Mortgage rates came down across all terms from a week ago, according to rate data collected by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans all receded.
While it’s expected that rates will gradually come down this year, the path might be bumpy.
At its Jan. 31 meeting, the Federal Reserve announced it would hold off changing rates, but could cut rates in the future. At their March 20th meeting, the Fed will update their outlook on rates. Rate changes affect many areas of the economy, including the 10-year Treasury, a key benchmark for fixed-rate mortgages.
“Where the 10-Year Treasury yield goes, mortgage rates will follow,” says Ken Johnson of Florida Atlantic University. “In roughly the last two months, the 10-year Treasury yield is up 50 basis points. Depending on the source, the 30-year mortgage rate is up 48 basis points. Treasurys’ path remains a coin toss at this point.”
Rates accurate as of March 14, 2024.
The rates listed here are averages based on the assumptions indicated here. Actual rates displayed on-site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Thursday, March 14th, 2024 at 7:30 a.m.
30-year mortgage rate declines, -0.18%
Today’s average rate for the benchmark 30-year fixed mortgage is 6.84 percent, a decrease of 18 basis points from a week ago. A month ago, the average rate on a 30-year fixed mortgage was higher, at 7.25 percent.
At the current average rate, you’ll pay principal and interest of $654.59 for every $100,000 you borrow. That’s a decline of $12.06 from last week.
The popular 30-year mortgage has a number of advantages:
Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower, more affordable payments spread over time.
Stability: With a 30-year fixed mortgage, you lock in a set principal and interest payment, making it easier to plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance premiums and property taxes go up or, less likely, down.
Buying power: With lower payments, you might qualify for a larger loan amount or a more expensive home.
Flexibility. Lower monthly payments can free up some of your monthly budget for other goals, like building an emergency fund, contributing to retirement or college tuition, or saving for home repairs and maintenance.
15-year mortgage rate drops, -0.14%
The average rate you’ll pay for a 15-year fixed mortgage is 6.42 percent, down 14 basis points from a week ago.
Monthly payments on a 15-year fixed mortgage at that rate will cost around $867 per $100,000 borrowed. The bigger payment may be a little more difficult to find room for in your monthly budget than a 30-year mortgage payment, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much more rapidly.
5/1 ARM moves lower, -0.11%
The average rate on a 5/1 adjustable rate mortgage is 6.35 percent, falling 11 basis points from a week ago.
Adjustable-rate mortgages, or ARMs, are home loans that come with a floating interest rate. In other words, the interest rate will change at regular intervals, unlike fixed-rate mortgages. These loan types are best for people who expect to refinance or sell before the first or second adjustment. Rates could be materially higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 6.35 percent would cost about $622 for each $100,000 borrowed over the initial five years, but could climb hundreds of dollars higher afterward, depending on the loan’s terms.
Current jumbo mortgage rate retreats, -0.12%
The average jumbo mortgage rate is 6.94 percent, a decrease of 12 basis points from a week ago. Last month on the 14th, the average rate for jumbo mortgages was greater than 6.94 at 7.31 percent.
At today’s average rate, you’ll pay a combined $661.28 per month in principal and interest for every $100,000 you borrow. That’s $8.06 lower, compared with last week.
Mortgage refinance rates
30-year fixed-rate refinance trends down, -0.20%
The average 30-year fixed-refinance rate is 6.84 percent, down 20 basis points since the same time last week. A month ago, the average rate on a 30-year fixed refinance was higher at 7.27 percent.
At the current average rate, you’ll pay $654.59 per month in principal and interest for every $100,000 you borrow. That represents a decline of $13.40 over what it would have been last week.
Where are mortgage rates going?
With inflation still above the Fed’s 2 percent goal and the job market holding strong, the Fed isn’t likely to cut rates at its March meeting.
“The Federal Reserve will not cut interest rates in the first half of this year, in my view,” says Lawrence Yun, chief economist of the National Association of Realtors, “but rate cuts of three, four or even five rounds will be possible in the second half of the year as rent measures will be much more well-behaved.”
The rates on 30-year mortgages mostly follow the 10-year Treasury, which shifts continuously as economic conditions dictate, while the cost of variable-rate home loans mirror the Fed’s moves.
These broader factors influence overall rate movement. As a borrower, you could be quoted a higher or lower rate compared to the trend.
What today’s rates mean for you and your mortgage
While mortgage rates change daily, it’s unlikely we’ll see rates back at 3 percent anytime soon. If you’re shopping for a mortgage now, it might be wise to lock your rate when you find an affordable loan. If your house-hunt is taking longer than anticipated, revisit your budget so you’ll know exactly how much house you can afford at prevailing market rates.
Keep in mind: You could save thousands over the life of your mortgage by getting at least three loan offers, according to Freddie Mac research. You don’t have to stick with your bank or credit union, either. There are many types of mortgage lenders, including online-only and local, smaller shops.
“All too often, some [homebuyers] take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
More on current mortgage rates
Methodology
Bankrate displays two sets of rate averages that are produced from two surveys we conduct: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).
The rates on this page represent our overnight averages. For these averages, APRs and rates are based on no existing relationship or automatic payments.
Learn more about Bankrate’s rate averages, editorial guidelines and how we make money.
What can employers do to make sure their financial benefits attract and serve a truly diverse workforce?
