Generally, it helps to save up to 20-25% of a house’s sales price. However, factors like geographical location, economic climate, real estate interest rates, and global events will influence how much money you’ll need to buy a house.
Key Takeaways:
An ideal down payment is 20% to 25% of a home’s value.
USDA and VA home loans traditionally don’t require down payments.
If you make a down payment below 20%, you may be required to get private mortgage insurance.
How much money do you need to buy a house? That cost depends on numerous factors like inflation and real estate trends. According to the Census, homes sold for a median price of $420,700 in January 2024.
Thankfully, you don’t need to pay off that amount all at once. A down payment that’s 20% to 25% of a home’s value can help you secure a property. Even if you don’t have the funds to make a sizeable down payment, low and no-down-payment mortgage options are available.
Below, we’ll share our expertise to help you learn all about loans and mortgage options. We’ll also answer several common questions and share helpful tools, like Credit.com’s mortgage calculator.
All Costs Associated with Buying a House
Spend enough time shopping around for houses, and you’ll learn very quickly that a property’s sales price isn’t the only expense you’ll have to pay. Below, we’ll cover down payments, earnest money deposits, and other factors that determine the real cost of a home.
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Down Payments for Different Mortgage Options
According to the United States Census Bureau, 661,000 new homes were sold in January 2023. Most homebuyers don’t pay off their properties in full from the get-go. Instead, they cover a portion of the home’s cost with a down payment, then gradually pay off the remaining value via monthly mortgage payments.
“How do home mortgage rates work?” and “What types of mortgages am I eligible for?” are common questions for first-time homebuyers.
Below, we’ll discuss four mortgage options and break down how each of them works.
1. Conventional Mortgage
A conventional loan is a mortgage option that’s offered by a private lender instead of the government. Mortgage companies, credit unions, and banks offer conventional loans, though they might require a down payment between 20% and 25% of a property’s sales price.
Lenders might request that you purchase private mortgage insurance (PMI) if your down payment is less than 20%. PMI reimburses lenders if you don’t make your mortgage payments, and borrowers will have to pay for coverage annually.
2. USDA Mortgage
The United States Department of Agriculture (USDA) offers this unique mortgage to borrowers who live in rural areas. A USDA mortgage has no down payment requirement, and its interest rate is very competitive.
To qualify for a USDA loan, you need to:
Buy an eligible property. Your potential home has to be in an eligible rural area.
Meet income guidelines. To qualify for a USDA loan, your income can’t exceed a state-specific amount.
Use the home as your primary dwelling. You have to live on the property permanently.
Be a U.S. citizen, a U.S. national, or a qualifying resident alien. Foreign nationals not authorized to remain in the United States can’t get USDA loans.
You’ll also need to meet the lender’s credit requirements. On average, a credit score of 620 or more will qualify you for a government-backed USDA loan.
3. FHA Mortgage
The Federal Housing Administration (FHA) offers this distinct government-backed mortgage. Borrowers can secure an FHA mortgage with a down payment as low as 3.5%.
Borrowers with very low credit scores might be eligible for an FHA loan, at the expense of having more strict loan limits and higher up-front costs.
To get an FHA loan, you need to meet the following requirements:
Primary residence. The house associated with your loan must be your primary residence. You can’t rent it out to others for profit.
FHA maximum limit. FHA loans can only apply to properties within a set price range. In 2024, the maximum FHA loan amount is $498,257 for single-family homes.
Debt-to-income ratio. To qualify for an FHA loan, you must spend a maximum of 43% of your income on housing costs and housing-related debt.
4. VA Home Loans
Veterans Affairs (VA) loans offer low credit requirements and come with no down payment restrictions.
Certain people qualify for VA loans, including:
Service members who’ve served for at least 90 days consecutively.
Veterans who’ve served at least 181 continuous days, depending on their deployment date.
National Guard members with six years of Active Reserve status or 90 consecutive days of active duty service.
Surviving spouses of veterans, including veterans who are missing in action or being held as a prisoner of war (POW).
Earnest Money Deposit
An earnest money deposit is a payment that buyers can place to demonstrate how serious they are about obtaining a property. Earnest money deposits are normally between 1% and 3% of a property’s sales price. This deposit is not the same as a down payment.
When you make an earnest money deposit, those funds are put into an escrow account. If the seller of a property closes on a deal with you, your earnest money deposit is then added to your down payment. If the seller doesn’t close on the deal with you, it’s possible to regain your earnest money deposit if contingencies are set in place.
Several common contingencies include:
Home inspection contingency: Buyers request to have an inspection conducted on a property. If problems are discovered, buyers can back out of a deal.
Home sale contingency: Buyers who might need to sell their current home can ask for extra time.
Insurance contingency: This is for buyers who may need time to obtain home insurance for a property.
Closing Costs
Closing costs include taxes, appraisals, home inspection costs, title costs, and attorney fees. They’re generally between 3% and 6% of your mortgage principal. Your mortgage principal is the amount you borrow—so the bigger your down payment, the less you’ll pay in closing costs.
Let’s use the $200,000 home above as an example. Consider these three 4% closing cost scenarios:
Your down payment is 10%, or $20,000, leaving a mortgage principal of $180,000. Your closing costs will roughly amount to $7,200.
You offer20%, or $40,000, as your down payment. Your mortgage principal is $160,000, and you’ll pay $6,400 in closing costs.
You apply for a mortgage with no down payment, so your mortgage principal is $200,000. Ultimately, you’ll pay $8,000 in closing costs.
Home-Buying Examples
Next, we’ll show you how to determine your down payment on a home with the previous loans as examples. Let’s imagine your dream home is on the market for $200,000.
Down payments for conventional mortgages are usually $10,000 – $40,000.
USDA mortgages normally don’t require down payments.
An FHA mortgage can cost as little as $7,000.
A VA home loan also doesn’t require a down payment.
USDA and VA home loan mortgage options have the lowest up-front costs for eligible borrowers. An FHA mortgage is less costly than a conventional loan, but interest rates will affect your total payments in the long term.
Financial Resource Ideas
Making a down payment can be challenging because you need a paper trail of your purchases. In most cases, you can’t use borrowed money for a down payment.
Conversely, we know several creative ways to come up with a down payment:
Profits earned from stock or bond sales
Filing for an IRA or 401(k) withdrawal
Paying with money from your checking or savings account
Cash earned from a money market account
Using funds from your retirement account
Monetary gifts
You can roll other funds, like your tax return or a security deposit refund, into your down payment, too.
How Much Money Should I Save Before Buying a House?
It’s important to look at the big picture when buying a house. You’ll need to pull together a down payment and closing costs, but you’ll also need to budget for removal costs, inspections, and repair fees.
A tool like a monthly budget template can put your common expenses into perspective and help you better understand how much house you can afford with your current income.
When Should I Seek Mortgage Relief?
“What happens if I miss a mortgage payment?” is another concern for new and long-time homeowners. First, know that your home won’t immediately be foreclosed on if you miss a payment. Foreclosure usually isn’t imminent unless you’ve missed two or three payments.
If your mortgage payments aren’t within reach, you can contact your lender and explain your specific situation. Seeking forbearance, which is a temporary pause on your payments, can also help you regain your bearings.
Prepare to Buy a Home with Credit.com
Knowing your credit score and understanding the elements that affect it can help you know what you need to do to prepare for loan opportunities.
Sign up for Credit.com’s ExtraCredit® subscription to check out 28 of your FICO® scores. Afterward, visit our mortgage rates page to get additional information.
Average mortgage rates edged higher yesterday. Unfortunately, it was the sixth consecutive business day on which they’ve risen.
Earlier this morning, markets were signaling that mortgage rates today might barely move. However, these early mini-trends frequently alter speed or direction as the hours pass.
Current mortgage and refinance rates
Find your lowest rate. Start here
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.15%
7.17%
Unchanged
Conventional 15-year fixed
6.57%
6.61%
-0.04
Conventional 20-year fixed
7.16%
7.19%
+0.02
Conventional 10-year fixed
6.63%
6.66%
-0.05
30-year fixed FHA
6.51%
7.19%
Unchanged
30-year fixed VA
6.61%
6.72%
-0.03
5/1 ARM Conventional
6.3%
7.39%
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?
