Apache is functioning normally
Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.
Apache is functioning normally
Key takeaways
- A lower credit score doesn’t necessarily mean a lender will deny you a home equity loan. It does mean the loan will be more expensive, as you won’t get the lowest interest rate.
- It’s possible to get a home equity loan with a fair credit score — as low as 620 — as long as other requirements around debt, equity and income are met.
- Strategies for getting a loan despite your bad credit include taking on a co-signer, applying to a place where you currently bank, and writing a letter of explanation to the lender.
- Alternatives to a home equity loan include personal loans, cash-out refinances, reverse mortgages and shared equity agreements.
Can you get a home equity loan with bad credit?
Yes, you can. A lower credit score doesn’t necessarily mean a lender will deny you a home equity loan. Some home equity lenders allow for FICO scores in the “fair” range (the lower 600s) as long as you meet other requirements around debt, equity and income.
That’s not to say it’ll be easy: Lenders tend to be stringent, even more so than they are with mortgages. Still, it’s not impossible. Here’s how to get a home equity loan (even) with bad credit.
Requirements for home equity loans
Not all home equity lenders have the exact same borrowing criteria, of course. Still, general guidelines do exist. Typical requirements for home equity loan applicants include:
- A minimum credit score of 620
- At least 15 percent to 20 percent equity in your home
- A maximum debt-to-income (DTI) ratio of 43 percent, or up to 50 percent in some cases
- On-time mortgage payment history
- Stable employment and income
To learn the requirements for a home equity loan with a specific lender, you’ll need to do some research online or contact a loan officer directly. If you aren’t ready to apply for the loan just yet, ask for a no-credit check prequalification to avoid having the loan inquiry affect your credit score.
What are “good” and “bad” scores for home equity loans?
First, let’s define our terms. Here’s how FICO — the most popular credit scoring model — categorizes different scores:
Score |
Classification |
---|---|
Source: MyFico.com | |
300-579 | Poor |
580-669 | Fair |
670-739 | Good |
740-799 | Very Good |
800-850 | Excellent |
When it comes to home equity loans, lenders set a high bar for creditworthiness — higher, even, than mortgages. That’s because they are considered riskier than mortgages: You, the applicant, are already carrying a big debt load. Should you default and your home get seized, the home equity loan — as a “second lien” — only gets paid after the primary (the original) mortgage.
Furthermore, home equity loans don’t have government backing, like some mortgages do. The lender bears all the risk.
So home equity lenders set stricter criteria, demanding scores squarely in the “fair” range. A score in the 500s – good enough for an FHA mortgage — will have a tough time qualifying for a home equity loan. Some lenders have loosened their standards of late and are approving applicants with scores as low as 620. But a “good” score, preferably above 700, remains the threshold for many institutions. It can vary even within one lender, depending on factors like the loan amount or other loan terms.
And of course — as with any loan — the lower your credit score, the less likely you will qualify for the best interest rates.
How to apply for a bad credit home equity loan
Before applying for a home equity loan, remember that it’s not just a question of getting the financing, but also how you can overcome a lower credit score to get the best possible rate. Here are some steps to take:
1. Check your credit report
While it’s possible to get a home equity loan with bad credit, it’s still wise to do all you can to improve your score before you apply (more on that below). A better credit score gets you a better rate. It can also help you get a bigger loan (up to the tappable amount of your equity, of course).
Check your credit reports at AnnualCreditReport.com to get a sense of where you stand. If there are any errors, like incorrect contact information, contact the credit bureau — Equifax, Experian or TransUnion — to get it updated as soon as possible.
2. Determine your equity level
To qualify for a home equity loan, lenders typically require at least 15 percent or 20 percent equity. The amount of equity you have, your home’s appraised value and combined loan-to-value (CLTV) ratio help determine how much you can borrow.
To estimate your home’s equity, take the value of your home and subtract the balance left on your mortgage. While lenders will only consider the official appraised value of your home when determining how much you can borrow, you can get an idea of your home’s value through Bankrate or a real estate listing portal or brokerage. Let’s say your home is worth $420,000 and you have $250,000 to pay on your mortgage:
$420,000 – $250,000 = $170,000
In this example, you’d have $170,000 in home equity. That doesn’t mean you can borrow $170,000, however. If the lender requires you to maintain at least 20 percent equity, you’d need to preserve $84,000 ($420,000 * 0.20). That leaves you with a home equity loan of up to $86,000 ($170,000 – $84,000).
Say you want to add a $60,000 home equity loan to the mix. That would increase your total mortgage debt — for both your first mortgage and the home equity loan — from $250,000 to $310,000.
That 20 percent equity requirement also means you’d need a CLTV ratio of 80 percent or lower. To calculate your CLTV ratio, divide the total mortgage debt ($310,000) by the value of your home ($420,000):
($250,000 + $60,000) / $420,000 = 73.8%
In this example, you’d be under the lender’s 80 percent CLTV requirement.
3. Find out your DTI ratio
The DTI ratio is a measure lenders use to determine whether you can reasonably afford to take on more debt. To calculate your DTI ratio, simply divide your monthly debt payments by your gross monthly income. For example, say you bring in $6,000 a month in income and have a $2,200 monthly mortgage payment and a $110 monthly student loan payment:
$2,310 / $6,000 x 100 = 38.5%
To make things even easier, you can use Bankrate’s DTI calculator.
For a home equity loan, most lenders look for a DTI ratio of no more than 43 percent.
4. Consider a co-signer
If your credit disqualifies you for a home equity loan, a co-signer with better credit might be able to help, in some cases.
“A co-signer can help with credit and income issues for an applicant who has a lower credit score, but ultimately the main applicant or primary borrower will have to have at least the bare minimum credit score that is required based on the bank’s underwriting guidelines,” says Ralph DiBugnara, president of Home Qualified, a real estate platform for buyers, sellers and investors.
A co-signer is just as responsible for repaying the loan as the primary borrower, even if they don’t actually intend to make payments. If you fall behind on loan payments, their credit suffers along with yours.
5. Try a lender you already work with
If your bank, credit union or mortgage lender offers home equity products, it might be able to extend some flexibility, or at least help with your application, since you’re an existing customer.
“A loan officer familiar with the details of an applicant’s situation can help them present it to an underwriter in the best possible way,” says DiBugnara.
