30-Year Fixed Mortgage Rate Hits Yet Another Record Low, Falls Below 3.2 Percent for the First Time

As of May 5, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.72%.

Abstract illustration of houses and charts

As of May 5, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.72%.

Mortgage rates fall to lowest levels in months.

“Mortgage rates fell slightly again this week, pushing rates to their lowest level since mid-to-late February,” said Zillow Economist Matthew Speakman. “With few surprising economic data or pandemic-related developments this week, mortgage rates and the bond yields that tend to influence them saw little reason to move significantly over the past seven days. Unlike stocks, bonds and mortgage rates brushed aside comments made by Treasury Secretary Janet Yellen, in which she suggested (but did not recommend) that interest rates will likely have to rise somewhat in order to ensure that the economy doesn’t overheat. But this period of relative calm will be put to the test in the coming days. April employment figures and inflation data, two key gauges of the economy’s path forward, are due this week, and stronger-than-expected readings of either – or both – reports will likely revert mortgage rates back upward.”

Additionally, the 15-year fixed mortgage rate was 2.09%, and for 5/1 ARMs, the rate was 2.38%.

Check Zillow for mortgage rate trends and up-to-the-minute mortgage rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

The weekly mortgage rate chart above illustrates the average 30-year fixed interest rate for the past week. Here’s a comprehensive look at the current mortgage rates for all loan types:

Today’s Average Rates for Conventional Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed 2.77% 2.82% 0.11%
20-Year Fixed 2.63% 2.71% 0.06%
15-Year Fixed 2.09% 2.17% 0.03%
10-Year Fixed 2.03% 2.15% -0.08%
7/1 ARM 2.22% 2.92% 0.26%
5/1 ARM 2.19% 3.04% 0.21%
3/1 ARM 0% 0% 0%

A 30-Year Fixed loan of $300,000 at 2.77% APR with a $75,000 down payment will have a monthly payment of $1,227. A 20-Year Fixed loan of $300,000 at 2.63% APR with a $75,000 down payment will have a monthly payment of $1,609. A 15-Year Fixed loan of $300,000 at 2.09% APR with a $75,000 down payment will have a monthly payment of $1,942. A 10-Year Fixed loan of $300,000 at 2.03% APR with a $75,000 down payment will have a monthly payment of $2,764. A 7/1 ARM loan of $300,000 at 2.22% APR with a $75,000 down payment will have a monthly payment of $1,141. A 5/1 ARM loan of $300,000 at 2.19% APR with a $75,000 down payment will have a monthly payment of $1,137. A 3/1 ARM loan of $0 at 0% APR with a $0 down payment will have a monthly payment of $0. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Government Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed FHA 2.4% 3.07% 0.17%
30-Year Fixed VA 2.47% 2.73% 0.12%
15-Year Fixed FHA 2.23% 2.93% 0.09%
15-Year Fixed VA 2.42% 2.89% 0.17%
5/1 ARM FHA 2.59% 2.97% 0.02%
5/1 ARM VA 3.17% 2.83% -0.27%

A 30-Year Fixed FHA loan of $300,000 at 2.4% APR with a $75,000 down payment will have a monthly payment of $1,170. A 30-Year Fixed VA loan of $300,000 at 2.47% APR with a $75,000 down payment will have a monthly payment of $1,180. A 15-Year Fixed FHA loan of $300,000 at 2.23% APR with a $75,000 down payment will have a monthly payment of $1,962. A 15-Year Fixed VA loan of $300,000 at 2.42% APR with a $75,000 down payment will have a monthly payment of $1,988. A 5/1 ARM FHA loan of $300,000 at 2.59% APR with a $75,000 down payment will have a monthly payment of $1,200. A 5/1 ARM VA loan of $300,000 at 3.17% APR with a $75,000 down payment will have a monthly payment of $1,291. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Jumbo Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed Jumbo 3.2% 3.25% 0.09%
20-Year Fixed Jumbo 3.28% 3.32% 0.25%
15-Year Fixed Jumbo 2.81% 2.89% 0.11%
10-Year Fixed Jumbo 2.5% 2.6% 0.1%
7/1 ARM Jumbo 2.68% 3.17% -0.35%
5/1 ARM Jumbo 2.75% 3.21% -0.25%
3/1 ARM Jumbo 2.14% 2.74% 0%

A 30-Year Fixed Jumbo loan of $600,000 at 3.2% APR with a $150,000 down payment will have a monthly payment of $2,595. A 20-Year Fixed Jumbo loan of $600,000 at 3.28% APR with a $150,000 down payment will have a monthly payment of $3,411. A 15-Year Fixed Jumbo loan of $600,000 at 2.81% APR with a $150,000 down payment will have a monthly payment of $4,089. A 10-Year Fixed Jumbo loan of $600,000 at 2.5% APR with a $150,000 down payment will have a monthly payment of $5,656. A 7/1 ARM Jumbo loan of $600,000 at 2.68% APR with a $150,000 down payment will have a monthly payment of $2,428. A 5/1 ARM Jumbo loan of $600,000 at 2.75% APR with a $150,000 down payment will have a monthly payment of $2,449. A 3/1 ARM Jumbo loan of $600,000 at 2.14% APR with a $150,000 down payment will have a monthly payment of $2,259. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Source: zillow.com

30-Year Fixed Mortgage Rate Holds Steady

As of May 5, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.72%.

Abstract illustration of houses and charts

As of May 5, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.72%.

Mortgage rates fall to lowest levels in months.

“Mortgage rates fell slightly again this week, pushing rates to their lowest level since mid-to-late February,” said Zillow Economist Matthew Speakman. “With few surprising economic data or pandemic-related developments this week, mortgage rates and the bond yields that tend to influence them saw little reason to move significantly over the past seven days. Unlike stocks, bonds and mortgage rates brushed aside comments made by Treasury Secretary Janet Yellen, in which she suggested (but did not recommend) that interest rates will likely have to rise somewhat in order to ensure that the economy doesn’t overheat. But this period of relative calm will be put to the test in the coming days. April employment figures and inflation data, two key gauges of the economy’s path forward, are due this week, and stronger-than-expected readings of either – or both – reports will likely revert mortgage rates back upward.”

Additionally, the 15-year fixed mortgage rate was 2.09%, and for 5/1 ARMs, the rate was 2.38%.

