortgage application activity. The 30-year fixed mortgage rate declined slightly to 6.91 percent, while the 15-year fixed-rate decreased to its lowest level in two months at 6.35 percent,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Elevated mortgage rates continued to weigh down on home buying. Purchase applications were unchanged overall, although FHA purchases did pick up slightly over the week. Refinance applications decreased to fall 5 percent below last year’s pace.”
Other Highlights from MBA’s Weekly Mortgage Application Survey
Loan sizes rose last week, with the average rising from $387,000 to $395,500. The size of loans for home purchases jumped to $453,000 from $441,800. During the same week in 2023, the average loan size was only slightly lower at $381,100 while the average for purchase loans has increased from $428,000.
The FHA share of total applications dropped to 11.7 percent from 12.0 percent while the VA share edged up to 12.1 percent from 12.0 percent. USD applications accounted for a 0.5 percent market share once again.
The 6.91 percent average rate for conforming 30-year fixed-rate mortgages (FRM) represented a 2-basis point decline from the prior week. Points dipped to 0.59 from 0.60.
The average contract interest rate for 30-year FRM with jumbo loan balances decreased to 7.06 percent from 7.14 percent,with points increasing to 0.57 from 0.38. T
hirty-year FRM with FHA backing had a rate of 6.74 percent with 0.90 point. The prior week the rate averaged 6.75 percent with 0.97 point.
The 15-year FRM average decreased to 6.35 percent from 6.46 percent with a decline in points to 0.56 from 0.75.
The average contract interest rate for 5/1 adjustable-rate mortgages (ARMs) rose 10 basis points to 6.37 percent and points increased to 0.68 from 0.64
The ARM share of activity was unchanged at 7.0 percent of total applications.
Mortgage demand receded for the third consecutive week despite slightly lower mortgage rates. Mortgage applications decreased by 0.6% on a seasonally adjusted basis during the week ending March 29, according to the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey.
“Mortgage rates moved lower last week, but that did little to ignite overall mortgage application activity,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. “Elevated mortgage rates continued to weigh down on home buying. Purchase applications were unchanged overall, although FHA purchases did pick up slightly over the week. Refinance applications decreased to fall 5% below last year’s pace.”
As of March 26, the 30-year fixed rate on HousingWire’s Mortgage Rates Center stood at 7.16%, up from 7.07% one week earlier. At the same time one year ago, the 30-year fixed rate averaged 6.53%. Meanwhile, the 15-year fixed rate averaged 6.51% on March 26, up from 6.5% one week earlier.
Both purchase and refinance activity decreased during the week. Purchase loan application volume dropped by 1% from one week earlier. Meanwhile, refinance volume fell by 2% from the prior week.
The MBA survey shows that the average mortgage rate for 30-year fixed loans with conforming balances ($766,550 or less) decreased to 6.91%, down from 6.93% last week. Meanwhile, rates on jumbo loans (balances greater than $766,550) decreased week over week to 7.06%, down from 7.14%.
TheFederal Housing Administration (FHA) share of total applications decreased to 11.7% last week, down from 12% the week before. The U.S. Department of Veterans Affairs (VA) share climbed to 12.1%, up from 12% the week before. And the U.S. Department of Agriculture(USDA) share remained unchanged at 0.5%.
The MBA survey, conducted weekly since 1990, covers more than 75% of all U.S. retail residential mortgage applications.
Refinancing your mortgage, or replacing your existing home loan with a new one, can lower your interest rate and monthly payments or even get you extra cash from the equity in your home.
Not all homeowners are approved for refinancing, though. With home prices and interest rates still high, lenders are careful about who they approve. The rejection rate on mortgage refinance applications increased to 15.5% in 2023 from 9.9% in 2022, according to the Federal Reserve Bank of New York.
If you’ve been turned down, you still have options for refinancing — and ways to improve your chances next time.
What we’ll cover
Compare offers to find the best mortgage
Common reasons mortgage refinancing is rejected
Lenders rely on federal underwriting guidelines from Fannie Mae and Freddie Mac when deciding whether to approve a refinancing application. Some issues are easier for borrowers to address than others.
High debt-to-income ratio
How much of your money is tied up in paying off debts isa major factor in getting approved for refinancing. Your debt-to-income (DTI) ratio is determined by dividing your total monthly debts (including your current mortgage) by your gross monthly income.