6. Write a letter to the lender
Write a letter of explanation describing why your credit score is low, especially if it has taken a recent hit. This letter should matter-of-factly explain credit issues — avoid catastrophizing — and include any relevant paperwork, like bankruptcy documentation. If your credit score was impacted by late payments due to job loss, for example, but you’re employed now, your lender can take this context into consideration.
Lenders that offer home equity loans with bad credit
There are home equity lenders that offer loans to borrowers with lower credit scores. Here are some to consider, along with requirements:
Lender | Bankrate Score (scale of 1-5) | Loan types | Credit score minimum | Maximum CLTV | Maximum DTI |
---|---|---|---|---|---|
Figure | 4.37 | HELOC | 640 | 75%-90% | Undisclosed |
Guaranteed Rate | 3.3 | HELOC | 620 | 90%-95% | 50% |
Spring EQ | 2.7 | Home equity loan, HELOC | 620 for home equity loans, 680 for HELOCs | Up to 97.5% | 43% |
TD Bank | 4.0 | Home equity loan, HELOC | 660 | Undisclosed | Undisclosed |
Connexus Credit Union | 3.5 | Home equity loan, HELOC | 640 | 90% | Undisclosed |
Discover | 4.4 | Home equity loan | 660 | 90% | 43% |
Pros and cons of getting a home equity loan with bad credit
Getting a home equity loan with bad credit has its benefits and drawbacks. You can tap your equity to help with expenses, but it’s also risky.
Pros
- You’ll pay a fixed rate: Home equity loans are for a fixed sum at a fixed interest rate, so you’ll know exactly how much your payment is each month. This can help you budget for and reliably pay down debt, which can help boost your credit score.
- You could get out of costlier debt: If you have high-interest debt — like credit card debt — you could pay it off with a lower-rate home equity loan, then repay that loan, with one payment, for less.
Cons
- You’re taking on more debt: If you’ve had trouble managing money in the past, it might not be wise to take on more debt with a home equity loan, even if you qualify.
- It’ll be more expensive: A lower credit score won’t qualify you for the best home equity loan rates, meaning you’ll pay more in interest.
- You could lose your home: If you fall behind on loan payments, you’ll further damage your credit. Even worse: If you’re eventually unable to pay back the loan, your home could go into foreclosure.
What to do if your home equity loan application is denied
If your application for a home equity loan is rejected, don’t despair. First, ask the lender for specific reasons why your application was denied. The answer can help you address any issues before applying in the future.
If your credit was one of the deciding factors, you can improve your score by making on-time payments and paying down any outstanding debt. If you don’t have enough equity in your home, wait until you’ve built a bigger stake (mainly by making your monthly mortgage payments) before submitting a new application.
Both these approaches may take a half-year to a year to make a significant difference in your credit profile. If you’re in more of a hurry, consider applying to other lenders, as their criteria may differ. Just bear in mind that more lenient terms often mean higher interest rates or fees.
And of course, you can consider other forms of financing.
Home equity loan alternatives if you have bad credit
If you need cash but have bad credit, a home equity loan is just one option. Here are some alternatives:
Personal loans
Personal loans can be easier to qualify for than a home equity product, and they aren’t tied to your home. This means that if you fail to repay the loan, the lender can’t go after your house. Personal loans have higher interest rates, however, and shorter repayment terms. This translates to a more expensive monthly payment compared to what you might get with a home equity loan.
Cash-out refinance
In a cash-out refinance, you take out a brand-new mortgage for more than what you owe on your existing mortgage, pay off the existing loan and take the difference in cash. Most lenders require you to maintain at least 20 percent equity in your home in order to cash out.
A caveat, however: A cash-out refi makes the most sense when you can qualify for a lower rate than what you have on your current mortgage, and if you can afford the closing costs. With bad credit, getting that lower rate might not be possible.
Reverse mortgage
Reverse mortgages allow homeowners over the age of 62 to tap their home’s equity as a source of tax-free income. These types of loans need to be repaid upon your death or when you move out or sell the home. You can use reverse mortgages for anything from medical expenses to home renovations, but you must meet some requirements to qualify.
Shared equity agreement
Home equity investment companies might work with you even if you have a lower credit score, often lower than what traditional lenders would accept. These companies offer shared equity agreements in which you receive a lump sum in exchange for an ownership percentage in your home and/or its appreciation.
Unlike with home equity lines of credit (HELOCs) or home equity loans, you don’t make monthly repayments in a shared equity arrangement. Some companies wait until you sell your home, then collect what they’re owed; others have multi-year agreements in which you’ll pay the balance in full at the end of a stated period.
Make sure you understand all the terms of this complex arrangement. Technically, you’re not borrowing money, you’re selling a stake in your home — to a financial professional who naturally wants to see a return on their investment.
How to get a HELOC with bad credit
Applying for a HELOC is pretty much the same as applying for a home equity loan, but if you have bad credit, a loan might have a slight edge over the line of credit. That’s because home equity loans have fixed interest rates and fixed payments, so you’ll know exactly what you need to repay each month. This predictability could help you better manage your budget and keep up with payments.
A HELOC, on the other hand, has a variable rate, which can cause unexpected increases in your monthly payments. For this reason, lenders often have higher credit score criteria for HELOCs than home equity loans.
Tips for improving your credit before getting a home equity loan
To increase your chances of getting approved for a home equity loan, work on improving your credit score well before applying — at least several months. Here are three tips to help you improve your score:
- Pay bills on time every month. At the very least, make the minimum payment, but try to pay the balance off completely, if possible — and don’t miss that due date.
- Don’t close credit cards after you pay them off. Either leave them open or charge just enough to have a small, recurring payment every month. That’s because closing a card reduces your credit utilization ratio, which can decrease your score. The recommended utilization ratio: no more than 30 percent.
- Be cautious with new credit. Getting a higher credit limit on a card or getting a new card can lower your credit utilization ratio — but not if you immediately max things out or blow through the bigger balance. Treat the newly available funds as sacred savings.
FAQ on getting a home equity loan with bad credit
-
In general, it’s better to get a home equity loan with bad credit. A home equity loan often has a lower credit score requirement compared to a HELOC, and it comes with a fixed interest rate, so your payment will be the same every month, making it easier to plan for.
-
Yes — in fact, this is the rule for any type of loan, including a home equity product. The higher your credit score, the lower your interest rate.