Check Zillow for mortgage rate trends and up-to-the-minute mortgage rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

The weekly mortgage rate chart above illustrates the average 30-year fixed interest rate for the past week. Here’s a comprehensive look at the current mortgage rates for all loan types:

Today’s Average Rates for Conventional Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed 2.79% 2.84% 0.09%
20-Year Fixed 2.66% 2.73% 0.04%
15-Year Fixed 2.1% 2.19% 0.02%
10-Year Fixed 2.03% 2.15% -0.08%
7/1 ARM 2.24% 2.94% 0.24%
5/1 ARM 2.27% 3.08% 0.17%
3/1 ARM 0% 0% 0%

A 30-Year Fixed loan of $300,000 at 2.79% APR with a $75,000 down payment will have a monthly payment of $1,231. A 20-Year Fixed loan of $300,000 at 2.66% APR with a $75,000 down payment will have a monthly payment of $1,612. A 15-Year Fixed loan of $300,000 at 2.1% APR with a $75,000 down payment will have a monthly payment of $1,944. A 10-Year Fixed loan of $300,000 at 2.03% APR with a $75,000 down payment will have a monthly payment of $2,764. A 7/1 ARM loan of $300,000 at 2.24% APR with a $75,000 down payment will have a monthly payment of $1,144. A 5/1 ARM loan of $300,000 at 2.27% APR with a $75,000 down payment will have a monthly payment of $1,149. A 3/1 ARM loan of $0 at 0% APR with a $0 down payment will have a monthly payment of $0. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Government Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed FHA 2.41% 3.07% 0.16%
30-Year Fixed VA 2.49% 2.75% 0.1%
15-Year Fixed FHA 2.23% 2.94% 0.08%
15-Year Fixed VA 2.42% 2.89% 0.17%
5/1 ARM FHA 2.59% 2.97% 0.02%
5/1 ARM VA 3.09% 2.77% -0.22%

A 30-Year Fixed FHA loan of $300,000 at 2.41% APR with a $75,000 down payment will have a monthly payment of $1,170. A 30-Year Fixed VA loan of $300,000 at 2.49% APR with a $75,000 down payment will have a monthly payment of $1,183. A 15-Year Fixed FHA loan of $300,000 at 2.23% APR with a $75,000 down payment will have a monthly payment of $1,962. A 15-Year Fixed VA loan of $300,000 at 2.42% APR with a $75,000 down payment will have a monthly payment of $1,989. A 5/1 ARM FHA loan of $300,000 at 2.59% APR with a $75,000 down payment will have a monthly payment of $1,200. A 5/1 ARM VA loan of $300,000 at 3.09% APR with a $75,000 down payment will have a monthly payment of $1,279. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Jumbo Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed Jumbo 3.24% 3.28% 0.06%
20-Year Fixed Jumbo 3.3% 3.34% 0.23%
15-Year Fixed Jumbo 2.83% 2.9% 0.09%
10-Year Fixed Jumbo 2.5% 2.6% 0.1%
7/1 ARM Jumbo 2.65% 3.1% -0.28%
5/1 ARM Jumbo 2.66% 3.15% -0.18%
3/1 ARM Jumbo 2.14% 2.74% 0%

A 30-Year Fixed Jumbo loan of $600,000 at 3.24% APR with a $150,000 down payment will have a monthly payment of $2,606. A 20-Year Fixed Jumbo loan of $600,000 at 3.3% APR with a $150,000 down payment will have a monthly payment of $3,416. A 15-Year Fixed Jumbo loan of $600,000 at 2.83% APR with a $150,000 down payment will have a monthly payment of $4,093. A 10-Year Fixed Jumbo loan of $600,000 at 2.5% APR with a $150,000 down payment will have a monthly payment of $5,656. A 7/1 ARM Jumbo loan of $600,000 at 2.65% APR with a $150,000 down payment will have a monthly payment of $2,418. A 5/1 ARM Jumbo loan of $600,000 at 2.66% APR with a $150,000 down payment will have a monthly payment of $2,420. A 3/1 ARM Jumbo loan of $600,000 at 2.14% APR with a $150,000 down payment will have a monthly payment of $2,259. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Source: zillow.com

What to Know about FHA 203K loans

Buying a fixer-upper is sometimes romanticized by pop culture. While it’s fun to dream, the reality of home renovation is that it can be laborious and draining, especially if the home needs serious help.

Repair work requires energy and resources, and it can be difficult to secure a loan to cover both the value of the home and the cost of repairs—especially if the home is currently uninhabitable. Most lenders won’t take that sort of chance.

But if you have your heart set on buying a fixer upper, an FHA 203(k) loan can help.

The Federal Housing Administration (FHA), part of the U.S. Department of Housing and Urban Development (HUD), insures loans for the purchase and substantial rehab of homes. It is also possible to take out an FHA 203(k) loan for home repairs only, though it might not be your best option if that’s all you need.

If you have the vision to revive a dreary house, here’s info about FHA 203(k) loans and other home improvement loan options.

What Is an FHA 203(k) home loan?

Section 203(k) insurance lets buyers finance both the purchase of a house and its rehabilitation costs through a single long-term, fixed- or adjustable-rate loan.

Before the availability of FHA 203(k) loans, borrowers often had to secure multiple loans to obtain a mortgage and a home improvement loan.

The loans are provided through HUD-approved mortgage lenders and insured by the FHA. The government is interested in rejuvenating neighborhoods and expanding homeownership opportunities.

Because the loans are backed by the federal government, you may be able to secure one even if you don’t have stellar credit. Rates are generally competitive but may not be the best, because a home with major flaws is a risk to the lender.

The FHA 203(k) process also requires more coordination, paperwork, and work on behalf of the lender, which can drive the interest rate up slightly. Lenders also may charge a supplemental origination fee, fees to cover review of the rehabilitation plan, and a higher appraisal fee.

The loan will require an upfront mortgage insurance payment of 1.75% of the total loan amount (it can be wrapped into the financing) and then a monthly mortgage insurance premium.

Applications must be submitted through an approved lender .

What Can FHA 203(k) Loans Be Used For?

Purchase and Repairs

Other than the cost of acquiring a property, rehabilitation may range from minor repairs (though exceeding $5,000 worth) to virtual reconstruction.

If a home needs a new bathroom or new siding, for example, the loan will include the projected cost of those renovations in addition to the value of the existing home. An FHA 203(k) loan, however, will not cover “luxury” upgrades like a pool, tennis court, or gazebo (so close!).