A DTI of 35% or less is ideal, according to Experian, although lenders typically will consider a ratio up to 43% for refinancing a conventional mortgage, depending on how strong the rest of their application is.
Low credit score
A credit score of at least 620 is usually needed to secure refinancing, although you may be able to get FHA cash-out refinancing with a score in the 500s.
Low home appraisal
An appraisal of your home’s fair market value ensures it hasn’t significantly depreciated, especially to the point that it’s worth less than what you owe (known as an “underwater mortgage”).
If the appraisal indicates your home is in poor condition or has renovations that are not up to code, it could also lead to being turned down.
Not enough home equity
The amount of your home that you own outright is known as home equity. If you put 5% of the cost of the property as a down payment, you’re starting with 5% home equity. That amount increases as you make mortgage payments and as the home’s value increases. You typically need to own at least 20% of your home outright to refinance your mortgage.
Employment history
According toFannie Mae’s underwriting guidelines,lenders look at an applicant’s career history and income over several years. Ideally, they want to see at least two years at your current job, but you probably won’t have to worry about a promotion or a better-paying job in the same industry. A consistent income is the key.
Taking a lesser role or lower-paying job and lengthy gaps in employment are more serious red flags, as is changing jobs in the middle of the application process. However, you can always try to explain your circumstances to your lender.
What to do if you’ve been rejected for refinancing
Find out why you were denied
Lenders are legally required to explain why you’ve been turned down. Find out the reason (or reasons) and if possible, make any necessary changes so you’ll be approved next time.
Shop for another lender
You may need a lender that is willing to accept a lower credit score. Rocket Mortgage works with applicants with scores as low as 580, rather than the 620 required by most lenders.
Rocket Mortgage Refinance
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Conventional loans, FHA loans, VA Interest Rate Reduction Refinance Loan (IRRRL) and jumbo loans
Fixed-rate Terms
8 – 29 years
Adjustable-rate Terms
Not disclosed
Credit needed
580 if opting for FHA loan refinance or VA IRRRL; 620 for a conventional loan refinance
Already have a mortgage through Rocket Mortgage or looking to start one? Check out the Rocket Visa Signature Card to learn how you can earn rewards
Ally Bank offers cash-out refinances for conventional and jumbo loans, allowing homeowners to convert their home equity into cash and take out a loan that’s larger than their current mortgage. Ally doesn’t charge application, origination or processing fees and its website has a refinance calculator that provides customized rates without affecting your credit score.
Ally Home
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Fixed-rate, adjustable-rate and jumbo loans available
Fixed-rate Terms
15 – 30 years
Adjustable-rate Terms
5/6 ARM, 7/6 ARM, 10/6 ARM
Credit needed
Not disclosed
Terms apply.
Pay down your existing mortgage
If you didn’t put 20% down when you bought your home, you may need to pay off another chunk of your mortgage before you’re able to secure refinancing.
Work on your credit
If your credit is the problem, take some time off to raise your score. Focus on making on-time bill payments and lowering your credit utilization ratio, or the amount of available credit you’re using. Avoid opening or closing any lines of credit and check your credit reports for any errors.
Experian Boost™ is a free way to improve your credit score. It links utility, phone and streaming service payments to your Experian credit report and uses the You’ll get an updated FICO® score delivered to you in real-time.
Experian Boost™
On Experian’s secure site
Cost
Average credit score increase
13 points, though results vary
Credit report affected
Experian®
Credit scoring model used
FICO® Score
Results will vary. See website for details.
How long should I wait before applying again?
Technically, you can reapply right away, but each application requires a hard credit check, which temporarily lowers your FICO score. So, consider why you were rejected first — if your credit score was too low or you don’t have enough home equity, address the issue before applying again.
If you were turned down because of a recent job change, you may have to wait up to two years to reapply.
How to lower your mortgage payments without refinancing
Whether it’s because you’ve been denied or the rates are still too high, refinancing might not be an option. Fortunately, there are ways you can lower your mortgage payment without refinancing.
Get rid of mortgage insurance
If you have a conventional mortgage, your lender will automatically cancel PMI when you reach 22% equity. You might be able to request cancelation once your equity reaches 20%.