Source: bankrate.com
Apache is functioning normally
If you’re trying to save some money, trimming some discretionary spending categories from your budget can be a good way to start.
But it isn’t necessarily the only or best way to save — especially if reducing or removing things like streaming services, concerts, or monthly massages from your budget makes it harder to stick to your plan.
Instead, it may make sense to track where your money is going for a few weeks and then take a look at all your spending categories to determine which cuts could have the biggest impact.
What Are Spending Categories?
Spending categories can help you group similar expenses together to better organize your budget. They can come in handy when you’re laying out your spending priorities, deciding how much money to allot toward various wants and needs, and determining whether an expense is essential or nonessential.
Many of the budgets you’ll see online use pretty much the same spending categories, such as housing, transportation, utilities, food, childcare, and entertainment. But you may find it’s more useful to track your spending for a while with a money tracker, and then create some of your own categories. You may choose to drill down to specific bills or go broader, breaking down your budget into just the basics.
By personalizing your spending categories, you may be able to put together a budget that’s more manageable — and, therefore, one you’re more likely to stay with.
Check your score with SoFi
Track your credit score for free. Sign up and get $10.*
How Do Spending Categories Work?
To customize your spending categories, it can help to gather as much information as possible about where your money is actually going.
You can start by looking at old bank and credit card statements to get a good picture of past spending. Your bigger spending categories should be easier to figure out. Those bills are often due on the same day every month and are usually about the same amount. But you’ll also want to keep an eye out for expenses that come just once or a few times a year (such as taxes, vet bills, etc.). And, if you use cash frequently, you’ll want to determine where that money went, too.
A tracking app can help you grasp the hard truth about your spending as you move forward. That cute plant you bought for your windowsill? Pitching in for a co-worker’s going-away gift? Those little splurges can add up before you know it.
Once your spending picture comes into focus, you can divide your expenses into useful personal budget categories, and start thinking about what you might be able to trim or cut out altogether.
💡 Quick Tip: When you have questions about what you can and can’t afford, a spending tracker app can show you the answer. With no guilt trip or hourly fee.
Examples of Spending Categories
Although it can be effective to organize your spending categories in a way that’s unique to you, there are a few basic classifications that can work for most households when making a budget: They include:
Essential Spending
• Housing: This category could include your rent or mortgage payment, property taxes, homeowners or renters insurance, HOA fees, etc.
• Utilities: You could limit this to basic services like gas, electricity, and water, or you might decide to include your cell phone service, cable, and WiFi costs.
• Food: This amount could be limited to what you spend on groceries every month, or it could include your at-home and away-from-home food costs.
• Transportation: Your car payment could go in this category, along with fuel costs, parking fees, car maintenance, car insurance, public transportation, and DMV fees. You could also include the cost of Uber rides.
• Childcare: If you need childcare while you work, this cost would be considered necessary spending. If it’s for a night out, you may want to move it to the entertainment or personal care category.
• Medical Costs and Health Care: This could include your health insurance premiums, insurance co-pays and prescription costs, vision and dental care, etc.
• Clothing: Clothing is a must-have, of course, but with limits. You may want to put impulse items in a separate category as a nonessential or discretionary expense.
Non-essential Spending
• Travel: This category would be for any travel that isn’t work-related, whether it’s a road trip or a vacation in Paris.
• Entertainment: You could get pretty broad in this category, but anything from streaming services and videogames to concerts and plays could go here.
• Personal: This might be your category for things like salon visits, your gym membership, and clothes and accessories that are more of a want than a need.
• Gifts: If you’re a generous gift-giver, you may find you need a separate category for these expenses.
Other Spending
• Savings and investments: Though it isn’t “essential” for day-to-day life, putting money aside for long- and short-term goals is a must for most budgets.
• Emergency fund: This will be your go-to for unexpected car repairs, home repairs, or medical bills.
• Debt repayment: Student loan payments, credit card debt, and other balances you’re trying to pay off could fit in this category.
Pros and Cons of Spending Categories
The idea of making a budget can be daunting, particularly if you’re trying to fit your needs and wants into spending categories that aren’t suited to how you live. Here are some pros and cons to using categories for spending that might keep you motivated and help you avoid potential budgeting pitfalls.
Pros
• More control: Creating a budget with spending categories that match your lifestyle can help you put your money toward things that really matter to you.
• Less stress: If you’re living paycheck to paycheck even though you know your income is sufficient to cover your needs, a budget with realistic spending categories can help you see where your money is going.
• Better planning: Whether you’re trying to save for a vacation, wedding, house, retirement, or all of the above, including those goals in your spending categories will help ensure they get your attention.
Cons
• May feel limiting: Working with a budget can feel restrictive, especially if you’ve been winging it for a while or aren’t including enough discretionary spending.
• Time consuming: It might take some trial and error to find a budget system that works for you. And if you’re budgeting as a couple, you’ll likely have to work out some compromises when determining your spending categories.
• Requires maintenance: Budgeting isn’t a one and done. You’ll be more likely to succeed if you consistently track your spending to make sure you’re hitting your goals.
Common Spending Categories to Cut First
Often when you see or hear budgeting advice, it tends to focus on cutting back on small extras — $6 daily lattes at your favorite café, for example, or those weekly Happy Meals for the kids. Some other top spending categories that traditionally are among the first to hit the chopping block include:
• Gym memberships
• Dining out
• Subscription services you don’t use anymore
• Cable
• Personal care services you can do at home for less, such as manicures and pedicures
• Alcoholic beverages
• Cigarettes and vaping products
• Vacations
But it can also be useful to review, and potentially cut back on, how much you’re budgeting for basic living expenses, such as:
• Clothing and shoes
• Utility bills
• Groceries
• Insurance
• Cars
• Cellphones and computers
• Rent
Tips for Customizing Your Spending Categories
As you create your spending plan, keep in mind that it doesn’t have to be like anyone else’s. If you track your expenses and use that information to create your personalized budget, you may have a better chance of building a plan you can stick with.
Here are some more steps to consider as you get started:
• Be realistic. It may take a while to get to your goal, but doing even a little bit consistently can make a difference. Know yourself and do what you can.
• Don’t forget irregular expenses. Bills that you pay every month can be easy to remember. (You might even put them on autopay to make things more convenient.) But infrequent expenses such as tax bills can get away from you if you don’t include them in your spending categories.