It’s a question that has become increasingly relevant since the Covid-19 pandemic shed a harsh light on the pervasive economic inequalities embedded in society and the workplace. While there have been gains in the average wealth of all demographic groups since 2019, the racial wealth gap remains stubbornly wide.
According to Federal Reserve data from the second quarter of 2023, Black families had about $986,000 less wealth, on average, compared with white families, while Hispanic families had about $992,000 less wealth, on average, than white families. Put more starkly: Black and Hispanic families had 24 cents for every $1 of white family wealth.
Even when they attend and graduate from college, minorities still face an uphill financial climb. According to the Education Data Initiative, Black college graduates owe an average of $25,000 more in student loan debt than white college graduates. Four years after graduation, black students owe an average of 188% more than white students borrowed.
And while women have increased their presence in higher-paying jobs traditionally dominated by men, the gender pay gap hasn’t gone away: On average, women are paid 83.7 percent as much as men, which amounts to a difference of $10,000 per year. The gaps are even larger for many women of color, according to the U.S. Department of Labor.
Given these realities, it’s important that diversity, equity, and inclusion (DE&I) programs and financial wellness initiatives are effectively combined to help address the problems of economic inequality throughout every segment of your workforce.
By helping underrepresented employees turn wages into long-term wealth, companies can play a pivotal role in driving financial success that impacts future generations and results in systemic change.
Where Do Financial Wellness and Diversity, Equity, and Inclusion Intersect?
These days, many employers of all sizes have a DE&I strategy or program in place to increase inclusion and remove bias and discrimination in the workplace. Financial wellness benefits are also growing in popularity as a way to attract, retain, and add value to employees.
While companies may actively promote both financial wellness and DE&I, they often overlook the potential synergy between the two. Understanding how these two human resource pillars work together can help amplify the relevance, effectiveness, and success of both programs throughout your workforce.
Traditionally, financial well-being programs have focused on long-term savings and investing for retirement. But it’s becoming increasingly apparent that this approach doesn’t meet all the needs of an increasingly diverse workforce.
Depending on the individual, financial success can come in many forms, not just having enough for retirement. Success might also include paying off debt, saving for emergencies, or buying a first home. Understanding your workforce and its diverse needs — as well as understanding the importance of a broad-based definition of financial well-being — helps put you at the nexus of your DE&I and financial wellness goals.
Recommended: How to Support Your Low-Wage Workforce
Can Financial Well-Being Initiatives Enhance Diversity, Equity, and Inclusion in Your Workforce?
The answer is an overwhelming yes — as long as your financial well-being programs are designed to be customizable for employees on different financial footings with a range of financial goals and stresses. Here are some steps you can take to integrate your financial well-being and DE&I programs.
Ensure Fair Pay for All Employees
This may seem like a basic concept, but it still needs plenty of attention. Doing everything you can to close the race and gender pay gaps in your organization shows your commitment to both DE&I and financial well-being — and to making them work together.
Recommended: How Employers Can Help Close the Racial Wealth Gap
Embrace Flexible Financial Contribution Programs
Personalized, relevant financial benefits can help you meet your employees where they are in terms of financial challenges and goals. When you offer a range of financial well-being benefits, you give employees the power to choose the financial programs that can help them the most.
The pandemic highlighted for many people the need for short-term, goal-oriented savings as well as long-term investing. Programs that can resonate strongly with today’s diverse workforce and its many needs include: emergency savings accounts; student loan repayment programs, including 401(k) matches for employees paying off student loans; budget counseling, and debt management tools. Established college tuition reimbursement and retirement savings programs are also vital parts of a holistic financial wellness program.
Recommended: How Does an HR Team Implement a Student Loan Matching or Direct Repayment Benefit?
Get Creative
Don’t be afraid to think out of the box when it comes to expanding financial well-being programs so that you can include all employees. Many employers are reimagining traditional approaches to leaves and paid time off — for example, allowing employees to transfer unused PTO balances into accounts like emergency savings or 529 tuition savings plans.
Creativity is also important when it comes to education efforts. Simply offering new programs is not enough. Education efforts should be accessible, interactive, and customized so that each employee can find the information they need and act on it.
SoFi at Work has noticed that some employers are adopting a “learning journey” approach that allows workers to choose their own paths depending on where they are on their journey towards their individual financial goals and aspirations.
Recommended: Are Your Benefits Helping Women — Especially Moms — Achieve Financial Wellness?
Choose Credible Partners for a Sustainable Program
To provide this extra support and guidance across a broad spectrum of financial needs, you’ll need to choose credible partners that can provide expertise, platforms, and cost-effective services in specific areas. Good partners can help you launch personalized and sustainable programs that are accessible in the short-term, but also build the foundation for your department’s long-term goals.
The Takeaway
Employers can play a key role in ensuring that all employees have the same opportunities for financial success and control of their own financial futures. Democratizing financial well-being can not only create a more diverse and inclusive workplace, but ultimately a more equitable future for all of us.
SoFi at Work can help. We provide the benefits platforms and education resources that can enhance financial wellness throughout your workforce.
Photo credit: iStock/pixdeluxe
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Average mortgage rates climbed moderately last Friday. Indeed, they rose on every business day last week. However, that followed a week of mainly falls. And those rates begin this morning close to where they were at the start of March.
First thing, it was looking as if mortgage rates today barely move. But that could change later in the day.