Tomorrow’s Federal Reserve events (see below) could make a big difference to mortgage rates in the near and medium terms. But, right now, I’m pessimistic about our seeing a sustained downward trend until the summer. And some wonder if the fall might be a more realistic timeframe.
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 again 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 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 increased to $83.18 from $81.35 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 $2,156 from $2,159 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 — dropped to 69 from 75 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 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?
Tomorrow
I covered yesterday the three Federal Reserve events due early tomorrow afternoon:
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
I’ll brief you more fully on those tomorrow morning. That way you’ll know what to look out for before it’s too late to act.
Personally, I’m not very hopeful about the impact of the Fed’s events on mortgage rates. Of course, I can’t be sure what they’ll bring. But recent economic data has likely reinforced the central bank’s natural caution. And I suspect that it may signal later and fewer cuts in general interest rates this year than markets have been expecting.
If I’m right, that could be seriously bad for mortgage rates. So, let’s hope I’m wrong.
Today and later in the week
I’ll be surprised if today’s economic reports move mortgage rates much. They cover February’s housing starts and building permits. It’s not that those data are unimportant. However, they rarely attract the attention of the investors who largely determine mortgage rates.
We have to wait until Thursday for a couple of reports that sometimes affect mortgage rates. They’re two March purchasing managers’ indexes (PMIs) from S&P. One is for the services sector and the other covers manufacturing. I’ll brief you on those tomorrow morning.
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.
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.
Editor’s Note: Parts of this story were auto-populated using data from Curinos, a mortgage research firm that collects data from more than 250 lenders. For more details on how we compile daily mortgage data, check out our methodology here.
Mortgage rates continue to hover around 7%, according to data from Curinos analyzed by MarketWatch Guides. The 30-year fixed-rate mortgage is 7.38% today, up+0.18 percentage points from last week.
In response to lower rates, mortgage applications rose for the first time in six weeks, according to data released by Freddie Mac on Thursday. A Mortgage Bankers Association (MBA) report published Wednesday showed that the volume of FHA loans strongly increased for the previous week, an indicator that first-time home buyers are getting back into the market – a potentially optimistic sign for the spring buying season.
Another potential good omen: Former Federal Reserve official James Bullard said he thinks the likelihood of another rate cut in the near future is strong, given the announcement in February’s job report that the unemployment rate has risen slightly. The Federal Reserve board will meet again next week.
Here are today’s average mortgage rates:
30-year fixed mortgage rate: 7.38%
15-year fixed mortgage rate: 6.69%
5/6 ARM mortgage rate: 7.05%
Jumbo mortgage rate: 7.19%
Current Mortgage Rates
Product
Rate
Last Week
Change
30-Year Fixed Rate
7.38%
7.20%
+0.18
15-Year Fixed Rate
6.69%
6.54%
+0.15
5/6 ARM
7.05%
6.92%
+0.13
7/6 ARM
7.26%
7.08%
+0.18
10/6 ARM
7.30%
7.16%
+0.14
30-Year Fixed Rate Jumbo
7.19%
7.05%
+0.14
30-Year Fixed Rate FHA
7.12%
6.94%
+0.18
30-Year Fixed Rate VA
7.14%
6.97%
+0.17
Disclaimer: The rates above are based on data from Curinos, LLC. All rate data is accurate as of Tuesday, March 19, 2024. Actual rates may vary.
>> View historical mortgage rate trends
Mortgage Rates for Home Purchase
30-year fixed-rate mortgages are up, +0.18
The average 30-year fixed-mortgage rate is 7.38%. Since the same time last week, the rate is up, changing +0.18 percentage points.
At the current average rate, you’ll pay $691.02 per month in principal and interest for every $100,000 you borrow. You’re paying more compared to last week when the average rate was 7.20%.
15-year fixed-rate mortgages are up, +0.15
The average rate you’ll pay for a 15-year fixed-mortgage is 6.69%, an increase of+0.15 percentage points compared to last week.
Monthly payments on a 15-year fixed-mortgage at a rate of 6.69% will cost approximately $881.59 per $100,000 borrowed. With the rate of 6.54% last week, you would’ve paid $873.31 per month.
5/6 adjustable-rate mortgages are up, +0.13
The average rate on a 5/6 adjustable rate mortgage is 7.05%, an increase of+0.13 percentage points over the last seven days.
Adjustable-rate mortgages, commonly referred to as ARMs, are mortgages with a fixed interest rate for a set period of time followed by a rate that adjusts on a regular basis. With a 5/6 ARM, the rate is fixed for the first 5 years and then adjusts every six months over the next 25 years.
Monthly payments on a 5/6 ARM at a rate of 7.05% will cost approximately $668.66 per $100,000 borrowed over the first 5 years of the loan.
Jumbo loan interest rates are up, +0.14
The average jumbo mortgage rate today is 7.19%, an increase of+0.14 percentage points over the past week.
Jumbo loans are mortgages that exceed loan limits set by the Federal Housing Finance Agency (FHFA) and funding criteria of Freddie Mac and Fannie Mae. This generally means that the amount of money borrowed is higher than $726,200.
Product
Monthly P&I per $100,000
Last Week
Change
30-Year Fixed Rate
$691.02
$678.79
+$12.23
15-Year Fixed Rate
$881.59
$873.31
+$8.28
5/6 ARM
$668.66
$659.94
+$8.72
7/6 ARM
$682.85
$670.68
+$12.17
10/6 ARM
$685.57
$676.08
+$9.49
30-Year Fixed Rate Jumbo
$678.11
$668.66
+$9.45
30-Year Fixed Rate FHA
$673.38
$661.28
+$12.10
30-Year Fixed Rate VA
$674.73
$663.29
+$11.44
Note: Monthly payments on adjustable-rate mortgages are shown for the first five, seven and 10 years of the loan, respectively.
Factors That Affect Your Mortgage Rate
Mortgage rates change frequently based on the economic environment. Inflation, the federal funds rate, housing market conditions and other factors all play into how rates move from week-to-week and month-to-month.
But outside of macroeconomic trends, several other factors specific to the borrower will affect the mortgage interest rate. They include:
Financial situation: Mortgage lenders use past financial decisions of borrowers as a way to evaluate the risk of loaning money.
Loan amount and structure: The amount of money that bank or mortgage lender loans and its structure (including both the term and whether its a fixed-rate or adjustable-rate).
Location: Mortgage rates vary by where you are buying a home. Areas with more lenders, and thus more competition, may have lower rates. Foreclosure laws can also impact a lender’s risk, affecting rates.
Whether borrowers are first-time homebuyers: Oftentimes first-time homebuyer programs will offer new homeowners lower rates.
Lenders: Banks, credit unions and online lenders all may offer slightly different rates depending on their internal determination.
How To Shop for the Best Mortgage Rate
Comparison shopping for a mortgage can be overwhelming, but it’s shown to be worth the effort. Homeowners may be able to save between $600 and $1,200 annually by shopping around for the best rate, researchers found in a recent study by Freddie Mac. That’s why we put together steps on how to shop for the best mortgage rate.
1. Check credit scores and credit reports
A borrower’s credit situation will likely determine the type of mortgage they can pursue, as well as their rate. Conventional loans are typically only offered to borrowers with a credit score of 620 or higher, while FHA loans may be the best option for borrowers with a FICO score between 500 and 619. Additionally, individuals with higher credit scores are more likely to be offered a lower mortgage interest rate.
Mortgage lenders often review scores from the three major credit bureaus: Equifax, Experian and TransUnion. By viewing your scores ahead of lenders considering you for a loan, you can check for errors and even work to improve your score by paying down balances and limiting new credit cards and loans.