• Avoid spending more than you have. Knowing how much you’ll have left after taxes each month is an important part of successful planning. An emergency fund can help you stay on track when unexpected expenses pop up.
• Leave room for fun. Eliminating date nights and small splurges completely could make it much harder to stay with your plan.
• Pay yourself. Make saving and investing goals a separate spending category.
• Find a budgeting method that works for you. Whether it’s the popular 50/30/20 budget — which divides your after-tax income into needs, wants, and savings — or a detailed spending breakdown with multiple categories, try various budgeting methods until you find one that motivates you.
💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.
The Takeaway
Want to save some money but know you need to make some changes? Monitoring where your money is going every month can help you create a spending plan with categories that are customized to your needs, wants, and goals. A plan that’s realistic, but not too restrictive, can give you the kind of control and motivation you need to get and stay on track financially.
Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.
With SoFi, you can keep tabs on how your money comes and goes.
FAQ
What are the four main categories in a budget?
The four main spending categories for most budgets are housing, food, utilities, and transportation. Once you’ve established how much you’ll need to cover these costs, you can move on to planning for other expenses.
What is the 50/30/20 rule of budgeting?
The 50/30/20 rule is a budgeting method that allocates your take-home income to three main spending categories: needs or essentials (50%), wants or nonessentials (30%), and saving or financial goals (20%).
What are the four characteristics of a successful budget?
A successful budget usually includes accurate income and spending projections, realistic and personalized spending categories, consistent and frequent check-ins, and solid savings goals.
Photo credit: iStock/mapodile
SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SORL0324011
Source: sofi.com
Apache is functioning normally
Today’s mortgage rates
Average mortgage rates rose very slightly yesterday. I’m afraid it’s a sign that Wednesday’s moderate fall wasn’t necessarily the start of much happier times.
Earlier this morning, markets were signaling that mortgage rates today could barely budge. However, these early mini-trends frequently alter direction or speed as the hours pass.
Current mortgage and refinance rates
Find your lowest rate. Start here
Program | Mortgage Rate | APR* | Change |
---|---|---|---|
Conventional 30-year fixed | 7.29% | 7.34% | +0.03 |
Conventional 15-year fixed | 6.744% | 6.822% | +0.04 |
30-year fixed FHA | 7.129% | 7.179% | +0.21 |
5/1 ARM Conventional | 6.682% | 7.918% | -0.01 |
Conventional 20-year fixed | 7.15% | 7.207% | +0.07 |
Conventional 10-year fixed | 6.607% | 6.68% | +0.02 |
30-year fixed VA | 7.28% | 7.324% | +0.2 |
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 reckon it’s likely to be some months before we begin to see consistently falling mortgage rates. The economy is currently too robust and inflation is too warm for a sustained downward trend. And there are few signs of that changing until the summer or fall — or perhaps even later.
So 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
- LOCK if closing in 60 days
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 ticked lower to 4.62 from 4.63%. (Good for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
- Major stock indexes were mixed this morning. (Neutral 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 decreased to $82.77 from $82.98 a barrel. (Neutral for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
- Gold prices rose to $2,398 from $2,393 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 down to 32 from 35 out of 100. (Good 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 be unchanged or close to unchanged. 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?
Today
There are no economic reports scheduled for release today. And the words of the sole senior Federal Reserve official with a speaking engagement, Chicago Fed President Austan Goolsbee, are unlikely to affect markets. His boss, Fed Chair Jerome Powell, laid out the central bank’s position on future cuts to general interest rates as recently as Tuesday.
Of course, mortgage rates can still move on days like today. But they’re generally driven by market sentiment or occasionally by important news that affects the economy.
Next week
Next Monday is much like today: zero economic reports on the schedule. Tuesday’s purchasing managers’ indexes (PMIs) could produce some movement in mortgage rates. But that’s typically limited and temporary, a description that applies to Wednesday’s durable goods orders data, too.
Things could warm up next Thursday when the first reading of gross domestic product (GDP) for the January-March quarter is due.
And next Friday should bring the March personal consumption expenditures (PCE) price index. That’s the Federal Reserve’s favorite gauge of inflation. So, it can certainly affect 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 Apr. 18 report put that same weekly average at 7.1%, up 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 Mar. 19 and the MBA’s on Apr. 18.
Forecaster | Q1/24 | Q2/24 | Q3/24 | Q4/24 |
Fannie Mae | 6.7% | 6.7% | 6.6% | 6.4% |
MBA | 6.8% | 6.7% | 6.6% | 6.4% |
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.
Time to make a move? Let us find the right mortgage for you
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.
Source: themortgagereports.com
Apache is functioning normally
Today’s average mortgage rates
Current mortgage interest rates
If you’re in the market for a home, here are today’s mortgage rates compared to last week’s.
Product | Rate | Last week | Change |
---|---|---|---|
30-year fixed | 7.13% | 7.02% | +0.11 |
15-year fixed | 6.64% | 6.44% | +0.20 |
10-year fixed | 6.51% | 6.37% | +0.14 |
5/1 ARM | 6.79% | 6.60% | +0.19 |
30-year jumbo mortgage rate | 7.40% | 7.20% | +0.20 |
30-year mortgage refinance rate | 7.11% | 6.97% | +0.13 |
Average rates offered by lenders nationwide as of April 16, 2024. We use rates collected by Bankrate to track daily mortgage rate trends.
Mortgage 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.
Mortgage interest rate trends
Over the last few years, high inflation and the Federal Reserve’s aggressive interest rate hikes pushed up mortgage rates from their record lows around the pandemic. Since last summer, the Fed has consistently kept the federal funds rate at 5.25% to 5.5%. Though the central bank doesn’t directly set the rates for mortgages, a high federal funds rate makes borrowing more expensive, including for home loans.
Mortgage rates change daily, but average rates have been moving between 6.5% and 7.5% since late last fall. Today’s homebuyers have less room in their budget to afford the cost of a home due to elevated mortgage rates and steep home prices. Limited housing inventory and low wage growth are also contributing to the affordability crisis and keeping mortgage demand down.
What to expect from mortgage rates in 2024
Mortgage forecasters base their projections on different data, but most housing market experts predict rates will move toward 6% by the end of 2024. Ultimately, a more affordable mortgage market will depend on how quickly the Fed begins cutting interest rates. Most economists predict that the Fed will start lowering interest rates later this summer.