Recast your mortgage
Some lenders will allow you to make a large lump-sum payment toward your principal balance and then re-amortize your loan. The terms remain the same when you recast your mortgage, but the lower balance means smaller monthly payments and an overall decrease in the amount you’ll pay in interest.
Request a loan modification
If you’re facing financial hardship, you can ask to change the terms of your mortgage permanently to help you avoid foreclosure. You can also request a forbearance to temporarily reduce or pause your mortgage, but you’ll eventually have to repay the late or suspended payments.
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FAQ
What is mortgage refinancing?
Refinancing your mortgage is when you replace your existing home loan with a new one, typically to get a lower interest rate.
How much does it cost to refinance a mortgage?
Depending on the lender, there are several fees associated with refinancing, usually 3% to 6% of the loan. Freddie Mac suggests putting aside $5,000 for refinancing closing costs
Can I lower my mortgage payments without refinancing?
Bottom Line
An applicant can be denied refinancing for various reasons, from a low credit score to a new job. If you know why you were turned down, you can work on the problem and reapply.
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Refinance rates are currently between 6.5% and 7.5%, but your personal interest rate will depend on your credit history, financial profile and application.
Average refinance rates reported by lenders across the US as of March 1, 2024. We track refinance rate trends using information from Bankrate.
Mortgage refinance rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
How to select the right refinance type and term
The rates advertised online often require specific conditions for eligibility. Your personal interest rate will be influenced by market conditions as well as your specific credit history, financial profile and application. Having a high credit score, a low credit utilization ratio and a history of consistent and on-time payments will generally help you get the best interest rates.
30-year fixed-rate refinance
The average rate for a 30-year fixed refinance loan is currently 7.10%, an increase of 1 basis point over this time last week. (A basis point is equivalent to 0.01%.) A 30-year fixed refinance will typically have lower monthly payments than a 15-year or 10-year refinance, but it will take you longer to pay off and typically cost you more in interest over the long term.
15-year fixed-rate refinance
For 15-year fixed refinances, the average rate is currently at 6.60%, a decrease of 2 basis points compared to one week ago. Though a 15-year fixed refinance will most likely raise your monthly payment compared to a 30-year loan, you’ll save more money over time because you’re paying off your loan quicker. Also, 15-year refinance rates are typically lower than 30-year refinance rates, which will help you save more in the long run.
10-year fixed-rate refinance
For 10-year fixed refinances, the average rate is currently at 6.45%, a decrease of 4 basis points compared to one week ago. A 10-year refinance typically has the lowest interest rate but the highest monthly payment of all refinance terms. A 10-year refinance can help you pay off your house much quicker and save on interest, but make sure you can afford the steeper monthly payment.
To get the best refinance rates, make your application as strong as possible by getting your finances in order, using credit responsibly and monitoring your credit regularly. And don’t forget to speak with multiple lenders and shop around.
What to know about today’s refinance rates
Refinance rates dropped significantly toward the end of 2023, bringing much-needed activity to the housing market. Since early February, however, rates have climbed back into the 7% range. The increase came after recent inflation and labor data made it clear to investors that the Federal Reserve won’t start cutting interest rates until early this summer. Higher mortgage rates make refinancing less attractive to homeowners, making them more likely to hold on to their existing mortgages.
30-year fixed refinance: 7.10%
15-year fixed refinance: 6.60%
10-year fixed refinance: 6.45%
What to know about 2024 refinance rate trends
Experts say slowing inflation and the Fed’s projected interest rate cuts should help push mortgage interest rates down to around 6% by the end of 2024, but that will depend on incoming economic data.
Over 82% of homeowners currently have interest rates below 5% on their property. If home loan rates stabilize over the next several months, more homeowners should be able to save money through refinancing. Yet in order for refinance applications to pick up in a meaningful way, rates would need to fall substantially, according to Mark Zandi, chief economist at Moody’s Analytics.
For homeowners looking to refinance, remember that you can’t time the market: Interest rates fluctuate on an hourly, daily and weekly basis, and are influenced by an array of macroeconomic factors. Your best move is to keep an eye on day-to-day rate changes and have a game plan on how to capitalize on a big enough percentage drop, said Matt Graham of Mortgage News Daily.