2. Know the options
There are four standard mortgage programs: conventional, FHA, VA and USDA. To get the best mortgage rate and increase your odds of approval, it’s important for potential borrowers to do their research and apply for the mortgage program that best fits their financial situation.
The table below describes each program, highlighting minimum credit score and down payment requirements.
Though conventional mortgages are most common, borrowers will also need to consider their repayment plan and term. Rates can be either fixed or adjustable and terms can range from 10 to 30 years, though most homeowners opt for a 15- or 30-year mortgage.
3. Compare quotes across multiple lenders
Shopping around for a mortgage goes beyond comparing rates online. We recommend reaching out to lenders directly to see the “real” rate as figures listed online may not be representative of a borrower’s particular situation. While most experts recommend getting quotes from three to five lenders, there is no limit on the number of mortgage companies you can apply with. In many cases, lenders will allow borrowers to prequalify for a mortgage and receive a tentative loan offer with no impact to their credit score.
After gathering your loan documents – including proof of income, assets and credit – borrowers may also apply for pre-approval. Pre-approval will let them know where they stand with lenders and may also improve negotiating power with home sellers.
4. Review loan estimates
To fully understand which lender is offering the cheapest loan overall, take a look at the loan estimate provided by each lender. A loan estimate will list not only the mortgage rate, but also a borrower’s annual percentage rate (APR), which includes the interest rate and other lender fees such as closing costs and discount points.
By comparing loan estimates across lenders, borrowers can see the full breakdown of their possible costs. One lender may offer lower interest rates, but higher fees and vice versa. Looking at the loan’s APR can give you a good apples-to-apples comparison between lenders that takes into account both rates and fees.
5. Consider negotiating with lenders on rates
Mortgage lenders want to do business. This means that borrowers may use competing offers as leverage to adjust fees and interest rates. Many lenders may not lower their offered rate by much, but even a few basis points may save borrowers more than they might think in the long run. For instance, the difference between 6.8% and 7.0% on a 30-year, fixed-rate $100,000 mortgage is roughly $5,000 over the life of the loan.
Expert Forecasts for Mortgage Rates
Mortgage rates have cooled significantly over the past several months. After the 30-year fixed-rate mortgage hit 8% last October, it ended 2023 closer to 7%. In fact, the average for Q4 2023 was 7.3%.
Analysts with Fannie Mae and the Mortgage Bankers Association (MBA) both project that rates will fall going into 2024 and throughout next year.
Fannie Mae economists expect rates to drop more quickly, falling below 6% by Q4 2024. Meanwhile, the MBA’s forecast for Q4 2024 is 6.1% and 5.9% for Q1 2025.
More Mortgage Resources
Methodology
Every weekday, MarketWatch Guides provides readers with the latest rates on 11 different types of mortgages. Data for these daily averages comes from Curinos, LLC, a leading provider of mortgage research that collects data from more than 250 lenders. For more details on how we compile daily mortgage data, check out our comprehensive methodology here. Editor’s Note: Before making significant financial decisions, consider reviewing your options with someone you trust, such as a financial adviser, credit counselor or financial professional, since every person’s situation and needs are different.
With low down payments, low closing costs and more flexible credit score requirements, it’s no wonder that nearly one in every five home purchases are made using an FHA loan. FHA loans are famous for their flexibility, but sometimes they come with requirements that both the borrower and the property owner must meet. Here’s how to know if an FHA loan is the right fit for you and your unique homeownership goals.
What is an FHA Loan?
FHA stands for the Federal Housing Administration, a government agency created in 1934 by the U.S. Department of Housing and Urban Development (HUD). The FHA was started by HUD as a resource to increase homeownership in America.
An FHA loan sounds like a loan that comes from the FHA, right? This is not true — the FHA does not issue loans directly to homebuyers. Instead, they insure loans offered by private lenders. If a homebuyer can’t pay for their FHA mortgage, the home will be foreclosed on. If that happens, HUD will pay off the loan to the lender and take ownership of the home. This insurance removes some of the risk for lenders, allowing them to offer lower credit score and down payment requirements. In return, more homebuyers may qualify for home loans.
Who Can Get an FHA Loan?
Although FHA loans are a relatively well-known type of mortgage, there are often misconceptions around both eligibility and overall criteria. FHA loans are most common among first-time homebuyers and low-income buyers, though other homeowners can benefit and qualify for this type of mortgage as well.
First-Time Homebuyers
Many first-time homebuyers use FHA mortgages to afford their starter home, especially because these loans offer lower down payments. Plus, the credit score for FHA loan requirements is usually lower than other loan options, which is helpful for new homeowners who have a limited credit history.
FHA loans are not restricted to your first home purchase and can only be used for your primary residence. This means homeowners generally can’t have two FHA loans open at the same time. However, there are several exceptions to this rule, such as a move required for work, or your family outgrowing your current home.
Low-Income Buyers
Many low-to-moderate income buyers who don’t qualify for a traditional loan or need a lower down payment option are still able to get an FHA loan. This is because the FHA allows lenders to be more flexible with potential buyers’ debt-to-income ratios (DTI), even sometimes approving up to a 55% DTI.
Requirements for an FHA Loan
If you think an FHA loan is a good fit for your needs, it’s time to start taking steps towards securing one. To get an FHA loan, you will need to connect with a lender. The requirements that borrowers need to have (and understand) include:
580+ credit score with a minimum down payment of 3.5%
A home appraisal done by an FHA-approved appraiser
A DTI ratio no higher than 50-55% (depending on their credit history)
You must occupy the home as your primary residence
While these are some of the basic requirements, FHA loans look into your overall financial health and history. Now that you have a broad overview, let’s get into the specifics.
FHA Loans And Credit Score
Compared to the required credit score for conventional loans, FHA loans are attractive to buyers for their credit score flexibility. Once you know your credit score, you can see your eligibility for various FHA loan products.
Credit scores are affected by several financial factors, such as:
If you pay your bills on time
How much credit you use (credit utilization)
The type of credit you have, whether on cards, loans, student loans, car loans, etc.
What you owe and any new credit you’ve recently acquired
Credit scores also affect other parts of your FHA loan eligibility, such as your DTI ratio, down payment minimums, interest rates and more. The better your score, the more flexibility there is with other requirements of the loan.
Here is the credit score needed for an FHA loan and the limits as of December 2023:
Minimum Credit Score: Borrowers need at least a credit score of 580 to qualify for an FHA loan
Credit Score of 580 and Higher: Potential buyers with a minimum credit score of 580 may be able to qualify for FHA’s low down payment advantage program, which is currently 3.5% of the purchase price.
Need to estimate your monthly mortgage payment? Use Pennymac’s home loan calculator to get an estimate today.
Down Payments
A down payment is a portion of the price of your home that is paid upfront. For mortgage loans, down payments are typically based on your creditworthiness, meaning the better your credit score is, the lower your down payment is. FHA loans allow you to pay as little as 3.5% for a down payment if you have a qualifying credit score. With a lower credit score, you should expect to put more like 10% down.
Though a larger down payment will lower your future mortgage payments, a primary benefit of FHA loans is getting a lower required down payment. If you are still concerned with making a 10% down payment, homeowners can use gift assistance to cover those funds as long as there is an accurate and credible paper trail.
Income Requirements and DTI Ratios
While your income amount doesn’t directly affect your eligibility, your employment history might. You will need to provide lenders with documents that verify your income, such as W-2s, bank statements, tax return documentation, etc.
Also consider that your DTI ratio will be evaluated. Your DTI compares how much debt you currently have compared to your monthly income. Lenders use this ratio to consider whether or not you can take on any additional debt. DTI includes debt you aren’t actively paying, such as deferred student loans. When determining what your monthly bills are, your lender will usually apply the “1 Percent Rule” to your student loan debt. For example, if you have $25,000 in student loan debt, your lender will assume a 1% ($250) monthly payment.
If your gross income is $3,000 a month, and you have $1,500 a month in debt payment obligations, your DTI is 57%. Many lenders want you to have a DTI ratio of 43% or less, but sometimes, homeowners only need about a 57% DTI to qualify for an FHA loan. Keep in mind that a higher credit score will also lower DTI requirements.