Current mortgage and refinance rates
Find your lowest rate. Start here
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.12%
7.13%
+0.02
Conventional 15-year fixed
6.62%
6.65%
+0.03
Conventional 20-year fixed
7.15%
7.17%
+0.04
Conventional 10-year fixed
6.64%
6.66%
Unchanged
30-year fixed FHA
6.49%
7.17%
+0.01
30-year fixed VA
6.61%
6.72%
+0.02
5/1 ARM Conventional
6.28%
7.38%
Unchanged
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock your mortgage rate today?
I doubt we’ll see mortgage rates enter a consistent downward trend much before the summer, and possibly later.
So, for now, my personal rate lock recommendations remain:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCKif closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So, let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data are mostly compared with roughly the same time the business day before, so much of the movement will often have happened in the previous session. The numbers are:
The yield on 10-year Treasury notes held steady at 4.32%. (Neutral for mortgage rates. However, yields were rising this morning.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were rising this morning. (Bad for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices increased to $81.35 from $80.62 a barrel. (Bad for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices inched down to $2,159 from $2,162 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Because gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — nudged up to 75 from 71 out of 100. (Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So, lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic, post-pandemic upheavals, and war in Ukraine, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today look likely to hold close to steady. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Find your lowest rate. Start here
What’s driving mortgage rates today?
The Fed
The Federal Reserve’s rate-setting body (the Federal Open Market Committee or FOMC) begins a two-day meeting tomorrow. And a flurry of events is scheduled for the following afternoon.
Almost nobody expects an announcement of a cut in general interest rates on Wednesday. But events that afternoon include:
2 p.m. Eastern — Rate announcement and report publications
2 p.m. Eastern — Summary of Economic Projects publication. This occurs only quarterly and includes a dot plot
These FOMC documents and the news conference may provide new insights into how the Fed’s thinking on future cuts to general interest rates is evolving. So, markets globally will be paying the closest attention to every word written and uttered.
And there is huge potential for Wednesday’s Fed events to move mortgage rates.
I covered this in last Saturday’s weekend edition. And I’ll brief you in more detail again on Wednesday morning so you’ll know what to look out for.
Other influences on mortgage rates this week
Most of the economic reports on this week’s calendar are unlikely to affect mortgage rates. It’s not impossible. But they cover areas of the economy that rarely interest the bond investors who largely determine those rates.
Today’s lone report is a good example. It’s the home builder confidence index for February, which came in as expected. I don’t recall the last time that had a perceptible influence on mortgage rates. And the same goes for tomorrow’s housing starts and building permits, also for February.
The two reports that might move mortgage rates this week are both March purchasing managers’ indexes (PMIs) from S&P. One covers the services sector and the other manufacturing.
They’re both expected to show purchasing activity slowing modestly. But I’ll brief you more fully on what to expect on Wednesday.
Friday has no scheduled economic reports. However, three Fed speakers, including Chair Jerome Powell, have speaking engagements that day. Those could be an opportunity to reinforce messages communicated on Wednesday and to correct any misunderstandings. So, they could have an impact on mortgage rates.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
Recent trends
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Mar. 14 report put that same weekly average at 6.74% down from the previous week’s 6.88%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Feb. 12 and the MBA’s on Feb. 20.
Forecaster
Q1/24
Q2/24
Q3/24
Q4/24
Fannie Mae
6.5%
6.3%
6.1%
5.9%
MBA
6.9%
6.6%
6.3%
6.1%
Of course, given so many unknowables, both these forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Verify your new rate
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Verify your new rate. Start here
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
Check your refinance rates today. Start here
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also, pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
So, for the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
Indeed, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
Verify your new rate. Start here
Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account as evidence of their financial circumstances. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. And this gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders. And it could save you thousands in the long run.
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Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Those mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
Car incentives nearly vanished during the past several years, thanks to pandemic-driven supply chain issues for auto manufacturers. As vehicle inventories dwindled and consumer demand outweighed supply, automakers had no reason to offer incentives like rebates or low-rate financing. The good news is that auto incentives, while still below prepandemic levels, are starting to return.
According to Kelley Blue Book, a Cox Automotive company, auto incentives — as a percentage of the average new-vehicle price buyers paid — reached 5.9% in February 2024. That’s compared with a general range of 10% to 11% before COVID-19 hit and 2% in fall 2022. In February, auto manufacturers spent an average of $2,808 per vehicle in incentives, up 88% from a year ago.
With inventories returning to normal and some auto manufacturers again sweetening deals to move vehicles, here’s how you can find and possibly save with car incentives.
Tips for saving with auto incentives
Although new car prices have declined since peaking in late 2022, the average price a buyer pays remains around $47,000. Incentives are one way to whittle down that price tag, and certain strategies can help maximize savings.
Be flexible about the vehicle you buy
Traditionally, auto dealers strive to have 60 selling days’ worth of cars in stock. As auto production has returned, some manufacturers — like Toyota — remain well below the 60-day mark, while others — including Ford, Nissan and Buick — are overstocked and more likely to offer incentives and discounts to move cars.
“The key right now is to be flexible about which vehicle you consider,” says Sean Tucker, senior editor for data company Cox Automotive. “If you had your heart set on something from Toyota, you’re probably not going to find a great deal. They just don’t have trouble selling cars right now.”
Auto manufacturer websites are a good place to research auto deals and incentives — including cash rebates, low-rate financing and lease deals — that are available for various makes and models. Such incentives often vary regionally, so you can usually narrow a search by ZIP code. Also, auto research companies like Edmunds maintain webpages with current car deals and incentives by carmaker.