Refinancing 101
When you refinance your mortgage, you take out another home loan that pays off your initial mortgage. With a traditional refinance, your new home loan will have a different term and/or interest rate. With a cash-out refinance, you’ll tap into your equity with a new loan that’s bigger than your existing mortgage balance, allowing you to pocket the difference in cash.
Refinancing can be a great financial move if you score a low rate or can pay off your home loan in less time, but consider whether it’s the right choice for you. Reducing your interest rate by 1% or more is an incentive to refinance, allowing you to cut your monthly payment significantly.
Refinancing in today’s market could make sense if you have a rate above 8%, said Logan Mohtashami, lead analyst at HousingWire. “However, with all refinancing options, it’s a personal financial choice because of the cost that goes with the loan process,” Mohtashami said.
Reasons to refinance
Homeowners usually refinance to save money, but there are other reasons to do so. Here are the most common reasons homeowners refinance:
To get a lower interest rate: If you can secure a rate that’s at least 1% lower than the one on your current mortgage, it could make sense to refinance.
To switch the type of mortgage: If you have an adjustable-rate mortgage and want greater security, you could refinance to a fixed-rate mortgage.
To eliminate mortgage insurance: If you have an FHA loan that requires mortgage insurance, you can refinance to a conventional loan once you have 20% equity.
To change the length of a loan term: Refinancing to a longer loan term could lower your monthly payment. Refinancing to a shorter term will save you interest in the long run.
To tap into your equity through a cash-out refinance: If you replace your mortgage with a larger loan, you can receive the difference in cash to cover a large expense.
To take someone off the mortgage: In case of divorce, you can apply for a new home loan in just your name and use the funds to pay off your existing mortgage.
Higher interest rates continued to depress mortgage applications last week. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of application volume, decreased 10.6 percent on a seasonally adjusted basis during the week ended February 16. The volume declined 8.0 percent before adjustment.
The Refinance Index declined by 11.0 percent compared to the previous week but eked out a 0.1 percent gain from the level one year earlier. Refinance applications accounted for 32.6 percent of the total, down from 34.0 percent the previous week.
The seasonally adjusted Purchase Index dropped 10 percent week-over-week and was down 6 percent before adjustment. Purchase applications lagged the same week in 2023 by 13.0 percent.
“Mortgage rates moved back above 7 percent last week following news that inflation picked up in January, dimming hopes of a near-term rate cut,” said Mike Fratantoni, MBA’s SVP and Chief Economist.
“Mortgage applications dropped as a result with a larger decline in refinance applications. Potential homebuyers are quite sensitive to these rate changes, as affordability is strained with both higher rates and higher home values in this supply-constrained market.”
Other Highlights from MBA’s Weekly Mortgage Applications Survey
Loan sizes were changed only slightly, to an average of $381,800 for all submissions and $440,700 for purchase mortgages.
The FHA share of applications decreased to 13.2 percent from 13.5 percent and the VA share decreased to 12.1 percent from 13.3 percent. USDA applications accounted for 0.5 percent of the total.
The average contract interest rate for conforming 30-year fixed-rate mortgages (FRM) increased to 7.06 percent from 6.87 percent, with points inching up to 0.66 from 0.65.
Thirty-year FRM with jumbo loan balances had a rate of 7.16 percent with 0.45 point. The prior week the rate was 7.00 percent with 0.39 point.
The average rate for FHA-backed 30-year FRM jumped to 6.91 percent from 6.68 percent and points increased to 1.03 from 0.89.
Fifteen-year FRM saw an increase of 8 basis points to an average rate of 6.61 percent while points dropped to 0.77 from 0.94.
The average contract interest rate for 5/1 adjustable-rate mortgages (ARM) increased to 6.37 percent from 6.30 percent,with points increasing to 0.71 from 0.60.
The ARM share of activity increased from 7.0 to 7.4 percent of total applications.
Higher mortgage rates hindered application activity during the week ended February 9. The Mortgage Bankers Association (MBA) said its Market Composite Index, a measure of mortgage loan application volume, decreased 2.3 percent on a seasonally adjusted basis from one week earlier although it did gain 2.0 percent on an unadjusted basis.
The Refinance Index was 2,0 percent lower than the prior week and 12.0 percent higher than the same week one year ago. The refinancing share of mortgage applications made up 34.2 percent of the total, down from 35.4 percent the previous week.