FHA Loan Interest Rates
One of the most important elements of your home loan is your interest rate, which will play a large factor in the affordability of your monthly payment. FHA loan rates are similar to traditional loan rates because they are based on both larger market conditions and the qualifications of the individual buyer. Wondering what your options will be?
View today’s FHA loan rates
FHA Loan Limits
In addition to the limits on your credit score and down payment amounts, there are restrictions on the total mortgage amount that can be offered through an FHA loan. The FHA does have lending limits, and these numbers can differ depending on where you buy a home. Loan limits are established by the FHA and can vary by county.
Mortgage Insurance
When buyers have little invested in a home (whether via down payment or equity), lenders consider the loan (FHA or conventional) to be a bigger risk. Because of this, they typically require those buyers to pay a monthly fee for mortgage insurance, also known as private mortgage insurance (PMI). This insurance is usually required for any buyer who has a loan amount more than 80% of their home’s value. For example, if your home is worth $100,000 and you have a mortgage balance of $90,000, you only have 10% in equity. Your loan is therefore 90% of your home’s value and your lender will require mortgage insurance.
For an FHA loan, the details are a little different. FHA loans don’t have the same standards of a conventional loan, rather, they require the following two kinds of mortgage insurance premiums: one paid in full upfront (or financed into the mortgage) and another paid as a monthly fee, regardless of how much equity you have.
Upfront mortgage insurance premium (UFMIP): This fee must be paid at closing (or added to your loan amount) and is currently 1.75% of your loan amount. For example, this would mean an extra $3,500 due at closing for a $200,000 loan.
Annual Mortgage Insurance Premium (MIP): This additional insurance cost ranges from 0.45% to 1.05% of your loan amount. The yearly cost (based on your loan-to-value ratio and loan length) is divided by 12 and paid as a part of your monthly mortgage payment. On a $200,000 loan, a MIP at 1% will add $167 to your monthly mortgage payment.
Looking to obtain mortgage insurance financing with down payments as low as 3.5%? Learn more here.
FHA Loan Benefits
In addition to expanded eligibility criteria (that makes them easier to qualify for overall), FHA loans offer many other benefits to borrowers:
Open to Buyers with a History of Bankruptcy and/or Foreclosure: A history of bankruptcy or foreclosure is not necessarily a barrier to qualifying for an FHA loan. There is a two-year waiting period after a bankruptcy, and a three-year waiting period after a foreclosure before you can qualify for an FHA loan.
Gift Money: Struggling to save for your down payment? If you have loved ones who want to help you, FHA loans accept gift money as a source of down payment or other funds. There are some limits and additional rules, so be sure to discuss your situation with your lender.
Competitive Interest Rates: FHA loan rates are comparable to conventional mortgage rates.
Credit History and Loan Eligibility: FHA loans can work for many borrowers when traditional loans can’t because they have looser credit score requirements. FHA lenders will look at your complete financial picture, including your ability to pay for things like rent, utilities, auto, student loans and more.
Non-Occupying Co-Borrowers are Allowed: If your debt-to-income ratio is high, a co-borrower (and their income) can help you qualify for a loan you would not otherwise be eligible for. Co-borrowers have ownership interest and are listed on the home’s title. They must sign all loan documents and will be obligated to pay the monthly payments if you ultimately cannot. FHA loans allow you to have a co-borrower who won’t be living with you, such as a family member who lives elsewhere.
FHA Loan Requirements for Single-Family and Other Properties
Once you have met all of the FHA loan requirements, it’s time to look at the property you want to purchase. There are certain requirements that your future home must meet as well. HUD has minimum property requirements to ensure that any home the FHA insures will be a good investment for both the buyer and the lender. Those requirements ensure the home must be:
Safe: Your home must be a healthy, safe place to live
Sound: The structure of your home must be sound, not significantly damaged
Secure: The home must be a secure investment for a lender
Types of FHA Loans
There are different types of FHA loans that range from general home loans to loans that deal with more specific needs of the borrower. The difference between loans often determines how you spend the funds and how homeowners qualify.
Purchase. Standard purchase loans fall into the basic standards outlined in the above requirements. This type of loan is best for borrowers with good credit scores and a low DTI.
Rate/Term Refinance. Refinancing is possible with an FHA loan and is a good option for homeowners who want to take advantage of the lower FHA rates, especially if their credit has been negatively affected by previous mortgages or loans.
Streamline. For borrowers that already have an FHA loan and are current on their loan, FHA Streamline loans allow those homeowners to refinance with some unique advantages. You can often get an even lower mortgage rate, a lower insurance rate, less documentation (like appraisals or income verification), no credit score requirement, etc.
Cash-Out Refinance. It’s possible to do a cash-out refinance with an FHA loan, though borrowers usually need decent credit and must keep a percentage of their equity in their home. It also requires a complete documentation evaluation.
FHA 203(k) Loan. Some lenders offer either standard or limited 203(k) loans, which allow borrowers to buy a home and make renovations under the same loan. There are specific stipulations, such as a minimum of $5,000 for renovations that will be complete within 6 months.
FHA Loan Alternatives
As common as FHA loans are, it’s important to remember that they are not the only option available to most homebuyers. Whether you are trying to avoid the 1 Percent Rule for student debt, want to buy an ineligible condo, or are looking for very specific loan terms, there are many situations where a conventional mortgage may be a better fit for you than an FHA loan. A credit score for conventional loan requirements will be higher, but this type of loan may meet the rest of your financial and purchasing needs. It’s important to discuss your situation with your lender, and carefully compare all of your choices.
FHA Loan Final Checklist
Once you have found your dream home and have gone through the application and underwriting process for an FHA loan, there are a few final items you will need to have in order to ensure a smooth closing process.
Homeowners Insurance Policy: Your homeowners insurance will protect one of your biggest investments — your house, its contents and your loved ones. The cost of this policy will be included in your monthly payment and paid annually by your lender, so make sure your lender has your insurance information before closing.
Identification: At your closing, you will need two forms of identification. One must be government-issued, photo I.D. — your driver’s license or passport are good options. The other must only have your name printed on it, such as a Social Security card, credit card, debit card or insurance card.
Title Insurance Policy: Title insurance protects you and your lender from any costs or other issues that may come from unknown liens, encumbrances or other issues with the title or legal ownership of your home.
Closing Funds: Finally, you will need the money you are using for your down payment, and any other closing costs you are paying. Talk to your lender to determine the total amount and the form (cashier’s check, wire transfer, etc.) in which the funds will need to be paid.
Ready to crunch your numbers and get your questions answered? Check out our current FHA Purchase Loan Options.
Finance Your Home Today with an FHA Loan
FHA loans are used by many homebuyers every year. From more flexible qualification requirements to greater flexibility with down payment amounts, FHA insured mortgages can help you buy your first home, last home and any home in between. If you’ve found your dream home and are ready to buy, reach out to a Pennymac Loan Expert to get BuyerReady Certified for an FHA loan today.
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.
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.
Are you eligible for the zero-down USDA home loan?
What if you could secure a USDA home loan that allows you to buy a house with no down payment, competitive mortgage rates, and reduced mortgage insurance costs?
It might sound like a dream, but it’s entirely possible with the USDA mortgage program. Designed to assist low- and moderate-income Americans in becoming homeowners, USDA loans provide incredibly affordable financing options for eligible buyers.
Essentially, USDA mortgages empower individuals to transition from renting to owning, even when they thought homeownership was out of reach.
Verify your USDA loan eligibility. Start here
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>Related: How to buy a house with $0 down: First-time home buyer
What is a USDA loan?
USDA loans are mortgages backed by the U.S. Department of Agriculture as part of its Rural Development Guaranteed Housing Loan program. The USDA offers financing with no down payment, reduced mortgage insurance, and below-market mortgage rates.