If you’re buying a condo, 203(k) loans are generally only issued for interior improvements. However, you can use a 203(k) loan to convert a property into a two- to four-unit dwelling.

Your loan amount is determined by project estimates done by the lender or the FHA. The loan process is paperwork-heavy. Working with contractors who are familiar with the way the program works and will not underbid will be important.

Contractors will also need to be efficient: The work must begin within 30 days of closing and be finished within six months.

Mortgage LoanMortgage Loan

Temporary Housing

If the home is indeed unlivable, the 203(k) loan can include a provision to provide you with up to six months of temporary housing costs or existing mortgage payments.

Who Is Eligible for an FHA 203(k) Loan?

Individuals and nonprofit organizations can use an FHA 203(k) loan, but investors cannot.

Most of the eligibility guidelines for regular FHA loans apply to 203(k) loans. They include a minimum credit score of 580 and at least a 3.5% down payment.

Applicants with a score as low as 500 will typically need to put 10% down.

Your debt-to-income ratio typically can’t exceed 43%. And you must be able to qualify for the costs of the renovations and the purchase price.

Again, to apply for any FHA loan, you have to use an approved lender. (It’s a good idea to get multiple quotes.)

Home Improvement Loan Options

The FHA 203(k) provides the most comprehensive solution for buyers who need a loan for both a home and substantial repairs. However, if you need a loan only for home improvements, there are other options to consider.

Depending on the improvements you have planned, your timeline, and your personal financial situation, one of the following could be a better fit.

Other Government-Backed Loans

In addition to the standard FHA 203(k) program, there is a limited FHA 203(k) loan of up to $35,000. Homebuyers and homeowners can use the funding to repair or upgrade a home.

Then there are FHA Title 1 loans for improvements that “substantially protect or improve the basic livability or utility of the property.” The fixed-rate loans may be used in tandem with a 203(k) rehabilitation mortgage.

The owner of a single-family home can apply to borrow up to $25,000 with a secured Title 1 loan.

With Fannie Mae’s HomeStyle® Renovation Mortgage, homebuyers and homeowners can combine their home purchase or refinance with renovation funding in a single mortgage. There’s also a Freddie Mac renovation mortgage, but standard credit score guidelines apply.

Cash-Out Refinance

If you have an existing mortgage and equity in the home, and want to take out a loan for home improvements, a cash-out refinance from a private lender may be worth looking into.

You usually must have at least 20% equity in your home to be eligible, meaning a maximum 80% loan-to-value (LTV) ratio of the home’s current value. (To calculate LTV, divide your mortgage balance by the home’s appraised value. Let’s say your mortgage balance is $225,000 and the home’s appraised value is $350,000. Your LTV is 64%, which indicates 36% equity in the home.)

A cash-out refi could also be an opportunity to improve your mortgage interest rate and change the length of the loan.

PACE Loan

For green improvements to your home, such as solar panels or an energy-efficient heating system, you might be eligible for a PACE loan .

The nonprofit organization PACENation promotes property-assessed clean energy (or PACE) financing for homeowners and commercial property owners, to be repaid over a period of up to 30 years.

Home Improvement Loan

A home improvement loan is an unsecured personal loan—meaning the house isn’t used as collateral to secure the loan. Approval is based on personal financial factors that will vary from lender to lender.

Lenders offer a wide range of loan sizes, so you can invest in minor updates to major renovations.

Home Equity Line of Credit

If you need a loan only for repairs but don’t have great credit, a HELOC may provide a lower rate. Be aware that if you can’t make payments on the borrowed funding, which is secured by your home, the lender can seize your home.

The Takeaway

If you have your eye on a fixer-upper that you just know can be polished into a jewel, an FHA 203(k) loan could be the ticket, but options may make more sense to other homebuyers and homeowners.

SoFi offers cash-out refinancing, turning your home equity into renovation money.

Or maybe a home improvement loan of $5,000 to $100,000 seems like a better way to turn your home into a haven.

Check your rate today.



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Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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Source: sofi.com

30-Year Fixed Mortgage Rate Hovers Above All-Time Low

As of April 28, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.78%.

Abstract illustration of houses and charts

As of April 28, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.78%.

Mortgage rates fall despite strong economic data reports.

“Mortgage rates fell again this week, continuing the downward trend they’ve exhibited for most of April,” said Zillow Economist Matthew Speakman. “In what was a relatively unremarkable week for mortgage rates, the modest movement was partially driven by discussions about a proposed increase in capital gains tax rates – which placed downward pressure on bond yields and thus rates – and anticipation of a key announcement by the Federal Reserve. Fed Chair Jerome Powell reiterated on Wednesday that the Central Bank has no immediate plans to increase interest rates or curb the purchases of mortgage-backed securities – a position that placed more downward pressure on bond yields and is likely to result in more mortgage decreases in the coming days. Looking ahead, with a slew of key economic reports on the horizon – including consumer spending and inflation data – the relatively muted mortgage rate activity from the past couple weeks may transition to more significant movements.”

Additionally, the 15-year fixed mortgage rate was 2.11%, and for 5/1 ARMs, the rate was 2.55%.

Check Zillow for mortgage rate trends and up-to-the-minute mortgage rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

The weekly mortgage rate chart above illustrates the average 30-year fixed interest rate for the past week. Here’s a comprehensive look at the current mortgage rates for all loan types:

Today’s Average Rates for Conventional Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed 2.8% 2.85% 0.08%
20-Year Fixed 2.66% 2.73% 0.03%
15-Year Fixed 2.1% 2.19% 0.02%
10-Year Fixed 2.01% 2.15% -0.08%
7/1 ARM 2.28% 2.96% 0.22%
5/1 ARM 2.34% 3.1% 0.15%
3/1 ARM 0% 0% 0%