The seasonally adjusted Purchase Index decreased 3.0 percent from one week earlier and was 4.0 percent higher before adjustment. The number of applications declined by 12 percent year-over-year.
“Application activity was weaker last week, as mortgage rates moved higher across the board. The 30year fixed mortgage rate was up to 6.87 percent – the highest rate since early December 2023,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications remained subdued as elevated rates continue to add to affordability challenges along with still-low existing housing inventory. Refinance applications declined and remained depressed, with rates still higher than a year ago.”
Additional Data from MBA’s Weekly Mortgage Applications Survey
The overall size of mortgage loans increased only slightly from the previous week to an average of $382,000 but the purchase mortgage amount jumped to $441,300 from $434,800.
The FHA share of applications increased to 13.4 percent from 13.1 percent and the VA share dipped 1 percentage point to 13.1 percent. The USDA share of total applications was unchanged at 0.4 percent.
The conforming mortgage interest rate of 6.87 percent was 7 basis points higher than the prior week and points increased to 0.65 from 0.59.
The average rate for jumbo 30-year fixed-rate mortgages (FRM) was 7.00 percent, up from 6.88 percent,with points decreasing to 0.39 from 0.47.
The 30-year FRM with FHA guarantees had a rate of 6.68 percent with 0.89 point. The prior week’s rates averaged 6.57 percentwith 0.84 point.
The average for 15-year FRM jumped 12 basis points to 6.53 percent and points moved to 0.94 from 0.71.
The rate for 5/1 adjustable-rate mortgages (ARMs) rose to 6.30 percent from 6.14 percent,with points increasing to 0.6 from 0.48.
The ARM share of activity increased to 7.0 percent of total applications from 6.4 percent the prior week.
The mean rate for a 15-year fixed-rate refinance moved higher this week, while 30-year fixed refinance rates trailed off. The average rate on 10-year fixed refinance increased.
30-year fixed refinance: 7.18%
15-year fixed refinance: 6.58%
10-year fixed refinance: 6.47%
Refinance rates saw some turmoil over the last week, but they’ve been slowly dropping from their peaks in 2023. Experts say slowing inflation and the Federal Reserve’s projected interest rate cuts should help push mortgage interest rates down to around 6% by the end of 2024.
Over 82% of homeowners currently have interest rates below 5% on their property. If home loan rates stabilize over the next several months, more homeowners should be able to save money through refinancing. But in order for refinance applications to pick up in a meaningful way, rates would need to fall substantially, according to Mark Zandi, chief economist at Moody’s Analytics.
Mortgage refinance rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
Refinance rates for homeowners
Refinance rates are currently between 6% and 7%, but your personal interest rate will depend on your credit history, financial profile and application.
Here are the average refinance rates provided by lenders across the US. We track refinance rate trends using information collected by Bankrate:
Average refinance interest rates
Product
Rate
A week ago
Change
30-year fixed refi
7.18%
7.21%
-0.03
15-year fixed refi
6.58%
6.52%
+0.06
10-year fixed refi
6.47%
6.38%
+0.09
Rates as of Feb. 13, 2024
What to know about 2024 refinance rate trends
When mortgage rates hit historic lows during the pandemic, millions of homeowners were able to refinance to lower interest rates. While experts don’t anticipate another refinancing boom, it’s a positive sign that rates are now tending to move downward or sideways instead of soaring up.
For homeowners looking to refinance, remember that you can’t time the market: Interest rates fluctuate on an hourly, daily and weekly basis, and are influenced by an array of macroeconomic factors. Your best move is to keep an eye on day-to-day rate changes and have a game plan on how to capitalize on a big enough percentage drop, said Matt Graham of Mortgage News Daily.
Refinancing 101
When you refinance your mortgage, you take out another home loan that pays off your initial mortgage. With a traditional refinance, your new home loan will have a different term and/or interest rate. With a cash-out refinance, you’ll tap into your equity with a new loan that’s bigger than your existing mortgage balance, allowing you to pocket the difference in cash.
Refinancing can be a great financial move if you score a low rate or can pay off your home loan in less time, but consider whether it’s the right choice for you. Reducing your interest rate by 1% or more is an incentive to refinance, allowing you to cut your monthly payment significantly.
Refinancing in today’s market could make sense if you have a rate above 8%, said Logan Mohtashami, lead analyst at HousingWire. “However, with all refinancing options, it’s a personal financial choice because of the cost that goes with the loan process,” Mohtashami said.