Verify your USDA loan eligibility. Start here
The USDA mortgage program is intended for home buyers with low-to-average household incomes. In order to qualify, you must also purchase a home in a “rural area” as the USDA defines it. Those who are eligible can use a USDA mortgage to buy a home or refinance one they already own.
USDA loans offer nearly unbeatable benefits for qualified borrowers. So if this program sounds like a good fit for you, it’s worth getting in touch with a participating lender to find out if you’re eligible.
How do USDA loans work?
The U.S. Department of Agriculture insures USDA loans. Thanks to government guarantees and subsidies, lenders can offer 100% financing and below-market interest rates without taking on too much risk.
Verify your USDA loan eligibility. Start here
Although the USDA backs this program, it typically isn’t the one lending money. Instead, private lenders are authorized to offer USDA loans. That means you can get a USDA mortgage from many mainstream banks, mortgage lenders, and credit unions.
The application process for a USDA mortgage works just like any other home loan. You’ll compare rates and choose a lender, complete an application (often online), provide financial documents, wait for the lender’s approval, and then set a closing day.
The only exception is for very low-income borrowers, who may qualify for a USDA Direct home loan. In this case, you’d go straight to the Department of Agriculture to apply rather than to a private lender.
Types of USDA loans
For eligible individuals and families looking to buy, build, or renovate a home in a rural area, the USDA offers three main mortgage loan types. The loan programs are as follows:.
Verify your USDA loan eligibility. Start here
USDA Guaranteed Loans
Approved private lenders, such as banks and mortgage companies, provide USDA loan guarantees to qualified borrowers. A USDA guaranteed loan is one in which the government backs a portion of the loan, lowering the lender’s risk and allowing them to offer more favorable terms to the borrower. These loans frequently have low interest rates, no down payment, and more lenient credit requirements. The property must be in an eligible rural area as the USDA defines it, and borrowers must meet household income requirements that vary depending on location and household size.
USDA Direct Loans
The USDA also offers the Single Family Housing Direct loan through the Section 502 Direct Loan Program. These loans are meant to help low-income families buy, build, or fix up small homes in rural areas. The USDA, rather than private lenders, provides funding for direct loans as opposed to guaranteed loans. These loans have favorable terms, such as low interest rates (as low as 1% with payment assistance) and long repayment periods (up to 38 years for eligible applicants). Income, creditworthiness, and the property’s location in an eligible rural area determine eligibility for direct loans.
USDA Home Improvement Loan
The USDA’s Single Family Housing Repair Loans and Grants program, also known as the Section 504 program, provides financing for home improvements. This program provides low-interest, fixed-rate loans and grants to low-income rural homeowners for necessary home repairs, improvements, and modifications that make their homes safer, more energy-efficient, and more accessible. However, if you’re looking for one, you might have a difficult time finding this type of USDA home loan. They are not widely available from lenders.
USDA loan eligibility requirements
To be eligible for a USDA home loan, you’ll need to meet a number of requirements that vary depending on whether you are applying for a USDA loan guarantee or a USDA direct loan.
Verify your USDA loan eligibility. Start here
Some general requirements, however, apply to all USDA loans, specifically those based on both buyer and property eligibility.
USDA loan property requirements
Eligible rural area
The USDA defines an eligible area in rural America as having a population of 20,000 or fewer. To check if the property you’re considering falls within these designated areas, the USDA’s eligibility site provides all the necessary information. We also provide a USDA eligibility map below.
Single-family primary residence
USDA loans are exclusively available for primary residences. Neither investment properties nor second homes are eligible for this program.
Meet safety standards
The property must adhere to the USDA’s minimum property requirements, which focus on safety, structural integrity, and adequate access to utilities and services.
USDA loan borrower requirements
Income limits
You must meet USDA monthly income limits, meaning your household income can’t exceed 115% of the area median income. Conforming to USDA income eligibility requirements ensures the program is accessible to those it’s intended to serve.
Stable income
Applicants are required to demonstrate a stable and dependable income, typically for at least 24 months, before applying. This helps ensure borrowers can maintain their loan payments.
Creditworthiness
Although USDA loans are known for their flexible credit requirements, creditworthiness is still important. Lenders usually seek a minimum credit score of 640 for guaranteed loans, with USDA Direct Loans potentially having more lenient criteria.
Debt-to-income ratio
Your monthly debt, including future mortgage payments, generally should not exceed 41% of your gross monthly income. However, lenders may make exceptions based on credit score and available cash reserves.
Citizenship status
Applicants need to be U.S. citizens, U.S. non-citizen nationals, or qualified aliens with a valid Social Security number to qualify for a USDA loan.
USDA loan eligibility map
The USDA eligibility map is a valuable online resource for potential borrowers. It helps them identify if a property is situated in an area of rural America that qualifies for USDA home loans.
Verify your USDA loan eligibility. Start here
Users can enter a specific address or explore areas of the map to see if they qualify for USDA guaranteed loans or direct loans by using this interactive map.
1 Source: USDAloans.com, based on Housing Assistance Council data
USDA loan rates
Compared to other home loan programs, USDA mortgage interest rates are some of the lowest available.
Check your USDA loan rates. Start here
The VA loan, specifically tailored for veterans and service members, stands alongside the USDA loan as one of the few government-backed loan programs offering competitively low rates. Due in large part to the security that government subsidies and guarantees provide, both the USDA and VA programs are able to offer interest rates below the market average.
Other mortgage programs, like the FHA loan and conventional loan, can have rates around 0.5%–0.75% higher than USDA rates on average. That said, mortgage rates are personal. Getting a USDA loan doesn’t necessarily mean your rate will be “below-market” or match the USDA loan rates advertised.
How to get the best USDA mortgage rates
Strengthening your financial standing is essential for obtaining the best USDA loan rates. Here are some helpful techniques for improving your personal finances:
Boost your credit score.Improving your credit score is an important step toward getting the best USDA loan rates. Taking steps to improve your credit score before applying for a USDA loan often proves beneficial.
Consider a down payment. While a down payment is not required for USDA loans, it can demonstrate to the lender your commitment to repaying the loan. This could also help lenders find your application more appealing.
Minimize existing debt.Lowering your debt-to-income ratio (DTI) by paying off existing high-interest debts can make you more appealing to lenders. It demonstrates that you are capable of handling your loan and making payments on time.
Shop around for lenders.Exploring loan options with multiple participating lenders is a smart move that can save you thousands of dollars over the life of the loan. Comparing their interest rates, fees, closing costs, and loan terms can help you identify the most appealing offer. It’s possible that first-time home buyers will find better options than what USDA loans can offer.
USDA loan costs
When it comes to financing a home purchase with a USDA loan, it’s not just the mortgage rate that you need to consider. You’ll be responsible for various fees and costs, which can add up over time. Understanding these costs upfront can help you make a more informed decision and plan your budget accordingly.
Here’s a breakdown of the expenses you can expect:.
USDA mortgage insurance
The USDA guarantees its mortgage loans, meaning it offers protection to approved mortgage lenders in case borrowers default. But the program is partially self-funded. To keep this loan program running, the USDA charges homeowner-paid mortgage insurance premiums.
Verify your USDA loan eligibility. Start here
Upfront guarantee fee
One of the first costs you’ll encounter is the upfront guarantee fee. This fee is a percentage of the loan amount and is required by the USDA to secure the loan. It’s usually around 1% but can vary. You can either pay this fee upfront or roll it into the loan balance.
Annual guarantee fee
Unlike conventional loans that may not require mortgage insurance, USDA loans come with a monthly mortgage insurance premium. You can expect to pay a 0.35% annual guarantee fee based on the remaining principal balance each year.
The annual fee is broken into 12 installments and included in your regular mortgage payment.
As a real-life example, a home buyer with a $100,000 loan size would have a $1,000 upfront mortgage insurance cost plus a monthly payment of $29.17 for the annual mortgage insurance. USDA upfront mortgage insurance is not paid in cash. It’s added to your loan balance, so you pay it over time.
Inspection fees
Before the loan is approved, the property will need to be inspected to ensure it meets USDA property eligibility requirements. This inspection can cost anywhere from $300 to $500, depending on the location and size of the home.