Tucker suggests that incentives for leasing and electric vehicles are both good sources for saving in the current market. Auto dealerships are trying to restore the leasing cycle that feeds the used car market, so many dealerships are offering lease deals.
“It’s actually relatively easy right now to get a good lease on an EV,” Tucker says. “And that might even be a good idea just from a technology standpoint, because three years from now, when your lease is likely coming up, there may be far better EVs on the market.”
Know what incentives you qualify for
To ensure you receive every incentive available to you, know exactly which incentives you qualify for before engaging with a car dealer. Joseph Yoon, consumer insights analyst at Edmunds, recommends telling the dealer upfront what you expect in the way of incentives.
“The dealer is not going to offer it to you unless they’re deeply desperate to get the deal done,” Yoon says.
As part of your research, be aware of the different types of incentives available, because in some cases they can be combined.
Auto rebates provide a certain dollar amount to reduce your overall cost of buying, financing or leasing a vehicle. The rebate reduction should be on top of any other discount you’ve negotiated.
Low-rate financing is an incentive offered by automaker captive lenders — although you’ll need to have good or excellent credit to qualify and may be limited on loan length. As of March 5, 2024, Cox Automotive reported that 14.2% of new vehicle financing transactions had an APR of 3% or less. Only 3.2% of transactions had a 0% APR. While low-rate offers are available, they aren’t plentiful.
Loyalty incentives may be available if you have a certain car brand and want to buy or lease another one from the same manufacturer.
Demographic-focused incentives — for example, if you’re a recent college graduate, military member or educator — are also offered by some auto manufacturers and dealers.
Stacking more than one incentive, when possible, can help you take advantage of every dollar available to you. If you have to choose between multiple incentives, for example, either a rebate or low rate from the same manufacturer, use an auto loan calculator to run each scenario and see which will save you the most money in the long run. Also, consider whether taking a cash rebate at the dealer and financing elsewhere could save you even more.
About EVs, Yoon says auto manufacturers and dealers are motivated right now to offer savings on top of the federal incentive, because “there’s still a little bit of inventory left from 2023 that they really, really, really want to get rid of as the 2024 models [are starting to] hit.”
Plan to negotiate and comparison shop
If you know you qualify for a $1,500 car rebate, don’t assume that’s the best you can do — even if the dealer tells you it is. The ability to negotiate car prices for some models has also reappeared, and incentives should be in addition to any amount you negotiate off the manufacturer’s suggested retail price. You can use valuation tools on car-buying sites to see what people are paying for the car you want and whether negotiating a lower price is realistic.
Finally, if you can find more than one dealership with the vehicle you want, present the deal you expect to each and let them compete for your business. Dealers receive factory-to-dealer discounts to help move certain vehicles, usually slower-selling ones. They can choose whether to pass these savings on to you and may be more motivated to do so if they know you’re shopping for the same car elsewhere.
Yoon says if a dealership isn’t willing to “play ball,” you shouldn’t hesitate to walk away. “Cars cost literally more than they have ever cost the consumer, and so you should, rightfully so, fight for every dollar that you can save.”
My work on housing moves around the 10-year yield and the economics that move that. The growth rate of inflation has fallen a lot on the year-over-year data, but mortgage rates haven’t gone down, which isn’t surprising to me as my mantra has been:“Labor over Inflation.”
For 2024, the 10-year yield running between 3.80%-4.25% looks perfectly normal to me as long as the economic data is firm and the Fed hasn’t pivoted. I can’t see the 10-year yield below 3.37% unless the labor market breaks — meaning jobless claims over 323,000 on the four-week moving average. That means I can’t see mortgage rates going below 6%, especially with the spreads being bad, until the labor market or the economy gets weaker.
However, now we are at the same spot as last year, near the critical 4.34% level and we have the Federal Reserve meeting coming up. This is a big week, as you can see in the chart below.
With mortgage rates above 7% again, we will have to see what the Fed says at this meeting because, in the past few meetings, they have made it clear that policy is restrained and that they don’t want it to get too restrictive. This is what happened last year when the 10-year yield headed to 5% and we had 8% mortgage rates. However, there is a risk of the Fed sounding too hawkish again which would send the 10-year yield higher.
Purchase application data
As mortgage rates have been falling recently, we saw back-to-back weeks of growth in the purchase application data, which aligns with what we saw last year. Remember, we are working from extremely depressed levels in this data line, so the bar is so low that it doesn’t take much to move the needle.
Since November 2023, we have had 10 positive and five negative purchase application prints after making holiday adjustments. Year to date, we have had four positive prints versus five negative prints. Clearly, if mortgage rates can head toward 6% and hold we will get rising demand, but I believe the Federal Reserve wouldn’t be able to sleep at night if more people were buying homes.
Weekly housing inventory data
The one positive story for me in housing this year is that inventory is growing year over year for both active inventory and new listing data. I know it’s not a lot, but growth is growth. The one benefit of higher rates is that inventory can grow in the post-2010 qualified mortgage world as long as higher rates create softness in demand. It hasn’t been a lot of growth historically, but growth is growth.
Last year, the seasonal inventory bottom happened on April 14, which was the the longest time to find a seasonal bottom ever. This means we will show more than normal inventory growth until we get past tax day 2024.