A 30-Year Fixed loan of $300,000 at 2.8% APR with a $75,000 down payment will have a monthly payment of $1,232. A 20-Year Fixed loan of $300,000 at 2.66% APR with a $75,000 down payment will have a monthly payment of $1,613. A 15-Year Fixed loan of $300,000 at 2.1% APR with a $75,000 down payment will have a monthly payment of $1,944. A 10-Year Fixed loan of $300,000 at 2.01% APR with a $75,000 down payment will have a monthly payment of $2,762. A 7/1 ARM loan of $300,000 at 2.28% APR with a $75,000 down payment will have a monthly payment of $1,151. A 5/1 ARM loan of $300,000 at 2.34% APR with a $75,000 down payment will have a monthly payment of $1,159. A 3/1 ARM loan of $0 at 0% APR with a $0 down payment will have a monthly payment of $0. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Government Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed FHA 2.33% 2.99% 0.24%
30-Year Fixed VA 2.54% 2.81% 0.05%
15-Year Fixed FHA 2.11% 2.85% 0.17%
15-Year Fixed VA 2.53% 3.02% 0.04%
5/1 ARM FHA 2.6% 2.97% 0.02%
5/1 ARM VA 3.06% 2.75% -0.19%

A 30-Year Fixed FHA loan of $300,000 at 2.33% APR with a $75,000 down payment will have a monthly payment of $1,159. A 30-Year Fixed VA loan of $300,000 at 2.54% APR with a $75,000 down payment will have a monthly payment of $1,191. A 15-Year Fixed FHA loan of $300,000 at 2.11% APR with a $75,000 down payment will have a monthly payment of $1,946. A 15-Year Fixed VA loan of $300,000 at 2.53% APR with a $75,000 down payment will have a monthly payment of $2,004. A 5/1 ARM FHA loan of $300,000 at 2.6% APR with a $75,000 down payment will have a monthly payment of $1,200. A 5/1 ARM VA loan of $300,000 at 3.06% APR with a $75,000 down payment will have a monthly payment of $1,273. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Jumbo Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed Jumbo 3.22% 3.27% 0.07%
20-Year Fixed Jumbo 3.29% 3.33% 0.24%
15-Year Fixed Jumbo 2.86% 2.94% 0.06%
10-Year Fixed Jumbo 2.52% 2.6% 0.1%
7/1 ARM Jumbo 2.68% 3.07% -0.25%
5/1 ARM Jumbo 2.61% 3.06% -0.09%
3/1 ARM Jumbo 2.14% 2.74% 0%

A 30-Year Fixed Jumbo loan of $600,000 at 3.22% APR with a $150,000 down payment will have a monthly payment of $2,602. A 20-Year Fixed Jumbo loan of $600,000 at 3.29% APR with a $150,000 down payment will have a monthly payment of $3,414. A 15-Year Fixed Jumbo loan of $600,000 at 2.86% APR with a $150,000 down payment will have a monthly payment of $4,102. A 10-Year Fixed Jumbo loan of $600,000 at 2.52% APR with a $150,000 down payment will have a monthly payment of $5,660. A 7/1 ARM Jumbo loan of $600,000 at 2.68% APR with a $150,000 down payment will have a monthly payment of $2,427. A 5/1 ARM Jumbo loan of $600,000 at 2.61% APR with a $150,000 down payment will have a monthly payment of $2,406. A 3/1 ARM Jumbo loan of $600,000 at 2.14% APR with a $150,000 down payment will have a monthly payment of $2,259. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Source: zillow.com

30-Year Fixed Mortgage Rate Rises

As of April 28, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.78%.

Abstract illustration of houses and charts

As of April 28, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.78%.

Mortgage rates fall despite strong economic data reports.

“Mortgage rates fell again this week, continuing the downward trend they’ve exhibited for most of April,” said Zillow Economist Matthew Speakman. “In what was a relatively unremarkable week for mortgage rates, the modest movement was partially driven by discussions about a proposed increase in capital gains tax rates – which placed downward pressure on bond yields and thus rates – and anticipation of a key announcement by the Federal Reserve. Fed Chair Jerome Powell reiterated on Wednesday that the Central Bank has no immediate plans to increase interest rates or curb the purchases of mortgage-backed securities – a position that placed more downward pressure on bond yields and is likely to result in more mortgage decreases in the coming days. Looking ahead, with a slew of key economic reports on the horizon – including consumer spending and inflation data – the relatively muted mortgage rate activity from the past couple weeks may transition to more significant movements.”

Additionally, the 15-year fixed mortgage rate was 2.11%, and for 5/1 ARMs, the rate was 2.55%.

Check Zillow for mortgage rate trends and up-to-the-minute mortgage rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

The weekly mortgage rate chart above illustrates the average 30-year fixed interest rate for the past week. Here’s a comprehensive look at the current mortgage rates for all loan types:

Today’s Average Rates for Conventional Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed 2.8% 2.85% 0.08%
20-Year Fixed 2.66% 2.73% 0.03%
15-Year Fixed 2.1% 2.19% 0.02%
10-Year Fixed 2.01% 2.15% -0.08%
7/1 ARM 2.28% 2.96% 0.22%
5/1 ARM 2.34% 3.1% 0.15%
3/1 ARM 0% 0% 0%

A 30-Year Fixed loan of $300,000 at 2.8% APR with a $75,000 down payment will have a monthly payment of $1,232. A 20-Year Fixed loan of $300,000 at 2.66% APR with a $75,000 down payment will have a monthly payment of $1,613. A 15-Year Fixed loan of $300,000 at 2.1% APR with a $75,000 down payment will have a monthly payment of $1,944. A 10-Year Fixed loan of $300,000 at 2.01% APR with a $75,000 down payment will have a monthly payment of $2,762. A 7/1 ARM loan of $300,000 at 2.28% APR with a $75,000 down payment will have a monthly payment of $1,151. A 5/1 ARM loan of $300,000 at 2.34% APR with a $75,000 down payment will have a monthly payment of $1,159. A 3/1 ARM loan of $0 at 0% APR with a $0 down payment will have a monthly payment of $0. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Government Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed FHA 2.33% 2.99% 0.24%
30-Year Fixed VA 2.54% 2.81% 0.05%
15-Year Fixed FHA 2.11% 2.85% 0.17%
15-Year Fixed VA 2.53% 3.02% 0.04%
5/1 ARM FHA 2.6% 2.97% 0.02%
5/1 ARM VA 3.06% 2.75% -0.19%