Closing Costs
Closing costs are a mix of fees that include loan origination fees, appraisal fees, title search fees, and more. These costs can range from 2% to 5% of the home’s purchase price. Some of these costs can be rolled into the loan amount, but it’s best to be prepared to pay some of them out-of-pocket.
How to apply for a USDA home loan
Qualifying for a USDA home loan can be a great way to finance a home, especially if you’re looking to buy in a rural area. These loans offer attractive benefits like zero down payments and competitive interest rates.
However, the USDA loan approval process involves several steps and specific eligibility criteria. Here’s a guide on how to apply for a USDA home loan.
Check your USDA loan eligibility. Start here
Step 1: Check your eligibility
Before diving into the application process, it’s important to determine if you meet the USDA’s eligibility requirements. These typically include:
A minimum credit score of 640
A debt-to-income (DTI) ratio of up to 41%
Income limitations, which vary by location and household size
The property must be located in a USDA-eligible area
Step 2: Gather necessary documentation
You’ll need to provide various documents to prove your eligibility, including:
Proof of income eligibility (e.g., pay stubs, tax returns)
Employment verification
Credit history report
Personal identification (e.g., driver’s license, passport)
Step 3: Pre-Qualification
Contact a USDA-approved lender to get pre-qualified for a loan. During this qualifying process, the participating lender will review your financial situation to give you an estimate of how much you can borrow.
Check if you’re eligible for a USDA loan. Start here
Both pre-approval and pre-qualification can give you a better idea of your budget and show sellers that you are a serious buyer.
Step 4: Property search
Once pre-qualified, you can start looking for a property that meets USDA guidelines. Keep in mind that the home must be your primary residence and be located in an eligible rural area.
Working with a real estate agent who has experience with USDA loans can be a big advantage.
Step 5: USDA home loan application
After finding the right property, you’ll need to fill out the USDA loan application. Your lender will guide you through this process, which will include a more thorough review of your financial situation and the submission of additional documents.
Step 6: Property appraisal and inspection
The lender will arrange for an appraisal to ensure the property meets USDA standards. An inspection may also be required to identify any potential issues with the home.
Step 7: Loan approval and closing
Once the appraisal and inspection are complete and all documentation is verified, you’ll move on to the loan approval stage. If approved, you’ll proceed to closing, where you’ll sign all necessary paperwork and officially secure your USDA home loan.
With the loan secured and the keys in hand, you’re now ready to move into your new home!
By following these steps and working closely with a USDA-approved lender, you can navigate the USDA home loan process with confidence. Always remember to consult with your lender for the most accurate and personalized advice.
How do USDA loans compare to conventional loans?
USDA loans and conventional loans both have fixed terms and interest rates, but they’re different when it comes to down payments and fees.
Down payment
USDA loans don’t ask for a down payment, unlike conventional mortgages, which usually require a 3% down payment. FHA loans require a 3.5% down payment. VA loans, like USDA loans, also don’t require a down payment.
Home appraisal
Both USDA loans and conventional loans need an appraisal from an independent third party before the loan is approved.
The home appraisal for a conventional loan determines whether the loan amount and the home’s value match. If the loan amount doesn’t measure up to the market value of the home, the lender can’t get back their money just by selling the house. If you want to know more about the home’s condition, like the roof or appliances, you need to get a home inspector.
For a USDA loan, the appraisal does two things:
Just like with a conventional loan, it makes sure the home’s value is right for the loan amount.
It checks if the home meets USDA standards. This means the home should be ready to live in. For example, the roof and heating should work properly. The appraisal also looks at whether the well and septic systems follow USDA rules.
If you’re looking for a detailed report on the house, hiring a home inspector is still a good idea.
Fees
While conventional loans charge private mortgage insurance (PMI) when you make less than a 20% down payment, this isn’t the case with USDA loans. You don’t need PMI for USDA direct or guaranteed loans.
However, USDA guaranteed loans have a guarantee fee of 1% at closing and then an annual fee of 0.35% of the loan, added to your monthly payment. You can roll the initial fee into your loan amount.
Loan terms
The term for a USDA guaranteed loan is 30 years with a fixed rate. If you get a USDA direct loan, you can have up to 33 years to pay it back. If you’re a very low-income borrower, you might get up to 38 years to make it more affordable.
FAQ: USDA loans
Verify your USDA loan eligibility. Start here
What is the USDA Rural Housing Mortgage and who is eligible for it?
The USDA Rural Housing Mortgage, officially known as the Single Family Housing Guaranteed Loan Program, is a rural development loan aimed at helping single-family home buyers. It’s often referred to as a “Section 502” loan, based on the Housing Act of 1949 that created this program. Designed to stimulate growth in less-populated and low-income areas, this rural development loan is ideal for those looking to buy in eligible rural areas with the possibility of a zero-down payment.
What is the income limit for USDA home loans?
The income limit for USDA home loans is based on your area’s median income. To be eligible for a USDA loan, you can’t exceed the median income by more than 15 percent. For example, if the median salary in your city is $65,000 per year, you could qualify for a USDA loan with a salary of $74,750 or less.
Do USDA loans take longer to close?
USDA lenders have to send each loan file to the Department of Agriculture for approval before underwriting. This can add around two to three weeks to your loan processing time.
Can I do a cash-out refinance with the USDA program?
No, cash-out refinancing is not allowed in the USDA Rural Housing Program. Its loans are for home buying and rate-and-term refinances only.
What’s the maximum USDA mortgage loan size?
The USDA does not set loan limits, but your household income and debt-to-income ratio have a limit on the amount you can borrow. The USDA typically caps debt-to-income ratios at 41 percent. However, the program may be more lenient for borrowers with a credit score over 660 and stable employment or who show a demonstrated ability to save.
Where can I find a USDA loan lender, and what loan terms are available?
You can find a USDA loan lender by visiting the U.S. Department of Agriculture’s website, which maintains a list of approved lenders for the Rural Housing Program. The USDA Rural Housing loan offers a 30-year fixed-rate mortgage only, with no 15-year fixed option or adjustable-rate mortgage (ARM) program available.
Can I receive a gift or have the seller pay for my closing costs with a USDA loan?
Yes, USDA rural development loans allow both gifts from family members and non-family members for closing costs. Inform your loan officer as soon as possible if you’ll be using gifted funds, as it requires extra documentation and verification from the lender. Additionally, the USDA Rural Housing Program permits sellers to pay closing costs for buyers through seller concessions. These concessions may cover all or part of a purchase’s state and local government fees, lender costs, title charges, and various home and pest inspections.
Can I use the USDA loan for a vacation home, investment property, or working farm?
No, the USDA loan program is designed specifically for primary residences and cannot be used for vacation homes, investment properties, or working farms. The Rural Housing Program focuses on residential property financing.
Am I eligible for the USDA if I recently returned to work or am self-employed?
If you are a W-2 employee, you are eligible for USDA financing immediately, as there’s no job history requirement. However, if you have less than two years in a job, you may not be able to use your bonus income for qualification purposes. Self-employed individuals can also use the USDA Rural Housing Program. To verify your self-employment income, you will need to provide two years of federal tax returns, similar to the requirements for FHA and conventional financing.
Can I use the USDA loan program for home repairs, improvements, accessibility, and energy-efficiency upgrades?
Yes, the USDA loan program can be used for various purposes, including making eligible repairs and improvements to a home (such as replacing windows or appliances, preparing a site with trees, walks, and driveways, drawing fixed broadband service, and connecting utilities), permanently installing equipment to assist household members with physical disabilities, and purchasing and installing materials to improve a home’s energy efficiency (including windows, roofing, and solar panels).
Can a non-citizen qualify for a USDA loan?
Yes, along with U.S. citizens, legal permanent residents of the United States can also apply for a USDA loan.
Today’s USDA mortgage rates
USDA mortgage interest rates consistently rank among the lowest in the market, next to VA loans.