Since mortgage rates fluctuate for many reasons — supply, demand, inflation, monetary policy and jobs data — homebuyers won’t see lower rates overnight, and it’s unlikely they’ll find rates in the 2% range again.
“We are expecting mortgage rates to fall to around 6.5% by the end of this year, but there’s still a lot of volatility I think we might see,” said Daryl Fairweather, chief economist at Redfin.
Every month brings a new set of inflation and labor data that can change how investors and the market respond and what direction mortgage rates go, said Odeta Kushi, deputy chief economist at First American Financial Corporation. “Ongoing inflation deceleration, a slowing economy and even geopolitical uncertainty can contribute to lower mortgage rates. On the other hand, data that signals upside risk to inflation may result in higher rates,” Kushi said.
Here’s a look at where some major housing authorities expect average mortgage rates to land.
How to select a mortgage term and type
When picking a mortgage, consider the loan term, or payment schedule. The most common mortgage terms are 15 and 30 years, although 10-, 20- and 40-year mortgages also exist. You’ll also need to choose between a fixed-rate mortgage, where the interest rate is set for the duration of the loan, and an adjustable-rate mortgage. With an adjustable-rate mortgage, the interest rate is only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the market’s current interest rate. Fixed-rate mortgages offer more stability and are a better option if you plan to live in a home in the long term, but adjustable-rate mortgages may offer lower interest rates upfront.
30-year fixed-rate mortgages
The average interest rate for a standard 30-year fixed mortgage is 7.13%, which is a growth of 11 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) A 30-year fixed mortgage is the most common loan term. It will often have a higher interest rate than a 15-year mortgage, but you’ll have a lower monthly payment.
15-year fixed-rate mortgages
The average rate for a 15-year, fixed mortgage is 6.64%, which is an increase of 20 basis points from the same time last week. Though you’ll have a bigger monthly payment than a 30-year fixed mortgage, a 15-year loan usually comes with a lower interest rate, allowing you to pay less interest in the long run and pay off your mortgage sooner.
5/1 adjustable-rate mortgages
A 5/1 adjustable-rate mortgage has an average rate of 6.79%, an uptick of 19 basis points from seven days ago. You’ll typically get a lower introductory interest rate with a 5/1 ARM in the first five years of the mortgage. But you could pay more after that period, depending on how the rate adjusts annually. If you plan to sell or refinance your house within five years, an ARM could be a good option.
What factors affect mortgage rates?
While it’s important to monitor mortgage rates if you’re shopping for a home, remember that no one has a crystal ball. It’s impossible to time the mortgage market, and rates will always have some level of volatility because so many factors are at play.
“Mortgage rates tend to follow long-date Treasury yields, a function of current inflation and economic growth as well as expectations about future economic conditions,” says Orphe Divounguy, senior macroeconomist at Zillow Home Loans.
Here are the factors that influence the average rates on home loans.
- Federal Reserve monetary policy: The nation’s central bank doesn’t set interest rates, but when it adjusts the federal funds rate, mortgages tend to go in the same direction.
- Inflation: Mortgage rates tend to increase during high inflation. Lenders usually set higher interest rates on loans to compensate for the loss of purchasing power.
- The bond market: Mortgage lenders often use long-term bond yields, like the 10-Year Treasury, as a benchmark to set interest rates on home loans. When yields rise, mortgage rates typically increase.
- Geopolitical events: World events, such as elections, pandemics or economic crises, can also affect home loan rates, particularly when global financial markets face uncertainty.
- Other economic factors: The bond market, employment data, investor confidence and housing market trends, such as supply and demand, can also affect the direction of mortgage rates.
Calculate your monthly mortgage payment
Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to make a budget and try to stay within your means. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.
Tips for finding the best mortgage rates
Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right.
- Save for a bigger down payment: Though a 20% down payment isn’t required, a larger upfront payment means taking out a smaller mortgage, which will help you save in interest.
- Boost your credit score: You can qualify for a conventional mortgage with a 620 credit score, but a higher score of at least 740 will get you better rates.
- Pay off debt: Experts recommend a debt-to-income ratio of 36% or less to help you qualify for the best rates. Not carrying other debt will put you in a better position to handle your monthly payments.
- Research loans and assistance: Government-sponsored loans have more flexible borrowing requirements than conventional loans. Some government-sponsored or private programs can also help with your down payment and closing costs.
- Shop around for lenders: Researching and comparing multiple loan offers from different lenders can help you secure the lowest mortgage rate for your situation.
Source: cnet.com
Apache is functioning normally
Deciding on a streaming service can be a difficult choice when there are so many companies and plans to choose from. Many households subscribe to popular platforms like Netflix and Prime Video, but there are a multitude of other options including Sling TV, which had about 2 million subscribers as of the fourth quarter of 2023.
Sling TV is a streaming platform owned by Dish Network that has live TV, including sports, and on-demand shows and movies. There are no contracts and you can cancel at any time.
You can stream for free or pay for upgraded services with a subscription. Read on to find out the features each plan offers.
How much is Sling Freestream per month?
As the name implies, Sling Freestream is free. You don’t even need an account to access it, though creating one will give you a more personalized experience like being able to create a favorite watch list.
While shows include ads, Freestream has over 500 live TV channels and a library of 40,000 on-demand shows and movies.
If you’re looking for a no-cost solution for streaming and you don’t mind watching ads, Freestream could be a good choice. If you want the most current live program selections, Sling TV’s paid subscriptions provide that.
How much is Sling TV per month?
Sling TV has several paid subscriptions for live TV: Sling Orange, Sling Blue and Sling Orange + Blue. All of the plans are ad-supported, but include 50 hours of DVR storage so you could record shows and fast-forward through commercials.
Prices vary based on location, and first-month price promotions are common. Input your ZIP code on Sling’s website to see pricing and features available for each plan in your area.
Sling Orange
Sling Orange typically costs $40 per month and comes with 32 channels, including seven sports and family channels like ESPN and Disney that can’t be found on Sling Blue’s plan. You’ll be able to stream on just one device at a time with the Orange plan.
Sling Blue
Sling Blue varies from $40 to $45 per month depending on your location. With Sling Blue, you won’t get the family and sports channels available on Sling Orange, but you will get other channels that Orange doesn’t have like Bravo and FX. You can stream on up to three devices at one time on this plan.