Reasons you might refinance your home
Homeowners usually refinance to save money, but there are other reasons to do so. Here are the most common reasons homeowners refinance:
To get a lower interest rate: If you can secure a rate that’s at least 1% lower than the one on your current mortgage, it could make sense to refinance.
To switch the type of mortgage: If you have an adjustable-rate mortgage and want greater security, you could refinance to a fixed-rate mortgage.
To eliminate mortgage insurance: If you have an FHA loan that requires mortgage insurance, you can refinance to a conventional loan once you have 20% equity.
To change the length of a loan term: Refinancing to a longer loan term could lower your monthly payment. Refinancing to a shorter term will save you interest in the long run.
To tap into your equity through a cash-out refinance: If you replace your mortgage with a larger loan, you can receive the difference in cash to cover a large expense.
To take someone off the mortgage: In case of divorce, you can apply for a new home loan in just your name and use the funds to pay off your existing mortgage.
How to shop for refinance rates
The rates advertised online often require specific conditions for eligibility. Your personal interest rate will be influenced by market conditions as well as your specific credit history, financial profile and application. Having a high credit score, a low credit utilization ratio and a history of consistent and on-time payments will generally help you get the best interest rates.
30-year fixed-rate refinance
The average rate for a 30-year fixed refinance loan is currently 7.18%, a decrease of 3 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) A 30-year fixed refinance will typically have lower monthly payments than a 15-year or 10-year refinance, but it will take you longer to pay off and typically cost you more in interest over the long term.
15-year fixed-rate refinance
The average 15-year fixed refinance rate right now is 6.58%, an increase of 6 basis points from what we saw the previous week. Though a 15-year fixed refinance will most likely raise your monthly payment compared to a 30-year loan, you’ll save more money over time because you’re paying off your loan quicker. Also, 15-year refinance rates are typically lower than 30-year refinance rates, which will help you save more in the long run.
10-year fixed-rate refinance
For 10-year fixed refinances, the average rate is currently at 6.47%, an increase of 9 basis points from what we saw the previous week. A 10-year refinance typically has the lowest interest rate but the highest monthly payment of all refinance terms. A 10-year refinance can help you pay off your house much quicker and save on interest, but make sure you can afford the steeper monthly payment.
To get the best refinance rates, make your application as strong as possible by getting your finances in order, using credit responsibly and monitoring your credit regularly. And don’t forget to speak with multiple lenders and shop around.
Mortgage demand was weaker last week as interest rates moved higher across the board.
Mortgage applications decreased by 2.3% on a seasonally adjusted basis during the week ending Feb. 9, according to the Mortgage Bankers Association’s (MBA) weekly mortgage applications survey.
“Purchase applications remained subdued as elevated rates continue to add to affordability challenges along with still-low existing housing inventory,” Joel Kan, MBA’s vice president and deputy chief economist, said in a statement. “Refinance applications declined and remained depressed, with rates still higher than a year ago.”
Purchase applications decreased by 3% from one week earlier on a seasonally adjusted basis, while refinance applications fell by 2% in the same period. Last week, refis comprised 34.2% of all applications, down from 35.4% the previous week.
The 30-year fixed-rate mortgage averaged 6.64% as of Feb. 8, according to Freddie Mac’s Primary Mortgage Market Survey.
The MBA survey shows that the average mortgage rate for 30-year fixed loans with conforming balances ($766,550 or less) increased to 6.87%, up from 6.80% the week before. Meanwhile, rates on jumbo loans (greater than $766,550) increased to 7%, up from 6.88%.
The Federal Housing Administration’s (FHA) share of total applications increased to 13.4% last week, down from 13.1% the week prior. The U.S. Department of Veterans Affairs (VA) share declined to 13.1%, down from 14.1% the week before. The U.S. Department of Agriculture (USDA) share remained unchanged at 0.4%.
The MBA survey, conducted weekly since 1990, covers more than 75% of all U.S. retail residential mortgage applications.
It doesn’t matter how long ago you purchased your house, whether it’s been just a few years or several decades. Consider re-evaluating your current mortgage and living situation to determine whether a refinance could benefit your wallet.