USDA loans can be particularly attractive to borrowers seeking optimal financial terms, especially in an environment with elevated interest rates. Prospective homebuyers who meet the criteria for a USDA loan may be able to secure a great deal right now.
To find out whether you qualify for one and what your rate is, consult with a trusted lender below.
Time to make a move? Let us find the right mortgage for you
1 Source: USDAloans.com, based on Housing Assistance Council data
Refinancing your mortgage, or replacing your existing home loan with a new one, can lower your interest rate and monthly payments or even get you extra cash from the equity in your home.
Not all homeowners are approved for refinancing, though. With home prices and interest rates still high, lenders are careful about who they approve. The rejection rate on mortgage refinance applications increased to 15.5% in 2023 from 9.9% in 2022, according to the Federal Reserve Bank of New York.
If you’ve been turned down, you still have options for refinancing — and ways to improve your chances next time.
What we’ll cover
Compare offers to find the best mortgage
Common reasons mortgage refinancing is rejected
Lenders rely on federal underwriting guidelines from Fannie Mae and Freddie Mac when deciding whether to approve a refinancing application. Some issues are easier for borrowers to address than others.
High debt-to-income ratio
How much of your money is tied up in paying off debts isa major factor in getting approved for refinancing. Your debt-to-income (DTI) ratio is determined by dividing your total monthly debts (including your current mortgage) by your gross monthly income.
A DTI of 35% or less is ideal, according to Experian, although lenders typically will consider a ratio up to 43% for refinancing a conventional mortgage, depending on how strong the rest of their application is.
Low credit score
A credit score of at least 620 is usually needed to secure refinancing, although you may be able to get FHA cash-out refinancing with a score in the 500s.
Low home appraisal
An appraisal of your home’s fair market value ensures it hasn’t significantly depreciated, especially to the point that it’s worth less than what you owe (known as an “underwater mortgage”).
If the appraisal indicates your home is in poor condition or has renovations that are not up to code, it could also lead to being turned down.
Not enough home equity
The amount of your home that you own outright is known as home equity. If you put 5% of the cost of the property as a down payment, you’re starting with 5% home equity. That amount increases as you make mortgage payments and as the home’s value increases. You typically need to own at least 20% of your home outright to refinance your mortgage.
Employment history
According toFannie Mae’s underwriting guidelines,lenders look at an applicant’s career history and income over several years. Ideally, they want to see at least two years at your current job, but you probably won’t have to worry about a promotion or a better-paying job in the same industry. A consistent income is the key.
Taking a lesser role or lower-paying job and lengthy gaps in employment are more serious red flags, as is changing jobs in the middle of the application process. However, you can always try to explain your circumstances to your lender.
What to do if you’ve been rejected for refinancing
Find out why you were denied
Lenders are legally required to explain why you’ve been turned down. Find out the reason (or reasons) and if possible, make any necessary changes so you’ll be approved next time.
Shop for another lender
You may need a lender that is willing to accept a lower credit score. Rocket Mortgage works with applicants with scores as low as 580, rather than the 620 required by most lenders.
Rocket Mortgage Refinance
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Conventional loans, FHA loans, VA Interest Rate Reduction Refinance Loan (IRRRL) and jumbo loans
Fixed-rate Terms
8 – 29 years
Adjustable-rate Terms
Not disclosed
Credit needed
580 if opting for FHA loan refinance or VA IRRRL; 620 for a conventional loan refinance
Already have a mortgage through Rocket Mortgage or looking to start one? Check out the Rocket Visa Signature Card to learn how you can earn rewards
Ally Bank offers cash-out refinances for conventional and jumbo loans, allowing homeowners to convert their home equity into cash and take out a loan that’s larger than their current mortgage. Ally doesn’t charge application, origination or processing fees and its website has a refinance calculator that provides customized rates without affecting your credit score.
Ally Home
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Fixed-rate, adjustable-rate and jumbo loans available
Fixed-rate Terms
15 – 30 years
Adjustable-rate Terms
5/6 ARM, 7/6 ARM, 10/6 ARM
Credit needed
Not disclosed
Terms apply.
Pay down your existing mortgage
If you didn’t put 20% down when you bought your home, you may need to pay off another chunk of your mortgage before you’re able to secure refinancing.
Work on your credit
If your credit is the problem, take some time off to raise your score. Focus on making on-time bill payments and lowering your credit utilization ratio, or the amount of available credit you’re using. Avoid opening or closing any lines of credit and check your credit reports for any errors.
Experian Boost™ is a free way to improve your credit score. It links utility, phone and streaming service payments to your Experian credit report and uses the You’ll get an updated FICO® score delivered to you in real-time.
Experian Boost™
On Experian’s secure site
Cost
Average credit score increase
13 points, though results vary
Credit report affected
Experian®
Credit scoring model used
FICO® Score
Results will vary. See website for details.
How long should I wait before applying again?
Technically, you can reapply right away, but each application requires a hard credit check, which temporarily lowers your FICO score. So, consider why you were rejected first — if your credit score was too low or you don’t have enough home equity, address the issue before applying again.
If you were turned down because of a recent job change, you may have to wait up to two years to reapply.
How to lower your mortgage payments without refinancing
Whether it’s because you’ve been denied or the rates are still too high, refinancing might not be an option. Fortunately, there are ways you can lower your mortgage payment without refinancing.
Get rid of mortgage insurance
If you have a conventional mortgage, your lender will automatically cancel PMI when you reach 22% equity. You might be able to request cancelation once your equity reaches 20%.
Recast your mortgage
Some lenders will allow you to make a large lump-sum payment toward your principal balance and then re-amortize your loan. The terms remain the same when you recast your mortgage, but the lower balance means smaller monthly payments and an overall decrease in the amount you’ll pay in interest.
Request a loan modification
If you’re facing financial hardship, you can ask to change the terms of your mortgage permanently to help you avoid foreclosure. You can also request a forbearance to temporarily reduce or pause your mortgage, but you’ll eventually have to repay the late or suspended payments.
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FAQ
What is mortgage refinancing?
Refinancing your mortgage is when you replace your existing home loan with a new one, typically to get a lower interest rate.
How much does it cost to refinance a mortgage?
Depending on the lender, there are several fees associated with refinancing, usually 3% to 6% of the loan. Freddie Mac suggests putting aside $5,000 for refinancing closing costs
Can I lower my mortgage payments without refinancing?
Bottom Line
An applicant can be denied refinancing for various reasons, from a low credit score to a new job. If you know why you were turned down, you can work on the problem and reapply.
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Editor’s Note: Parts of this story were auto-populated using data from Curinos, a mortgage research firm that collects data from more than 250 lenders. For more details on how we compile daily mortgage data, check out our methodology here.
Mortgage rates remain above 7%, according to data from Curinos analyzed by MarketWatch Guides. The 30-year fixed-rate mortgage is 7.17% today, down-0.21 percentage points from last week.
With mortgage rates above 7% and home prices showing no signs of dropping, home affordability has continued to decline, according to the Mortgage Bankers Association (MBA). An MBA report published last week showed that the median monthly payment for new home purchases in the U.S. increased to $2,134 in January – up 4% from the month before.
Prospective home buyers may see rates drop more substantially this year, however. The Federal Reserve board previously indicated that it expects three rate cuts throughout 2024 and their next meeting is scheduled for March 19-20.
Here are today’s average mortgage rates:
30-year fixed mortgage rate: 7.17%
15-year fixed mortgage rate: 6.53%
5/6 ARM mortgage rate: 6.93%
Jumbo mortgage rate: 7.02%
Current Mortgage Rates
Product
Rate
Last Week
Change
30-Year Fixed Rate
7.17%
7.38%
-0.21
15-Year Fixed Rate
6.53%
6.72%
-0.19
5/6 ARM
6.93%
7.02%
-0.09
7/6 ARM
7.09%
7.23%
-0.14
10/6 ARM
7.24%
7.35%
-0.11
30-Year Fixed Rate Jumbo
7.02%
7.17%
-0.15
30-Year Fixed Rate FHA
6.96%
7.17%
-0.21
30-Year Fixed Rate VA
6.98%
7.16%
-0.18
Disclaimer: The rates above are based on data from Curinos, LLC. All rate data is accurate as of Friday, March 08, 2024. Actual rates may vary.