Sling Orange + Blue
Deciding between Sling Orange and Blue may not be a straightforward choice as each includes popular channels that the other doesn’t. Determining which one to go with comes down to what your viewing preferences are and the channels you want.
If you want access to all channels, you can get Sling Orange + Blue for $55 to $60 per month. This plan combines the Orange and Blue channel packages into one subscription. While you’ll pay a little extra for this plan, you won’t have to worry about missing a game on ESPN or not catching the latest reality shows on Bravo because you’ll have access to the full channel lineup.
Sling TV extras
One of the unique features of Sling TV is the ability to create your own add-ons, or Extras as Sling refers to them, to customize your viewing experience. Extras are mini-channel collections that can be added to your subscription.
There are specific offerings available for Orange and Blue plans so you’ll want to check Sling’s website to see which channel collections are available for your subscription type.
Extras range from $6 to $11 per month and include the following categories:
-
Entertainment Extra: $6 per month for extra entertainment channels such as Paramount Network and MTV.
-
Heartland Extra: $6 per month for outdoor sporting channels like Sportsman Channel.
-
Hollywood Extra: $6 per month for movie-focused channels like Sundance TV and TCM.
-
Kids Extra: $6 per month for children’s channels like Disney Junior and NickToons.
-
Lifestyle Extra: $6 per month for lifestyle content such as Hallmark Channel and Cooking Channel.
-
News Extra: $6 per month for national and world news channels like BBC World News and News Nation.
-
Sports Extra: $11 per month for sports channels like NHL Network and MLB Network.
You also have an option to buy more than one Extra for a small cost savings. For instance, for $13 per month, you can get a bundle that includes four Extras, which is a savings of about $10 per month compared with buying each Extra without the grouped pricing.
For subscribers seeking premium channels, like Showtime or Starz, those can be added for an additional monthly fee. There are currently about 35 premium Extras to choose from, depending on where you live; they range in monthly price from $1.99 to $10.
How Sling TV might fit into your budget
A helpful budgeting method is the 50/30/20 budget, where you allocate 50% of your income to needs and minimum debt payments, 30% to wants, and 20% to savings and debt repayment beyond those minimums.
A streaming service like Sling TV usually falls into the 30% wants category, meaning it would be nice to have but isn’t essential to your survival in the same way that needs are.
With hundreds of streaming services to choose from, knowing how much you can spend in your wants category — and what streaming features you value most — is a good starting point in making a selection.
You could look for ways to save money by reviewing Sling TV’s offerings to see if there are any deals you can score.
For instance, if you don’t want to commit to a paid subscription but Freestream doesn’t quite fit your needs, you could explore purchasing standalone channels. You don’t need a Sling base service to add Extras like Showtime or Starz. Standalone channels start at $3 per month.
You can also take advantage of Sling TV’s promotions, which we’ve seen with $10 to $25 off the first month.
If you need a streaming device, Sling TV currently gives new subscribers an AirTV Mini — a device optimized specifically for Sling — for free when you prepay two months.
Source: nerdwallet.com
Apache is functioning normally
Key takeaways
- The main types of mortgages are conventional loans, government-backed loans, jumbo loans, fixed-rate loans and adjustable-rate loans.
- There are other types of mortgages for various purposes, such as building or renovating a home or investing in property.
- The right mortgage for you depends on the strength of your credit score and finances along with your goals.
Most of us need a mortgage to buy a home, but this type of loan isn’t one-size-fits-all. To help you find the right home loan for your needs, here’s our guide to the five main types of mortgages.
Types of home loans
There are five main kinds of mortgages, each with their own benefits and features.
- Conventional loan: Best for borrowers with good credit scores
- Jumbo loan: Best for borrowers with good credit looking to buy a more expensive home
- Government-backed loan: Best for borrowers with lower credit scores and minimal cash for a down payment
- Fixed-rate mortgage: Best for borrowers who’d prefer a predictable, set monthly payment for the duration of the loan
- Adjustable-rate mortgage: Best for borrowers who aren’t planning to stay in the home for an extended period, prefer lower payments in the short term or are comfortable with possibly having to pay more in the future
1. Conventional loan
Conventional loans, the most popular type of mortgage, come in two flavors: conforming and non-conforming.
- Conforming loans: A conforming loan “conforms” to a set of Federal Housing Finance Agency (FHFA) standards, including guidelines around credit, debt and loan size. When a conventional loan meets these standards, it’s eligible to be purchased by Fannie Mae and Freddie Mac, the two government-sponsored enterprises (GSEs) that back much of the mortgage market.
- Non-conforming loans: These loans do not meet one or more of the FHFA’s standards. One of the most common types of non-conforming loan is a jumbo loan, a mortgage in an amount that exceeds the conforming loan limit. Non-conforming loans can’t be purchased by the GSEs, so they’re considered a riskier prospect for lenders.
Pros of conventional loans
- Available from the majority of lenders
- Can be used to finance primary residences, second or vacation homes and investment or rental properties
- Can put down as little as 3% for a conforming, fixed-rate loan
Cons of conventional loans
- Need a credit score of at least 620 to qualify
- Lower debt-to-income (DTI) ratio threshold compared to other types of mortgages
- Need to pay private mortgage insurance (PMI) premiums if putting less than 20% down
Who are conventional loans best for?
If you have a strong credit score and can afford to make a sizable down payment, a conventional mortgage is the best pick. The 30-year, fixed-rate option is the most popular choice for homebuyers. Compare conventional loan rates.
2. Jumbo loan
Jumbo mortgages are home loans in an amount that surpasses FHFA’s conforming loan limits. In 2024, that means any loan over $766,550, or $1,149,825 in higher-cost areas. Because these are bigger loans ineligible to be purchased by the GSEs, they can present more risk.
Pros of jumbo loans
- Can finance a more expensive home
- Competitive interest rates, nowadays on par with those on conforming loans
- Often the only option in areas with high home values
Cons of jumbo loans
- Not available with every lender
- Higher credit score requirement, often a minimum of 700
- Higher down payment requirement, often 10% to 20%
Who are jumbo loans best for?
If you’re looking to finance a home with a purchase price exceeding the latest conforming loan limits, a jumbo loan is the best route. Compare jumbo loan rates.