A 30-Year Fixed FHA loan of $300,000 at 2.33% APR with a $75,000 down payment will have a monthly payment of $1,159. A 30-Year Fixed VA loan of $300,000 at 2.54% APR with a $75,000 down payment will have a monthly payment of $1,191. A 15-Year Fixed FHA loan of $300,000 at 2.11% APR with a $75,000 down payment will have a monthly payment of $1,946. A 15-Year Fixed VA loan of $300,000 at 2.53% APR with a $75,000 down payment will have a monthly payment of $2,004. A 5/1 ARM FHA loan of $300,000 at 2.6% APR with a $75,000 down payment will have a monthly payment of $1,200. A 5/1 ARM VA loan of $300,000 at 3.06% APR with a $75,000 down payment will have a monthly payment of $1,273. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Jumbo Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed Jumbo 3.22% 3.27% 0.07%
20-Year Fixed Jumbo 3.29% 3.33% 0.24%
15-Year Fixed Jumbo 2.86% 2.94% 0.06%
10-Year Fixed Jumbo 2.52% 2.6% 0.1%
7/1 ARM Jumbo 2.68% 3.07% -0.25%
5/1 ARM Jumbo 2.61% 3.06% -0.09%
3/1 ARM Jumbo 2.14% 2.74% 0%

A 30-Year Fixed Jumbo loan of $600,000 at 3.22% APR with a $150,000 down payment will have a monthly payment of $2,602. A 20-Year Fixed Jumbo loan of $600,000 at 3.29% APR with a $150,000 down payment will have a monthly payment of $3,414. A 15-Year Fixed Jumbo loan of $600,000 at 2.86% APR with a $150,000 down payment will have a monthly payment of $4,102. A 10-Year Fixed Jumbo loan of $600,000 at 2.52% APR with a $150,000 down payment will have a monthly payment of $5,660. A 7/1 ARM Jumbo loan of $600,000 at 2.68% APR with a $150,000 down payment will have a monthly payment of $2,427. A 5/1 ARM Jumbo loan of $600,000 at 2.61% APR with a $150,000 down payment will have a monthly payment of $2,406. A 3/1 ARM Jumbo loan of $600,000 at 2.14% APR with a $150,000 down payment will have a monthly payment of $2,259. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Source: zillow.com

The evolution of the good faith estimate

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

A good faith estimate (GFE) is a comparison of mortgage offers provided by lenders or brokers to a consumer. It was recently replaced by the loan estimate—a similar concept with a few small differences. 

What Is a Good Faith Estimate Designed to Do?

The GFE’s purpose was to present mortgage shoppers with all the details they need to know about their mortgage options to help them make well-informed decisions. This transparency ensures consumers are aware of all the costs associated with the mortgage—including fees, APR and other expenses.

Borrowers would receive a GFE three business days after submitting their mortgage application, and after thorough review, would then select which mortgage option they would like to move forward with. 

Are Good Faith Estimates Still Used?

The term “good faith estimate” is not used by lenders anymore, but the concept remains prevalent. In 2015, the GFE was replaced by the loan estimate. Anyone who purchased a home after October 3, 2015, received a loan estimate rather than a GFE. 

In October of 2015, the good faith estimate was replaced by the loan estimate.

If you applied for a reverse mortgage, HELOC, a mortgage through an assistance program or a manufactured loan not secured by real estate, you will not receive a loan estimate. Instead, you will receive a Truth-in-Lending disclosure. 

The purposes of a GFE, a loan estimate and a Truth-in-Lending disclosure are largely the same: providing transparency to borrowers. The main difference—and benefit—of a loan estimate is that there’s more regulation by the Consumer Financial Protection Bureau (CFPB). Since the GFE was not standardized through regulations, they were sometimes difficult to decipher, especially for first-time homebuyers. Conversely, each loan estimate must contain the exact same information in a standardized way, which we’ll cover below. 

What Appears on a Loan Estimate?

According to the CFPB, a complete, compliant loan estimate should include the length of the loan term, the purpose of the loan, the product (fixed versus adjustable interest rate, for example), the loan type (conventional, FHA, VA or other), the loan ID number and indication of an interest rate lock. Additionally, the loan estimate will include the following:

  • Loan terms: A summary of the total loan amount, interest rate, monthly principal and interest and penalties, and whether these amounts can increase after closing.
  • Projected payments: A summary of monthly principal, interest, mortgage insurance, taxes and insurance. Broken down by years 1–7 and 8–30 for a 30-year mortgage.
  • Costs at closing: Estimated closing costs and the total estimated cash needed to close, which includes the down payment and any credits.
  • Loan costs: Origination charges—which is broken down by 0.25% of the loan amount, application fees and underwriting fees—and other fees.
  • Other costs: Taxes, government fees, prepaid homeowners insurance, interest and prepaid property, escrow payment at closing and title policy.
  • Comparisons: Metrics you can use to compare your loan to others. Includes the total principal, interest, mortgage insurance and loan costs you will have paid after five years.
  • Other considerations: Information about appraisal, assumption, homeowner’s insurance, late payment fees, refinancing and servicing.
  • Confirmation of receipt: A line at the end of the statement that confirms you have received the form. This does not legally bind you to accept the loan.

Your loan estimate will also include your personal information, including your full name, income, address and Social Security number. Make sure to double-check all of this information for errors, as they could cause potential problems later in the process.

To better understand your loan estimate, explore the CFPB’s interactive guide.

Closing Disclosure

For first-time homebuyers in particular, it’s important to understand the timeline of events so that you can be prepared for your home buying process and have all the information and necessary documents at hand.

Closing Disclosure Timeline

Lenders are required to send you a loan estimate form no more than three business days after receiving your application. Finally, at least three business days prior to loan consummation—when you are contractually obligated to the loan—you will receive a closing disclosure.

Lenders are required to send you a loan estimate no more than three days after receiving your application and a closing disclosure at least three days prior to loan consummation.

What Is the Purpose of a Closing Disclosure?

The purpose of a closing disclosure is to assign “tolerance levels” to fees listed in the loan estimate form. This means that fees cannot increase over their tolerance level unless a specific triggering event occurs. There are three different tolerance levels:

  • Zero percent tolerance: Fees in this category cannot increase from what is listed on the loan estimate. These fees are typically those paid to a creditor, broker or affiliate, such as origination fees.
  • 10 percent cumulative tolerance: Fees in this category are added together, and the sum of these fees are not to increase by more than 10 percent of the amount listed in the loan estimate. Fees include recording fees and third-party service fees.
  • No tolerance or unlimited tolerance: Fees in this category have no limits at all, and can increase by any amount, as long as they are disclosed “in good faith,” using the best information available. These are usually fees lenders have little to no control over.

Remember not to confuse “zero percent tolerance” with “no tolerance,” as they are quite different. Zero percent tolerance fees cannot increase, while no tolerance fees can increase by any amount as long as it is considered “in good faith.”