Here is a look at the inventory last week:
Weekly inventory change (March 8-15 ): Inventory rose from 500,579 to 507,160
The same week last year (March 9-16): Inventory rose from 413,199 to 414,967
The all-time inventory bottom was in 2022 at 240,194
The inventory peak for 2023 was 569,898
For some context, active listings for this week in 2015 were 982,639
New listings data
New listings are growing yearly, which is another plus for housing. Last year, II picked up on the trend that new listing data was creating a historical bottom as the data line wasn’t heading lower with higher rates. The growth is a tad lighter than what I was hoping for. But as someone who didn’t buy the mortgage rate lockdown premise that inventory can’t grow with higher rates, this year is a good test case.
Here’s the weekly new listing data for last week over several previous years:
2024: 59,542
2023: 41,415
2022: 54,542
For some historical context, new listing data this week in 2010 was 306,020.
Price-cut percentage
Every year, one-third of all homes take a price cut before selling — this is regular housing activity and this data line is very seasonal. The price-cut percentage can grow when mortgage rates move higher and demand gets hit. When rates fall, they go lower than an average year.
Inventory is higher than last year, and we might have found the bottom already, so as the year progresses, the number of homes taking a price cut should increase. The goal is to see how the mortgage rate variable plays into this data line. This is why this week’s Fed meeting is key, to see if the 10-year yield can break higher, which should increase the price-cut data.
Here’s the percentage of homes that took a price cut before selling last week and how that compares to the same week in previous years:
2024: 31%
2023: 30%
2022: 17%
Week ahead: The Fed and housing data
The Federal Reserve’s language and the dot plot are the two things to watch this week. The dot plot should still show many Fed members having two to three rate cuts in play for 2024, with some going the opposite way from that group. We also will have tons of housing data coming out this week, including the builders’ confidence, housing starts, existing home sales, and Zillow home price data. However, the key is the Fed, Fed and the Fed!
LOS ANGELES — More homeowners eager to sell their home are lowering their initial asking price in a bid to entice prospective buyers as the spring homebuying season gets going.
Some 14.6% of U.S. homes listed for sale last month had their price lowered, according to Realtor.com. That’s up from 13.2% a year earlier, the first annual increase since May. In January, the percentage of homes on the market with price reductions was 14.7%.
The share of home listings that have had their price lowered is running slightly higher than the monthly average on data going back to January 2017.
That trend bodes well for prospective homebuyers navigating a housing market that remains unaffordable for many Americans. A chronically low supply of homes for sale has kept pushing home prices higher overall even as U.S. home sales slumped the past two years.
“Sellers are cutting prices, but it just means we’re seeing smaller price gains than we would otherwise have seen,” said Danielle Hale, chief economist at Realtor.com.
The pickup in the share of home listings with price cuts is a sign the housing market is shifting back toward a more balanced dynamic between buyers and sellers. Rock-bottom mortgage rates in the first two years of the pandemic armed homebuyers with more purchasing power, which fueled bidding wars, driving the median sale price for previously occupied U.S. homes 42% higher from 2019 through 2022.
“Essentially, the price reductions suggest far more normalcy in the housing market than we’ve seen over the last couple of years,” Hale said.
The share of properties that had their listing price lowered peaked in October 2018 at 21.7%. It got nearly as high as that — 21.5% — in October 2022.
Last year, the percentage of home listings that had their asking price lowered jumped to 18.9% in October, as the average rate on a 30-year mortgage surged to a 23-year high of 7.79%, according to Freddie Mac.
Mortgage rates eased in December amid expectations that inflation has cooled enough for the Federal Reserve begin cutting its key short term rate as soon as this spring. Those expectations were dampened following stronger-than-expected reports on inflation and the economy this year, which led to a rise in mortgage rates through most of February.
That’s put pressure on sellers to scale back their asking price to “meet buyers where they are,” Hale said.
That pressure could ease if, as many economists expect, mortgage rates decline this year.
Ben Affleck and Jennifer Lopez, aka Bennifer, have finally found their perfect love nest — one that’s modeled after a famous queen’s lavish chateau.
It may have taken them two years and three failed escrows but the wait paid off because this mansion is the ultimate luxury home for the power couple.
Many were confused over the stars’ indecision to commit to buying a property. With an unlimited budget at their disposal, it was a little out of the ordinary that these A-listers kept changing their minds.
According to reports, the two looked at mansions in the range of $35 to as high as $85 million in the most exclusive neighborhoods. But none of them quite passed the mark, leading people to believe that there was trouble in paradise. Or are they just really picky?
All doubts were cast aside when the lovebirds set their eyes on this mansion. They instantly fell in love with the property! They paid $61 million in cold cash and the deal took just one week to close, per TMZ.
What’s not to love? This stunning mansion is inspired by one of the most iconic chateaus in history.
The mansion was modeled after Marie Antoinette’s chateau, Le Petit Trianon
Dubbed the Wallingford Estate, the Beverly Hills abode features French-style architecture that was originally modeled after Marie Antoinette’s private chateau, Le Petit Trianon.
The queen’s manor, located on the grounds of the Palace of Versailles, was a gift from her husband, King Louis XVI.
Known for her love for all things opulent, Marie Antoinette adored her private estate. It served as a place of refuge, where the queen staged operas, productions, and lavish parties.
See also: 24 celebrities who live in Beverly Hills & their million-dollar homes
The Wallingford’s exterior features stately columns, large windows, and a rectangular shape that echoes the iconic design of Le Petit Trianon.