The process is almost as in-depth as getting a new mortgage, so we’ll show you exactly when you should consider refinancing and how to complete the process.
What is a mortgage refinance?
Mortgage refinancing is the process of replacing an existing mortgage with a new mortgage loan. The new loan may have a different interest rate, term, or loan amount than the original mortgage.
People often refinance their mortgages to take advantage of lower interest rates, to change the terms of their loan, or to tap into the equity they have built up in their home.
When should you refinance your mortgage?
Before you jump into the refinance process, it’s wise to think about your goals. There are many times when it’s a good idea to look into mortgage refinancing, but you always have to look at the big picture as well.
For example, if interest rates are lower than when you got your mortgage or your credit has improved recently, you may qualify for a lower interest rate. This allows you to save money over the long run and have a lower monthly payment.
But here’s the catch.
If you lock into that lower interest rate and refinance for another 30-year mortgage, you’re adding time to the loan term. This might not be a big deal if you’ve only been paying off your mortgage for a couple of years. On the other hand, you may end up paying more interest over time, even with the lower rate, if you’re already several years into your current term.
Get your lender to crunch some comparisons for you, or do it yourself using a refinance calculator. That way you know for sure whether you’re really saving money or not.
See also: How Much Does it Cost to Refinance a Mortgage?
Drop Your PMI Coverage
Another time to look into refinancing your mortgage is if you’re paying private mortgage insurance and have reached 20% equity in your home’s value. At that point, you may be able to refinance and drop that PMI contingency.
Since PMI typically costs up to 1% of your loan amount each year, you could save yourself some serious money, especially since it’s not going towards your principal or interest.
As always, be sure to also consider the closing costs that come along with refinancing as well as how much of your loan you’ve already repaid. The financial benefits of the refinance should always outweigh the expenses.
Cash-Out Refinance
Another reason some people want to refinance is to access cash. Maybe they want to fund a home renovation project or pay off debts. A cash-out refinance will allow them to leverage the equity in their house to obtain that cash.
How soon can you refinance your home?
When it comes to refinancing, lenders typically look more at the amount of equity in your home than the length of time you’ve owned it. This is especially true of cash out refinances, which require 20% equity in the home. If you just want to change your interest rate or length of the loan, then you’ll need somewhere between 5% and 10% home equity.
If you’ve already refinanced your home once after the original purchase, your lender might make you wait before doing it again. The industry standard is usually six months, so as long as you’re over that threshold, you shouldn’t have an issue.
Prepayment Penalties
One issue to be aware of, however, is the potential for a prepayment clause in your existing home loan. Although it’s rare these days, this penalty can charge you a large fee if you pay off your mortgage early.
When you refinance, that’s exactly what you’re doing: paying off your old mortgage (and lender) with a new mortgage that could very well be through a new lender. Check your existing loan contract to make sure a refinance won’t come with any unexpected penalties.
How much could you end up paying?
Some prepayment penalty clauses are structured so that you pay 80% of the interest you would owe over the next six months. That can easily amount to thousands of dollars, especially if you’re early in your mortgage with interest-heavy payments.
How to Refinance a Mortgage
Refinancing your home doesn’t happen overnight. In fact, there are several steps involved. Here’s a play by play so you know exactly what to expect.
1. Determine the Type of Refinance You Want
We’ve talked about setting a goal for your refinance and this is a huge part of starting the process. You may want a standard refinance that merely adjusts your interest rate. Or perhaps you want to cash out some of your equity. Alternatively, you may wish to refinance out of an adjustable-rate mortgage to a fixed-rate or switch the length of your term.
2. Check Your Credit Score
Once you know the type of mortgage loan you want, it’s time to start preparing for the process. Knowing your credit score lets you know a bit more what you can expect in terms of loan qualification and interest rates.
Some loan types have absolute minimums, while others are more flexible. Check your credit score upfront so that you can get an idea of whether you meet basic refinance requirements.
3. Estimate Your Home’s Value
Next, you need to get an idea of how much your home is currently worth. The best way to do this is to look at comps in your neighborhood.
Check websites like Zillow and Realtor.com to find out what current sales prices look like, as well as properties that have been recently sold. Take a look at the price per square foot for these homes and apply that number to the square footage of your own home.
Of course, that’s not an absolute. Your home’s true value depends on several factors, including upgrades and lot size. But you can take these things into consideration to get a general idea of what your appraisal value could be.