Does a Loan Estimate Affect My Credit?

The act of applying for a mortgage may temporarily cause your credit score to dip, as it requires a hard inquiry by lenders. However, you may shop around for different mortgages from different lenders to get multiple preapprovals and loan estimates. As long as you do this all within a 45-day window, these separate credit checks will be recorded on your credit report as one single hard inquiry.

This is because lenders realize that you are only going to buy one home, so they categorize all of the actions you take under one umbrella of applying for a mortgage. Note that you may want to consider the 45-day rule loosely. Prioritize finding the best mortgage deal possible. Even if this means processing a hard inquiry outside of the 45-day window for a better deal, you’ll likely end up saving more money in the long run.

To learn more about what affects your credit and how to work toward improving your credit profile, contact our team at Lexington Law.


Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.

Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

30-Year Fixed Mortgage Rate Falls to New Record Low

As of April 28, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.78%.

Abstract illustration of houses and charts

As of April 28, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.78%.

Mortgage rates fall despite strong economic data reports.

“Mortgage rates fell again this week, continuing the downward trend they’ve exhibited for most of April,” said Zillow Economist Matthew Speakman. “In what was a relatively unremarkable week for mortgage rates, the modest movement was partially driven by discussions about a proposed increase in capital gains tax rates – which placed downward pressure on bond yields and thus rates – and anticipation of a key announcement by the Federal Reserve. Fed Chair Jerome Powell reiterated on Wednesday that the Central Bank has no immediate plans to increase interest rates or curb the purchases of mortgage-backed securities – a position that placed more downward pressure on bond yields and is likely to result in more mortgage decreases in the coming days. Looking ahead, with a slew of key economic reports on the horizon – including consumer spending and inflation data – the relatively muted mortgage rate activity from the past couple weeks may transition to more significant movements.”

Additionally, the 15-year fixed mortgage rate was 2.11%, and for 5/1 ARMs, the rate was 2.55%.

Check Zillow for mortgage rate trends and up-to-the-minute mortgage rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

The weekly mortgage rate chart above illustrates the average 30-year fixed interest rate for the past week. Here’s a comprehensive look at the current mortgage rates for all loan types:

Today’s Average Rates for Conventional Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed 2.84% 2.9% -0.05%
20-Year Fixed 2.72% 2.79% -0.04%
15-Year Fixed 2.13% 2.21% -0.03%
10-Year Fixed 2.02% 2.14% -0.12%
7/1 ARM 2.65% 3.25% -0.1%
5/1 ARM 2.49% 3.19% 0.02%
3/1 ARM 0% 0% 0%

A 30-Year Fixed loan of $300,000 at 2.84% APR with a $75,000 down payment will have a monthly payment of $1,239. A 20-Year Fixed loan of $300,000 at 2.72% APR with a $75,000 down payment will have a monthly payment of $1,621. A 15-Year Fixed loan of $300,000 at 2.13% APR with a $75,000 down payment will have a monthly payment of $1,948. A 10-Year Fixed loan of $300,000 at 2.02% APR with a $75,000 down payment will have a monthly payment of $2,762. A 7/1 ARM loan of $300,000 at 2.65% APR with a $75,000 down payment will have a monthly payment of $1,208. A 5/1 ARM loan of $300,000 at 2.49% APR with a $75,000 down payment will have a monthly payment of $1,183. A 3/1 ARM loan of $0 at 0% APR with a $0 down payment will have a monthly payment of $0. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Government Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed FHA 2.33% 2.99% 0.53%
30-Year Fixed VA 2.6% 2.89% -0.21%
15-Year Fixed FHA 2.06% 2.84% -0.06%
15-Year Fixed VA 2.62% 3.13% 0%
5/1 ARM FHA 2.69% 3% -0.14%
5/1 ARM VA 2.35% 2.45% 0.09%

A 30-Year Fixed FHA loan of $300,000 at 2.33% APR with a $75,000 down payment will have a monthly payment of $1,158. A 30-Year Fixed VA loan of $300,000 at 2.6% APR with a $75,000 down payment will have a monthly payment of $1,200. A 15-Year Fixed FHA loan of $300,000 at 2.06% APR with a $75,000 down payment will have a monthly payment of $1,939. A 15-Year Fixed VA loan of $300,000 at 2.62% APR with a $75,000 down payment will have a monthly payment of $2,017. A 5/1 ARM FHA loan of $300,000 at 2.69% APR with a $75,000 down payment will have a monthly payment of $1,214. A 5/1 ARM VA loan of $300,000 at 2.35% APR with a $75,000 down payment will have a monthly payment of $1,162. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Jumbo Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed Jumbo 3.27% 3.32% -0.03%
20-Year Fixed Jumbo 3.71% 3.76% -0.3%
15-Year Fixed Jumbo 2.86% 2.94% -0.06%
10-Year Fixed Jumbo 2.63% 2.7% 0%
7/1 ARM Jumbo 2.59% 2.81% 0.04%
5/1 ARM Jumbo 2.39% 2.73% 0.19%
3/1 ARM Jumbo 2.14% 2.74% 0%

A 30-Year Fixed Jumbo loan of $600,000 at 3.27% APR with a $150,000 down payment will have a monthly payment of $2,618. A 20-Year Fixed Jumbo loan of $600,000 at 3.71% APR with a $150,000 down payment will have a monthly payment of $3,545. A 15-Year Fixed Jumbo loan of $600,000 at 2.86% APR with a $150,000 down payment will have a monthly payment of $4,101. A 10-Year Fixed Jumbo loan of $600,000 at 2.63% APR with a $150,000 down payment will have a monthly payment of $5,690. A 7/1 ARM Jumbo loan of $600,000 at 2.59% APR with a $150,000 down payment will have a monthly payment of $2,400. A 5/1 ARM Jumbo loan of $600,000 at 2.39% APR with a $150,000 down payment will have a monthly payment of $2,336. A 3/1 ARM Jumbo loan of $600,000 at 2.14% APR with a $150,000 down payment will have a monthly payment of $2,259. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Source: zillow.com

How to Refinance Your Home Mortgage – Step-by-Step Guide

Deciding to refinance your mortgage is only the beginning of the process. You’re far more likely to accomplish what you set out to achieve with your refinance — and to get a good deal in the meantime — when you understand what a mortgage refinance entails.