While the interiors have been modernized with state-of-the-art technology and contemporary furniture, it still retains its French Neoclassic ambiance.
Ben and J.Lo’s house has 12 bedrooms and 24 bathrooms
Situated on a 5.2-acre lot, the megamansion boasts a total of 12 bedrooms and 24 bathrooms across an impressive 38,000 square feet of indoor living space — providing plenty of living space for Ben and Jen’s blended family.
You can take a closer look inside Ben Affleck and Jennifer Lopez’s new mansion here (swipe to see the revamped interiors):
The couple are co-parenting peacefully with their exes (Jennifer Gardner and Marc Anthony) and share five children between them.
There won’t be any shortage of space for their big family in this huge mansion!
Like its sprawling grounds, everything about this house is grand. The double-door entryway opens to an expansive living room with double-height ceilings and large skylights that make the space even more massive.
White walls with frame molding display sophistication, while large windows allow plenty of natural light to brighten up every corner of the open floor space.
JLo previously shared a glimpse of the mansion’s downstairs area on Instagram while celebrating the success of Mother with her friends. Walking from the stairs to the bar, fans got a view of the gorgeous interiors of the ground floor.
Another highlight of this property is its secured grounds — a top requirement among high-profile celebrities. The mansion is surrounded by tall hedges and comes fully fenced with secured entrance and exit gates from two different private streets.
This design layout safeguards the often-photographed couple from prying eyes and paparazzi. And we know all too well how much Ben Affleck ‘loves’ paparazzi, don’t we?
Recreational amenities include a 155-foot-long infinity pool, a home theater, spa areas, a full-service salon, and a sports complex complete with a basketball court, a pickleball court, a fully equipped gym, and a boxing ring.
Visitors can also enjoy a slice of luxury living in the 5,000-square-foot guest penthouse. This structure also houses the garage area, which is large enough to fit 90 cars!
It’s one of the most luxurious homes in all of Beverly Hills
Fitting for one of Hollywood’s most famous couples, Ben and Jennifer’s new house is one of the city’s most impressive mansions and was once one of L.A.’s priciest listings.
Sitting mere minutes away from the Beverly Hills Hotel in the gated Wallingford Estates community. It had previously been owned by healthcare entrepreneur Jeoung Lee before real estate mogul Gala Asher picked it up for $22 million back in 2016.
What followed was an extensive renovation that brought the sprawling mansion into the 21st century. Asher then sought to capitalize on his big investments in the property by listing it for a whopping $135 million in 2018.
With no takers, a series of price adjustments followed, until the famous couple finally took it off the market in 2023. The final sale price was $60,850,000 — which amounts to $1,601/sqft.
The moral of Ben and Jen’s house-hunting saga? Patience pays off. By holding off on their purchase, they were able to find a perfect palace to call their home. A happily-ever-after ending for a Hollywood royal couple.
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Central to that shift has been focusing on their own “BS”: what others may dismiss as the unappealing side of the job, but what Carter has come to understand as denoting something entirely different. “I feel some loan officers, some real estate agents are falling out [of the profession] – when you have three different … [Read more…]
Amidst a backdrop of inflation, rising borrowing costs, and growing debt levels, employee financial wellness has been on the decline in recent years. According to PwC’s 2023 Employee Financial Wellness Survey, a full 60% of full-time employees are stressed about their finances. Indeed, employees are even more concerned about their finances today than during the height of the pandemic.
Given that money worries can take a toll on employee health and well-being, as well as productivity at work, it makes sense that a growing number of employers are enhancing support for financial wellness. Bank of America’s 2023 Workplace Benefits Report found that 97% of employers now feel responsible for employee financial wellness (up from 95% in 2021, and from 41% in 2013).
Regardless of how well-compensated your staff may be, this type of resource can help workers feel more financially confident and prepared for the future. Here’s a look at 10 reasons why adding this benefit is so important.
1. Decreases Distractions and Increases Productivity
According to PwC’s Survey (which included 3,638 full-time employed adults across a variety of industries), financially stressed employees tend to be more distracted and less engaged while at work. The study found that financial stress and money worries had a negative impact on the respondents’ sleep, mental health, self-esteem, physical health, and personal relationships. Nearly one-third of employees surveyed admitted that financial insecurity has negatively impacted their productivity at work.
When employees are able to easily get answers to their financial questions and access on-site support when dealing with money problems, there’s a good chance they’ll be less stressed about their finances and more able to focus on their jobs. That’s a win for both employees and employers.
2. Improves Employee Physical Health
Financial stressors have been found to correlate directly with not only mental health challenges but also with poor physical well-being. As the American Psychological Association points out in their Stress in America 2023 report, stress and anxiety put the body on high alert and ongoing stress can accumulate, causing inflammation, wearing on the immune system, and increasing the risk of a number of different ailments, including digestive issues, heart disease, weight gain, and stroke.
Providing your employees with the support they need now can go a long way toward staving off physical health challenges down the line.
3. Builds Loyalty
By offering financial wellness programs, employers demonstrate a commitment to their employees’ well-being, which can help foster employee loyalty and increase retention rates.
The PwC study found that just 54% of financially stressed employees felt there was a promising future for them at their employer, and they were twice as likely to be looking for a new job than employees who were less stressed about their personal finances. What’s more, 73% of financially stressed employees said they would be attracted to another employer that cares more about their financial well-being compared to just 54% of non-financially stressed employees.