3. Government-backed loan
The U.S. government isn’t a mortgage lender, but it does play a role in making homeownership accessible to more Americans by backing three main types of mortgages:
- FHA loans: Insured by the Federal Housing Administration (FHA), FHA loans can be had with a credit score as low as 580 and a 3.5 percent down payment, or a score as low as 500 with 10 percent down. FHA loans also require you to pay mortgage insurance premiums, adding to your costs. These premiums help the FHA insure lenders against borrowers who default. In addition, you can’t borrow as much money with an FHA loan; its ceiling is much lower than those on conventional conforming loans.
- VA loans: Guaranteed by the U.S. Department of Veterans Affairs (VA), VA loans are for eligible members of the U.S. military (active duty, veterans, National Guard and Reservists) as well as surviving spouses. There’s no minimum down payment, mortgage insurance or credit score requirement, but you’ll need to pay a funding fee ranging from 1.25 percent to 3.3 percent at closing.
- USDA loans: Guaranteed by the U.S. Department of Agriculture (USDA) loans help moderate- to low-income borrowers buy homes in rural, USDA-eligible areas. These loans don’t have a credit score or down payment requirement, but do charge guarantee fees.
Pros of government-backed loans
- Much more flexible credit and down payment guidelines
- Help borrowers who wouldn’t otherwise qualify
Cons of government-backed loans
- Additional cost for FHA mortgage insurance, VA funding fee and USDA guarantee fees
- Limited to borrowers buying a home priced within FHA loan limits or in a rural area, or servicemembers
Who are government-backed loans best for?
If your credit or down payment prevents you from qualifying for a conventional loan, an FHA loan can be an attractive alternative. Likewise, if you’re buying a home in a rural area or are eligible for a VA loan, these options might be easier to qualify for. Compare FHA loan rates and VA loan rates.
4. Fixed-rate mortgage
Fixed-rate mortgages maintain the same interest rate over the life of your loan, which means your monthly mortgage payment (the loan principal and interest) always stays the same. Fixed loans typically come in terms of 15 years or 30 years, although some lenders offer flexible term lengths.
Pros of fixed-rate mortgages
- Fixed monthly mortgage payment
- Easier to budget for
Cons of fixed-rate mortgages
- Interest rates usually higher than introductory rates on adjustable-rate loans
- Need to refinance to get a lower rate
Who are fixed-rate mortgages best for?
If you’re planning to stay in your home for some time and looking for the stability of a monthly payment that doesn’t change (notwithstanding homeowners insurance premium and property tax increases), a fixed-rate mortgage is right for you. Compare current mortgage rates.
5. Adjustable-rate mortgage (ARM)
In contrast to fixed-rate loans, adjustable-rate mortgages (ARMs) come with interest rates that change over time. Typically with an ARM, you’ll get a lower, fixed introductory rate for a set period. After this period, the rate changes, either up or down, at predetermined intervals for the remainder of the loan term. A 5/6 ARM, for example, has a fixed rate for the first five years; the rate then increases or decreases based on economic conditions every six months until you pay it off. When your rate goes up, your monthly mortgage payment does as well, and vice versa.
Pros of ARMs
- Lower introductory rates
- Could pay less over time if prevailing interest rates fall
Cons of ARMs
- Ongoing risk of higher monthly payments
- Tougher to plan your budget as rate changes
Who are adjustable-rate mortgages best for?
If you don’t plan to stay in your home beyond a few years, an ARM could help you save on interest payments. However, it’s important to be comfortable with a certain level of risk that your payments might increase if you’re still in the home. Compare ARM loan rates.
Other types of home loans
In addition to these common kinds of mortgages, there are other types you might encounter when shopping around for a loan:
Construction loans
If you want to build a home, a construction loan can be a good financing choice — especially a construction-to-permanent loan, which converts to a traditional mortgage once you move into the residence. These short-term loans are best for those who can make a higher down payment.
Interest-only mortgages
With an interest-only mortgage, the borrower makes interest-only payments for a set period – usually five or seven years — followed by payments for both principal and interest. You won’t build equity as quickly with this loan since you’re initially only paying back interest. These loans are best for those who know they can sell or refinance, or reasonably expect to afford the higher monthly payment later.
Piggyback loans
A piggyback loan, also referred to as an 80/10/10 loan, involves two loans: one for 80 percent of the home price and another for 10 percent. You’ll make a down payment for the remaining 10 percent. These loan products are designed to help the borrower avoid paying for mortgage insurance, but also require two sets of closing costs. You’ll also accrue interest on two loans, making this unconventional arrangement best for those who’ll actually save money using it.
Balloon mortgages
A balloon mortgage requires a large payment at the end of the loan term. Generally, you’ll make payments based on a 30-year term, but only for a short time, such as seven years. When the loan term ends, you’ll make a large payment on the outstanding balance, which can be unmanageable if you’re not prepared. These loans are best for those who have the stable financial resources needed to make a large balloon payment once the loan term ends.
Portfolio loans
While most lenders sell the loans they make to investors (more on that here), some choose to keep them in their portfolio, or “on the books.” Because the lender holds onto these loans, they don’t have to adhere to FHFA or other standards. As such, they might have more lenient qualifying requirements.
Renovation mortgages
If you want to purchase a home that needs major work, you could use a renovation loan. These loans combine the costs of purchasing and renovation into one mortgage.
Physician loans
Because doctors often have large amounts of medical school debt, qualifying for a traditional mortgage can be hard, even with a good-paying job. Enter physician loans, which help doctors, nurses and other health professionals buy a home.
Non-qualifying loans
Non-qualifying mortgages or non-QM loans don’t meet certain standards set by the Consumer Financial Protection Bureau, so they offer more lenient credit and income requirements. This might appeal to a borrower with unique circumstances, such as an inconsistent income. Some non-QM loans, however, come with higher down payments and interest rates.
How to choose the right type of mortgage loan for you
Depending on your credit and finances, more than one type of mortgage could make sense for you. Likewise, you might be able to strike some loan types off your list immediately. You can’t get a VA loan, for example, if you or your spouse haven’t served in the military.
As you think about which type of mortgage to get, consider:
- Your credit score – Which loan types do you qualify for from a credit standpoint?
- Your anticipated down payment – Do you need a low- or no-down payment loan? What about down payment assistance? Will you be using gift funds from family or friends?
- Your debt and income – After debt payments, is your monthly income sufficient to cover a mortgage?
- Your appetite for risk – Do you need a stable monthly payment? Do you expect to earn more money in the future?