From decision to closing, mortgage refinancing applicants pass through four key stages on their journey to a new mortgage loan.

How to Refinance a Mortgage on Your Home

Getting a home loan of any kind is a highly involved and consequential process.

On the front end, it requires careful consideration on your part. In this case, that means weighing the pros and cons of refinancing in general and the purpose of your loan in particular.

For example, are you refinancing to get a lower rate loan (reducing borrowing costs relative to your current loan) or do you need a cash-out refinance to finance a home improvement project, which could actually entail a higher rate?

Next, you’ll need to gather all the documents and details you’ll need to apply for your loan, evaluate your loan options and calculate what your new home mortgage will cost, and then begin the process of actually shopping for and applying for your new loan — the longest step in the process.

Expect the whole endeavor to take several weeks.

1. Determining Your Loan’s Purpose & Objectives

The decision to refinance a mortgage is not one to make lightly. If you’ve decided to go through with it, you probably have a goal in mind already.

Still, before getting any deeper into the process, it’s worth reviewing your longer-term objectives and determining what you hope to get out of your refinance. You might uncover a secondary or tertiary goal or benefit that alters your approach to the process before it’s too late to change course.

Refinancing advances a whole host of goals, some of which are complementary. For example:

  • Accelerating Payoff. A shorter loan term means fewer monthly payments and quicker payoff. It also means lower borrowing costs over the life of the loan. The principal downside: Shortening a loan’s remaining term from, say, 25 years to 15 years is likely to raise the monthly payment, even as it cuts down total interest charges.
  • Lowering the Monthly Payment. A lower monthly payment means a more affordable loan from month to month — a key benefit for borrowers struggling to live within their means. If you plan to stay in your home for at least three to five years, accepting a prepayment penalty (which is usually a bad idea) can further reduce your interest rate and your monthly payment along with it. The most significant downsides here are the possibility of higher overall borrowing costs and taking longer to pay it off if, as is often the case, you reduce your monthly payment by lengthening your loan term.
  • Lowering the Interest Rate. Even with an identical term, a lower interest rate reduces total borrowing costs and lowers the monthly payment. That’s why refinancing activity spikes when interest rates are low. Choose a shorter term and you’ll see a more drastic reduction.
  • Avoiding the Downsides of Adjustable Rates. Life is good for borrowers during the first five to seven years of the typical adjustable-rate mortgage (ARM) term when the 30-year loan rate is likely to be lower than prevailing rates on 30-year fixed-rate mortgages. The bill comes due, literally, when the time comes for the rate to adjust. If rates have risen since the loan’s origination, which is common, the monthly payment spikes. Borrowers can avoid this unwelcome development by refinancing to a fixed-rate mortgage ahead of the jump.
  • Getting Rid of FHA Mortgage Insurance. With relaxed approval standards and low down payment requirements, Federal Housing Administration (FHA) mortgage loans help lower-income, lower-asset first-time buyers afford starter homes. But they have some significant drawbacks, including pricey mortgage insurance that lasts for the life of the loan. Borrowers with sufficient equity (typically 20% or more) can put that behind them, reduce their monthly payment in the process by refinancing to a conventional mortgage, and avoid less expensive but still unwelcome private mortgage insurance (PMI).
  • Tapping Home Equity. Use a cash-out refinance loan to extract equity from your home. This type of loan allows you to borrow cash against the value of your home to fund things like home improvement projects or debt consolidation. Depending on the lender and jurisdiction, you can borrow up to 85% of your home equity (between rolled-over principal and cash proceeds) with this type of loan. But mind your other equity-tapping options: a home equity loan or home equity line of credit.

Confirming what you hope to get out of your refinance is an essential prerequisite to calculating its likely cost and choosing the optimal offer.


2. Confirm the Timing & Gather Everything You Need

With your loan’s purpose and your long-term financial objectives set, it’s time to confirm you’re ready to refinance. If yes, you must gather everything you need to apply, or at least begin thinking about how to do that.

Assessing Your Timing & Determining Whether to Wait

The purpose of your loan plays a substantial role in dictating the timing of your refinance.

For example, if your primary goal is to tap the equity in your home to finance a major home improvement project, such as a kitchen remodel or basement finish, wait until your loan-to-value ratio is low enough to produce the requisite windfall. That time might not arrive until you’ve been in your home for a decade or longer, depending on the property’s value (and change in value over time).

As a simplified example, if you accumulate an average of $5,000 in equity per year during your first decade of homeownership by making regular payments on your mortgage, you must pay your 30-year mortgage on time for 10 consecutive years to build the $50,000 needed for a major kitchen remodel (without accounting for a potential increase in equity due to a rise in market value).

By contrast, if your primary goal is to avoid a spike in your ARM payment, it’s in your interest to refinance before that happens — most often five or seven years into your original mortgage term.

But other factors can also influence the timing of your refinance or give you second thoughts about going through with it at all:

  • Your Credit Score. Because mortgage refinance loans are secured by the value of the properties they cover, their interest rates tend to be lower than riskier forms of unsecured debt, such as personal loans and credit cards. But borrower credit still plays a vital role in setting their rates. Borrowers with credit scores above 760 get the best rates, and borrowers with scores much below 680 can expect significantly higher rates. That’s not to say refinancing never makes sense for someone whose FICO score is in the mid-600s or below, only that those with the luxury to wait out the credit rebuilding or credit improvement process might want to consider it. If you’re unsure of your credit score, you can check it for free through Credit Karma.
  • Debt-to-Income Ratio. Mortgage lenders prefer borrowers with low debt-to-income ratios. Under 36% is ideal, and over 43% is likely a deal breaker for most lenders. If your debt-to-income ratio is uncomfortably high, consider putting off your refinance for six months to a year and using the time to pay down debt.
  • Work History. Fairly or not, lenders tend to be leery of borrowers who’ve recently changed jobs. If you’ve been with your current employer for two years or less, you must demonstrate that your income has been steady for longer and still might fail to qualify for the rate you expected. However, if you expect interest rates to rise in the near term, waiting out your new job could cancel out any benefits due to the higher future prevailing rates.
  • Prevailing Interest Rates. Given the considerable sums of money involved, even an incremental change to your refinance loan’s interest rate could translate to thousands or tens of thousands of dollars saved over the life of the loan. If you expect interest rates to fall in the near term, put off your refinance application. Conversely, if you believe rates will rise, don’t delay. And if the difference between your original mortgage rate and the rate you expect to receive on your refinance loan isn’t at least 1.5 percentage points, think twice about going ahead with the refinance at all. Under those circumstances, it takes longer to recoup your refinance loan’s closing costs.
  • Anticipated Time in the Home. It rarely makes sense to refinance your original mortgage if you plan to sell the home or pay off the mortgage within two years. Depending on your expected interest savings on the refinance, it can take much longer than that (upward of five years) to break even. Think carefully about how much effort you want to devote to refinancing a loan you’re going to pay off in a few years anyway.