Recommended: 3 Ways to Support Your Employees During Times of Uncertainty
4. Can Help Reduce the Burden of Student Debt
Employees struggling to pay down student debt often have difficulty contributing to 401(k) plans and achieving other financial goals, such as buying a house or car. By offering student loan repayment benefits and education, employers can reduce this burden and help employees plan for the future.
The good news is that these programs recently became more affordable. Under the Coronavirus Aid, Relief and Economic Security (CARES) Act, employers can now provide $5,250 tax-exempt annually for an employee’s student loan repayment through 2025. That means employees won’t pay income tax on contributions made by their employers toward educational assistance programs, yet the employer also gets a payroll tax exclusion on these funds.
A growing number of employers are offering some form of loan repayment support. In 2021, only 17% of companies offered any of these benefits. In October 2023, 34% of employers offered student loan benefits.
Recommended: How Student Loan Benefits Can Help Retain Employees
5. Employees Want It
According to the PwC study, the vast majority of employees want help with their finances. Not only that, the stigma around getting help with finances appears to be lifting. In 2023, employees overall were less likely to be embarrassed to ask for guidance or advice about their finances than they’ve been in the past: Just 33% said they find it embarrassing, compared to 42% in PwC’s 2019 survey.
In Bank of America’s Workplace Benefits Report (which surveyed more than 1,300 employees and nearly 800 employers), 76% of employees said they felt that employers are responsible for their financial wellness.
6. Can Help Parents Save for Future College Expenses
In a June 2023 survey of 1,000 parents of teenagers by Discover Student Loans, 70% of subjects said they were worried about financing their kids’ college expenses. In addition, 68% of parents were concerned about the amount of debt their kids will be saddled with even after the parents offer up their own financial assistance.
Providing employees with much-needed information about 529 college savings plans and giving them a convenient way to contribute directly from their pay, can go a long way in helping to relieve the stress associated with one of their top financial concerns.
While in the past, the options for using unspent 529 funds were limited (and often meant facing tax and penalty consequences), the SECURE 2.0 Act allows savers to roll unused 529 funds — to a lifetime limit of $35,000 — into the beneficiary’s Roth IRA, without incurring the usual 10% penalty for nonqualified withdrawals or generating any taxable income. The new rule went into effect January 1, 2024 and might come as a relief to any employees who worry about having excess funds stuck in a 529 should their child end up not needing the money.
Recommended: The Importance of Offering 529 Plan Contributions in an Employee Benefits Package
7. Helps to Clarify Confusing Financial Topics
Many young professionals want to buy their first home, but they don’t know how to save for a down payment or secure a mortgage. New to the workforce, they also struggle to understand financial topics they weren’t taught in school, such as income tax deductions (especially as they get married and have children), the necessity of life insurance, and wealth management and investing.
At the same time, older employees might feel overwhelmed by the financial options available to them. With educational resources and access to experts through a financial wellness program, employees can find the information they need from vetted and trusted sources. In PwC’s survey, 68% of employees said they use their employer’s financial wellness services such as coaching, workshops or online tools.
8. Protects Employees
Sometimes healthcare benefits just aren’t enough. In the event of a health emergency, employees need to be prepared for insurance deductibles and other unexpected costs. Solid financial preparations can prevent them from dipping into savings or making hardship withdrawals from 401(k) plans. Those withdrawals can not only damage their prospects for long-term financial stability, but also create administrative headaches for HR.
Providing an automated emergency savings program is fast becoming a way for employers to help provide a foundation for financial well-being for workers. These plans allow employees to make paycheck contributions to a dedicated account (possibly with a company match), and can help make your workforce more financially resilient in the face of life’s “What Ifs.”
Recommended: How Much Should Your Employees Have in Emergency Savings?
9. Enhances Your Organization’s DEI Efforts
These days, many employers of all sizes have a diversity, equity and inclusion (DEI) strategy or program in place to increase inclusion in the workplace. Offering financial wellness benefits to employees is yet another way to foster a more equitable company culture.
The reason is that financial wellness benefits can help level the playing field by helping to empower minorities and underrepresented groups, who may have more financial stress and encounter more barriers to economic opportunities. Giving all employee populations access to programs that can help them buy their first homes, pay down student debt, save for emergencies, and invest for the future allows them to build wealth for generations to come.
Recommended: How to Support Your Low-Wage Workforce
10. Helps Employees Plan for Retirement
Employer-sponsored retirement plans can help to ease the financial stress that stems from retirement planning. In addition to offering a retirement plan, you might also provide education programs on planning for retirement, understanding different types of accounts available, and best places to get started based on age and goals.
In addition, you might consider instituting a 401(k) match for their student loan payments. Thanks to a provision in Secure Act 2.0 (that went into effect at the start of 2024), companies can match employees’ qualified student loan payments with contributions to their retirement accounts, including 401(k)s, 403(b)s, SIMPLE IRAs, and government 457(b) plans. With this benefit, employees won’t need to make the decision regarding whether to contribute to their 401(k)s or make student loan payments.
Recommended: How Does an HR Team Implement a Student Loan Matching or Direct Repayment Benefit?
The Takeaway
Financial stress is a major concern for today’s employees, and something a growing number of workers want their employers to help with. Providing support for financial wellness can help boost employee engagement and retention, stave off mental and physical health concerns, help your company recruit top talent, and even lead to a more inclusive and equitable workplace.