>> View historical mortgage rate trends
Mortgage Rates for Home Purchase
30-year fixed-rate mortgages are down, -0.21
The average 30-year fixed-mortgage rate is 7.17%. Since the same time last week, the rate is down, changing -0.21 percentage points.
At the current average rate, you’ll pay $676.76 per month in principal and interest for every $100,000 you borrow. You’re paying less compared to last week when the average rate was 7.38%.
15-year fixed-rate mortgages are down, -0.19
The average rate you’ll pay for a 15-year fixed-mortgage is 6.53%, a decrease of-0.19 percentage points compared to last week.
Monthly payments on a 15-year fixed-mortgage at a rate of 6.53% will cost approximately $872.76 per $100,000 borrowed. With the rate of 6.72% last week, you would’ve paid $883.25 per month.
5/6 adjustable-rate mortgages are down, -0.09
The average rate on a 5/6 adjustable rate mortgage is 6.93%, a decrease of-0.09 percentage points over the last seven days.
Adjustable-rate mortgages, commonly referred to as ARMs, are mortgages with a fixed interest rate for a set period of time followed by a rate that adjusts on a regular basis. With a 5/6 ARM, the rate is fixed for the first 5 years and then adjusts every six months over the next 25 years.
Monthly payments on a 5/6 ARM at a rate of 6.93% will cost approximately $660.61 per $100,000 borrowed over the first 5 years of the loan.
Jumbo loan interest rates are down, -0.15
The average jumbo mortgage rate today is 7.02%, a decrease of-0.15 percentage points over the past week.
Jumbo loans are mortgages that exceed loan limits set by the Federal Housing Finance Agency (FHFA) and funding criteria of Freddie Mac and Fannie Mae. This generally means that the amount of money borrowed is higher than $726,200.
Product
Monthly P&I per $100,000
Last Week
Change
30-Year Fixed Rate
$676.76
$691.02
-$14.26
15-Year Fixed Rate
$872.76
$883.25
-$10.49
5/6 ARM
$660.61
$666.65
-$6.04
7/6 ARM
$671.36
$680.82
-$9.46
10/6 ARM
$681.50
$688.97
-$7.47
30-Year Fixed Rate Jumbo
$666.65
$676.76
-$10.11
30-Year Fixed Rate FHA
$662.62
$676.76
-$14.14
30-Year Fixed Rate VA
$663.96
$676.08
-$12.12
Note: Monthly payments on adjustable-rate mortgages are shown for the first five, seven and 10 years of the loan, respectively.
Factors That Affect Your Mortgage Rate
Mortgage rates change frequently based on the economic environment. Inflation, the federal funds rate, housing market conditions and other factors all play into how rates move from week-to-week and month-to-month.
But outside of macroeconomic trends, several other factors specific to the borrower will affect the mortgage interest rate. They include:
Financial situation: Mortgage lenders use past financial decisions of borrowers as a way to evaluate the risk of loaning money.
Loan amount and structure: The amount of money that bank or mortgage lender loans and its structure (including both the term and whether its a fixed-rate or adjustable-rate).
Location: Mortgage rates vary by where you are buying a home. Areas with more lenders, and thus more competition, may have lower rates. Foreclosure laws can also impact a lender’s risk, affecting rates.
Whether borrowers are first-time homebuyers: Oftentimes first-time homebuyer programs will offer new homeowners lower rates.
Lenders: Banks, credit unions and online lenders all may offer slightly different rates depending on their internal determination.
How To Shop for the Best Mortgage Rate
Comparison shopping for a mortgage can be overwhelming, but it’s shown to be worth the effort. Homeowners may be able to save between $600 and $1,200 annually by shopping around for the best rate, researchers found in a recent study by Freddie Mac. That’s why we put together steps on how to shop for the best mortgage rate.
1. Check credit scores and credit reports
A borrower’s credit situation will likely determine the type of mortgage they can pursue, as well as their rate. Conventional loans are typically only offered to borrowers with a credit score of 620 or higher, while FHA loans may be the best option for borrowers with a FICO score between 500 and 619. Additionally, individuals with higher credit scores are more likely to be offered a lower mortgage interest rate.
Mortgage lenders often review scores from the three major credit bureaus: Equifax, Experian and TransUnion. By viewing your scores ahead of lenders considering you for a loan, you can check for errors and even work to improve your score by paying down balances and limiting new credit cards and loans.
2. Know the options
There are four standard mortgage programs: conventional, FHA, VA and USDA. To get the best mortgage rate and increase your odds of approval, it’s important for potential borrowers to do their research and apply for the mortgage program that best fits their financial situation.
The table below describes each program, highlighting minimum credit score and down payment requirements.
Though conventional mortgages are most common, borrowers will also need to consider their repayment plan and term. Rates can be either fixed or adjustable and terms can range from 10 to 30 years, though most homeowners opt for a 15- or 30-year mortgage.
3. Compare quotes across multiple lenders
Shopping around for a mortgage goes beyond comparing rates online. We recommend reaching out to lenders directly to see the “real” rate as figures listed online may not be representative of a borrower’s particular situation. While most experts recommend getting quotes from three to five lenders, there is no limit on the number of mortgage companies you can apply with. In many cases, lenders will allow borrowers to prequalify for a mortgage and receive a tentative loan offer with no impact to their credit score.
After gathering your loan documents – including proof of income, assets and credit – borrowers may also apply for pre-approval. Pre-approval will let them know where they stand with lenders and may also improve negotiating power with home sellers.
4. Review loan estimates
To fully understand which lender is offering the cheapest loan overall, take a look at the loan estimate provided by each lender. A loan estimate will list not only the mortgage rate, but also a borrower’s annual percentage rate (APR), which includes the interest rate and other lender fees such as closing costs and discount points.
By comparing loan estimates across lenders, borrowers can see the full breakdown of their possible costs. One lender may offer lower interest rates, but higher fees and vice versa. Looking at the loan’s APR can give you a good apples-to-apples comparison between lenders that takes into account both rates and fees.
5. Consider negotiating with lenders on rates
Mortgage lenders want to do business. This means that borrowers may use competing offers as leverage to adjust fees and interest rates. Many lenders may not lower their offered rate by much, but even a few basis points may save borrowers more than they might think in the long run. For instance, the difference between 6.8% and 7.0% on a 30-year, fixed-rate $100,000 mortgage is roughly $5,000 over the life of the loan.
Expert Forecasts for Mortgage Rates
Mortgage rates have cooled significantly over the past several months. After the 30-year fixed-rate mortgage hit 8% last October, it ended 2023 closer to 7%. In fact, the average for Q4 2023 was 7.3%.
Analysts with Fannie Mae and the Mortgage Bankers Association (MBA) both project that rates will fall going into 2024 and throughout next year.
Fannie Mae economists expect rates to drop more quickly, falling below 6% by Q4 2024. Meanwhile, the MBA’s forecast for Q4 2024 is 6.1% and 5.9% for Q1 2025.
More Mortgage Resources
Methodology
Every weekday, MarketWatch Guides provides readers with the latest rates on 11 different types of mortgages. Data for these daily averages comes from Curinos, LLC, a leading provider of mortgage research that collects data from more than 250 lenders. For more details on how we compile daily mortgage data, check out our comprehensive methodology here. Editor’s Note: Before making significant financial decisions, consider reviewing your options with someone you trust, such as a financial adviser, credit counselor or financial professional, since every person’s situation and needs are different.
“The latest data on inflation was not markedly better nor worse than expected, which was enough to bring mortgage rates down a bit, with the 30-year fixed mortgage rate declining slightly last week to 7.02%,” MBA senior vice president Mike Fratantoni said, adding that the significant boost in mortgage applications, particularly for FHA loans, underscores … [Read more…]
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