4. Compare Lenders
You don’t have to refinance with your current mortgage lender. In fact, it’s smart to shop around to find the best loan terms. Compare all the details of your refinance offer. Getting a lower interest rate is definitely important, but you also want to consider potential closing costs and origination fees.
How a lender structures the new loan is also significant and can influence your decision. If you’re trying to save on how much cash you spend upfront, you might prefer a lender who lets you incorporate your closing costs into the loan amount. Alternatively, low interest rates may be the most influential factor when choosing a lender.
5. Get a Loan Estimate
After comparing rates and fees from multiple mortgage lenders, you can get a loan estimate from your top choices. A loan estimate is a form that provides essential information about the terms of a mortgage refinance loan.
It is intended to help borrowers compare different loan offers and make an informed decision about which one is the best fit for them. The loan estimate includes the loan terms, the projected monthly payments, the closing costs, and other charges associated with the loan. It also includes information about the lender, the mortgage broker (if applicable), and the real estate broker (if applicable).
6. Prepare for Your Application
After you pick out a lender with the mortgage rates and terms you like, it’s time to start gathering your documentation for your refinance application. You’ll likely need things like bank statements, tax forms from the last two years, and pay stubs.
Getting all of this paperwork together in advance can save time during the application and underwriting processes.
7. Get Ready for the Appraisal
Part of the mortgage refinance process is to get a professional appraisal on your home. Your lender typically orders this and the fee is usually included in your closing costs. Make sure your home is clean and presentable. You don’t need to make major changes but picking up ahead of time can create a good impression on the appraiser, as can a freshly mowed yard.
8. Anticipate Your Needs for Closing
Closing on a refinance is similar to when you originally closed on your home. Typically, your lender will arrange a meeting with a public notary so you can sign all of your paperwork. You can make this at a time and place that is convenient for you. If the refinanced loan is in both your name and someone else’s, like your spouse’s, then you’ll both need to be present to sign.
Once the paperwork is complete, you’ll start making monthly payments to your new lender as scheduled in your closing documents. Any new terms or rates will also apply so you can start paying down your newly refinanced home loan.
How to Refinance Your Mortgage FAQs
What are the eligibility requirements for a mortgage refinance?
To be eligible for a mortgage refinance, you typically need to have good credit, sufficient equity in your home, and the ability to make the monthly payment on the new loan.
Credit score: Lenders typically prefer borrowers with good credit scores when evaluating mortgage refinance applications. A good credit score is generally considered to be above 670, but this can vary depending on the lender. If you have a lower credit score, you may still be able to refinance your mortgage. However, you may be offered less favorable terms, such as a higher interest rate.
Equity: To be eligible for a mortgage refinance, you typically need to have sufficient equity in your home. Equity is the portion of your home that you own outright, and it is determined by subtracting the amount you owe on your mortgage from the value of your home. To refinance, you will typically need to have at least 20% equity in your home.
Ability to make payments: Lenders will consider your income, debts, and other financial obligations when evaluating your ability to make the monthly mortgage payment on a refinance. You will typically have to provide proof of income, such as pay stubs or tax returns, and you will need a debt-to-income ratio that is within the lender’s guidelines.
In addition to these requirements, you may also need to meet other eligibility criteria, such as being current on your mortgage payments and having no recent bankruptcies or foreclosures.
How do I compare refinancing options?
To compare refinancing options, you can use online mortgage calculators or consult a financial professional or mortgage lender. You should consider the interest rate, terms, and costs of each option.
What are closing costs?
Closing costs are fees that are associated with the process of obtaining a mortgage. They can include fees for appraisals, credit checks, title searches, and other services.
How much do closing costs typically cost?
Closing costs can vary widely depending on the specific loan and lender, but they typically range from 2% to 5% of the loan amount.
Can I refinance my mortgage if I have bad credit?
It may be more difficult to qualify for mortgage refinancing if you have bad credit, but it’s not impossible. You may be able to qualify for a refinancing option with a higher interest rate or with a co-signer.
How long does it take to refinance a mortgage?
Refinancing your mortgage can take anywhere from a few weeks to a few months, depending on the complexity of your situation and the lender’s process. It’s a good idea to start the process as early as possible to ensure that you have enough time to complete it.