- Your future plans – Do you plan to move in the short term? Do you want to pay off your mortgage sooner than 30 years?
Once you’ve weighed these questions, compare mortgage lenders and talk to a loan officer. They can help you pinpoint the best fit. Here’s more on how to get a mortgage.
Source: bankrate.com
Apache is functioning normally
Following the submission of a letter by Indiana Sen. Mike Braun (R) to Ginnie Mae President Alanna McCargo about concerns related to the Home Equity Conversion Mortgage (HECM)-backed Securities (HMBS) program, McCargo’s predecessor, Ted Tozer, hopes the senator will dive deeper into the program’s mechanics and what led to the collapse of Reverse Mortgage Funding (RMF).
The late 2022 failure of RMF and the subsequent assumption of its reverse mortgage portfolio by Ginnie Mae were major concerns for Braun, which influenced his decision to inquire about the program’s challenges.
“RMF’s failure raised serious red flags,” Sen. Braun said in a subsequent email to RMD. “The scope of this failure is glaring, comprising 36 percent of all existing HECM loans at the time. I am seeking clarity about Ginnie Mae’s actions in dealing with this distressed issuer and their actions to fix underlying programmatic problems.”
In an interview with RMD, Tozer explained that his major concern with Braun’s letter is that the senator didn’t characterize what he says is the actual reason for Ginnie Mae’s assumption of the company’s portfolio.
“Ginnie Mae, like any creditor, took control of the collateral when they (RMF) defaulted on their debts,” Tozer said. “This is to protect the taxpayer. RMF was obligated to make payments to the bondholder, but they could not come up with the cash to facilitate that funding and defaulted. Ginnie Mae had no choice but to take the loans as collateral.”
But Braun’s letter does not mention the intent to protect U.S. taxpayers, Tozer added.
“My concern is he didn’t make it clear that Ginnie Mae was stepping in to protect the taxpayer,” Tozer explained. “By doing this, he kind of threw Ginnie Mae under the bus, questioning why Ginnie Mae took this action with RMF. I think that’s the thing he misunderstood.”
Braun’s letter also requested information about Ginnie Mae’s attempts to “market RMF’s assets to potential buyers,” and to explain details about challenges the company encountered in locating a financier for RMF.
“Ginnie Mae did that,” he said. “They tried to find people willing to take over the debt obligations and the underlying collateral, but as I understand it, every other HMBS issuer was having enough problems obtaining liquidity for the 98% buyouts, and they didn’t want to take on additional obligations.”
Braun noted that Ginnie Mae had never before extinguished an issuer from the HMBS program, but Tozer contends that’s not the issue at the heart of the matter.
“The issue was not the fact that Ginnie Mae did the extinguishment,” he said. “The problem is that the HMBS program is so cash-intensive for older HECMs that hit the 98% threshold, and [independent mortgage banks (IMBs)] just don’t have the financing facilities to handle those buyouts.”
Tozer said he interpreted some of the letter’s content to be disfavorable to the actions Ginnie Mae has taken to protect both the HMBS program and taxpayers.
“[The letter] made it sound like Ginnie Mae was just sitting back and not doing anything, but it’s back to the fact that the IMBs are the only ones doing HMBS,” he said. “It’s a very cash-intensive business, and IMBs just don’t have the financial wherewithal that depositories do to raise a lot of cash to meet their obligations.”
Tozer hopes that Ginnie Mae can explain this to Braun in its own response, but he has also personally reached out to the senator’s office to offer any information he may need. When asked about the interaction, Tozer said he was satisfied that the senator’s office understood his concerns.
Related
Source: housingwire.com
Apache is functioning normally
Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.
Apache is functioning normally
The Federal Housing Finance Agency (FHFA) this week announced a new product proposal for government-sponsored enterprise (GSE) Freddie Mac that would allow the agency to purchase certain single-family, closed-end second mortgages.
This would offer borrowers an alternative way to access their home equity without surrendering a first mortgage with a more favorable interest rate than is currently available.
The proposal, published in the Federal Register, recognizes that existing borrowers “face limited options” if they seek to access equity on their primary residence, particularly if they have a mortgage rate from a loan originated during the low-rate environment of the COVID-19 pandemic.
“[A] traditional cash-out refinance today may pose a significant financial burden, as it requires a refinancing of the entire outstanding loan balance at a new, and likely much higher, interest rate,” FHFA said in its proposal. “Homeowners may also use second mortgages to access the equity in their homes, [where] only the smaller, second mortgage would be subject to the current market rate, as the original terms of the first mortgage would remain intact.”
Second mortgages are also typically offered at a lower interest rate than certain alternative products like personal loans, so Freddie Mac’s proposal is to purchase “certain closed-end second mortgage loans from primary market lenders” that are already approved to sell mortgages to Freddie Mac, the proposal states.
“In a closed-end second mortgage loan, the borrower’s funds are fully disbursed when the loan closes, the borrower repays over a set time schedule, and the mortgage is recorded in a junior lien position in the land records,” FHFA stated. “Freddie Mac has indicated that the primary goal of this proposed new product is to provide borrowers a lower cost alternative to a cash-out refinance in higher interest rate environments.”
FHFA Director Sandra Thompson explained that such options are needed in the current mortgage rate environment.
“The proposed activity is intended to provide homeowners with a cost-effective alternative for accessing the equity in their homes,” Thompson said in an announcement of the proposal. “Reviewing and considering comments from the public will be a critical component of our review as the agency exercises its statutory responsibility to evaluate new enterprise products.”
This is specifically designed to benefit consumers during the high rate environment, the agency said.
“In the current mortgage interest rate environment, a closed-end second mortgage may provide a more affordable option to homeowners than obtaining a new cash-out refinance or leveraging other consumer debt products,” the proposal explained. “A significant portion of borrowers have low interest rate first mortgages, and the proposal would allow those homeowners to retain this beneficial interest rate on the first mortgage and avoid resetting to a higher rate through a cash-out refinance.”
The Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act (HERA) of 2008, requires the GSEs to provide advance notice to FHFA of any potential actions or products they aim to pursue. This notice demonstrates that FHFA is fulfilling its mandate and seeks public comments on the proposal.
The comment period lasts 30 days from the publication of the proposal in the Federal Register, making May 16, 2024, the end of the comment period. Interested parties can submit comments to the agency on its website or via email.
Related
Source: housingwire.com