SoFi at Work can help. We provide the benefit platforms and education resources that can enhance financial wellness throughout your workforce.
Photo credit: iStock/Inside Creative House
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The greenshoe option allows underwriters involved with IPOs to sell more shares than initially agreed upon: usually up to 15% more. That can occur if there is enough investor demand to purchase the shares.
Because IPO share prices can be volatile, the greenshoe option is an important tool that can help underwriters stabilize the price of a newly listed stock to protect both the company and investors.
Understanding the Greenshoe Option
Also called the over-allotment option, the greenshoe provision is part of an underwriting agreement between an underwriter and a company issuing stock as part of an IPO, or initial public offering. The greenshoe option is the only type of price stabilization allowed by the Securities and Exchange Commission (SEC).
The SEC allows this because it increases competitiveness and efficiency of IPO fundraising. It gives underwriters the ability to stabilize security prices by increasing the available supply. It is the responsibility of an underwriter to help sell shares, build a market for a new stock, and use the tools at their disposal to launch a successful initial public offering.
The greenshoe option got its name when the Green Shoe Manufacturing Company was issued the first over-allotment options in 1919.
💡 Quick Tip: Access to IPO shares before they trade on public exchanges has usually been available only to large institutional investors. That’s changing now, and some brokerages offer pre-listing IPO investing to qualified investors.
How Does a Greenshoe Option Work?
During the IPO process, stock issuers set limits on how many shares they will sell to investors during an IPO. With a greenshoe option, the IPO underwriter can sell up to 15% more shares than the set amount.
IPO underwriters want to sell as many shares as they can because they earn on commission as a percentage of IPO sales.
All of the details about an IPO sale and underwriter abilities appear in the prospectus filed by the issuing company before the sale. Not every company allows their investment banker to use the greenshoe option. For instance, if they only want to raise a specific amount of capital, they wouldn’t want to sell any more shares than necessary to raise that money.
There are two ways an underwriter can over allot sales:
At the IPO Price
If the IPO they are underwriting is doing well, investors are buying IPO shares and the price is going up, the underwriter can use the greenshoe option to purchase up to 15% more stock from the issuing company at the IPO price and sell that stock to investors at the higher market price for a profit.
A Break Issue
Conversely, if an IPO isn’t doing well, the underwriter can take a short position on up to 15% of the issued stock and buy back shares from the market to stabilize the price and cover their position.
The underwriter then returns those additional shares to the issuing company. This is known as a “break issue.” When an IPO isn’t performing well, this can reduce consumer confidence in the stock, and result in investors either selling their shares or refraining from buying them.
The greenshoe option helps the underwriter stabilize the stock price and reduce stock volatility.
Types of Greenshoe Options
There are three types of greenshoe options an underwriter might choose to use depending on what happens after an IPO launches. These options are:
Full Greenshoe
If the underwriter can’t buy back any shares before the stock price increases, this is known as a full greenshoe. In this case, the underwriter buys shares at the current offering price.
Partial Greenshoe
In a partial greenshoe scenario, the underwriter only buys back some of the stock inventory they started with in order to increase the share price.
Reverse Greenshoe
The third option for underwriters is to purchase shares from market investors and sell them back to the stock issuer if the share price has dipped below the original offering price. This is similar to a put option in stock trading.
Recommended: How Are IPO Prices Set?
Greenshoe Option Examples
Here’s an example of how a greenshoe option might work in real life.
Once the IPO company owners, underwriter, and clients determine the offering or initial price of the newly issued shares, they’re ready to be traded on the public market. Ideally, the share price will rise above offering, but if the shares fall below the offering price the underwriter can exercise the greenshoe option (assuming the company had approved it in the prospectus).
To control the price, the underwrite can short up to 15% more shares than were part of the original IPO offering.
Let’s say a company’s initial public offering is going to be 10 million shares. The underwriters can sell up to 15% over that amount, or 1.5 million more shares, thus giving underwriters the ability to increase or decrease the supply as needed — adding to liquidity and helping to control price stability.
💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you set up an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.
What the Greenshoe Option Means for IPO Investors
The greenshoe option is an important tool for underwriters that can help with the success of an IPO and bring additional funds to the issuing company. It reduces risk for the issuing company as well as investors. It can maintain IPO investor confidence in a newly issued stock which helps to build a long-term group of shareholders.
Although buying IPO stocks can be very profitable, stock prices don’t always increase and sometimes they can be volatile. It’s important for investors to research a company, look at the IPO prospectus, understand what the stock lock-up period and greenshoe options are before deciding to buy.
The Takeaway
Buying shares in IPOs can be a great way to invest in companies right when they go public. Although IPO investing comes with some risks, and IPO stock can be volatile, investment banks and companies going public use tools such as the greenshoe option to minimize volatility.
Whether you’re curious about exploring IPOs, or interested in traditional stocks and exchange-traded funds (ETFs), you can get started by opening an account on the SoFi Invest® brokerage platform. On SoFi Invest, eligible SoFi members have the opportunity to trade IPO shares, and there are no account minimums for those with an Active Investing account. As with any investment, it’s wise to consider your overall portfolio goals in order to assess whether IPO investing is right for you, given the risks of volatility and loss.
For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.
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Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. IPOs offered through SoFi Securities are not a recommendation and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation.
New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For SoFi’s allocation procedures please refer to IPO Allocation Procedures.
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