Pro tip: If you need to give your credit score a bump, sign up for Experian Boost. It’s free and it’ll help you instantly increase your credit score.

Gathering Information & Application Materials

If and when you’re ready to go through with your refinance, you need a great deal of information and documentation before and during the application and closing processes, including:

  • Proof of Income. Depending on your employment status and sources of income, the lender will ask you to supply recent pay stubs, tax returns, or bank statements.
  • A Recent Home Appraisal. Your refinance lender will order a home appraisal before closing, so you don’t need to arrange one on your own. However, to avoid surprises, you can use open-source comparable local sales data to get an idea of your home’s likely market value.
  • Property Insurance Information. Your lender (and later, mortgage servicer) needs your homeowners insurance information to bundle your escrow payment. If it has been more than a year since you reviewed your property insurance policy, now’s the time to shop around for a better deal.

Be prepared to provide additional documentation if requested by your lender before closing. Any missing information or delays in producing documents can jeopardize the close.

Home Appraisal Blackboard Chalk Hand


3. Calculate Your Approximate Refinancing Costs

Next, use a free mortgage refinance calculator like Bank of America’s to calculate your approximate refinancing costs.

Above all else, this calculation must confirm you can afford the monthly mortgage payment on your refinance loan. If one of your aims in refinancing is to reduce the amount of interest paid over the life of your loan, this calculation can also confirm your chosen loan term and structure will achieve that.

For it to be worth it, you must at least break even on the loan after accounting for closing costs.

Calculating Your Breakeven Cost

Breakeven is a simple concept. When the total amount of interest you must pay over the life of your refinance loan matches the loan’s closing costs, you break even on the loan.

The point in time at which you reach parity is the breakeven point. Any interest saved after the breakeven point is effectively a bonus — money you would have forfeited had you chosen not to refinance.

Two factors determine if and when the breakeven point arrives. First, a longer loan term increases the likelihood you’ll break even at some point. More important still is the magnitude of change in your loan’s interest rate. The further your refinance rate falls from your original loan’s rate, the more you save each month and the faster you can recoup your closing costs.

A good mortgage refinance calculator should automatically calculate your breakeven point. Otherwise, calculate your breakeven point by dividing your refinance loan’s closing costs by the monthly savings relative to the original loan and round the result up to the next whole number.

Because you won’t have exact figures for your loan’s closing costs or monthly savings until you’ve applied and received loan disclosures, you’re calculating an estimated breakeven range at this point.

Refinance loan closing costs typically range from 2% to 6% of the refinanced loan’s principal, depending on the origination fee and other big-ticket expenses, so run one optimistic scenario (closing costs at 2% and a short time to breakeven) and one pessimistic scenario (closing costs at 6% and a long time to breakeven). The actual outcome will likely fall somewhere in the middle.

Note that the breakeven point is why it rarely makes sense to bother refinancing if you plan to sell or pay off the loan within two years or can’t reduce your interest rate by more than 1.5 to 2 percentage points.


4. Shop, Apply, & Close

You’re now in the home stretch — ready to shop, apply, and close the deal on your refinance loan.

Follow each of these steps in order, beginning with a multipronged effort to source accurate refinance quotes, continuing through an application and evaluation marathon, and finishing up with a closing that should seem breezier than your first.

Use a Quote Finder (Online Broker) to Get Multiple Quotes Quickly

Start by using an online broker like Credible* to source multiple refinance quotes from banks and mortgage lenders without contacting each party directly. Be prepared to provide basic information about your property and objectives, such as:

  • Property type, such as single-family home or townhouse
  • Property purpose, such as primary home or vacation home
  • Loan purpose, such as lowering the monthly payment
  • Property zip code
  • Estimated property value and remaining first mortgage loan balance
  • Cash-out needs, if any
  • Basic personal information, such as estimated credit score and date of birth

If your credit is decent or better, expect to receive multiple conditional refinance offers — with some coming immediately and others trickling in by email or phone in the subsequent hours and days. You’re under no obligation to act on any, sales pressure notwithstanding, but do make note of the most appealing.

Approach Banks & Lenders You’ve Worked With Before

Next, investigate whether any financial institutions with which you have a preexisting relationship offer refinance loans, including your current mortgage lender.

Most banks and credit unions do offer refinance loans. Though their rates tend to be less competitive at a baseline than direct lenders without expensive branch offices, many offer special pricing for longtime or high-asset customers. It’s certainly worth taking the time to make a few calls or website visits.

Apply for Multiple Loans Within 14 Days

You won’t know the exact cost of any refinance offer until you officially apply and receive the formal loan disclosure all lenders must provide to every prospective borrower.

But you can’t formally apply for a refinance loan without consenting to a hard credit pull, which can temporarily depress your credit score. And you definitely shouldn’t go through with your refinance until you’ve entertained multiple offers to ensure you’re getting the best deal.

Fortunately, the major consumer credit-reporting bureaus count all applications for a specific loan type (such as mortgage refinance loans) made within a two-week period as a single application, regardless of the final application count.

In other words, get in all the refinance applications you plan to make within two weeks, and your credit report will show just a single inquiry.

Evaluate Each Offer

Evaluate the loan disclosure for each accepted application with your objectives and general financial goals in mind. If your primary goal is reducing your monthly payment, look for the loan with the lowest monthly cost.

If your primary goal is reducing your lifetime homeownership costs, look for the loan offering the most substantial interest savings (the lowest mortgage interest rate).

Regardless of your loan’s purpose, make sure you understand what (if anything) you’re obligated to pay out of pocket for your loan. Many refinance loans simply roll closing costs into the principal, raising the monthly payment and increasing lifetime interest costs.

If your goal is to get the lowest possible monthly payment and you can afford to, try paying the closing costs out of pocket.

Choose an Offer & Consider Locking Your Rate

Choose the best offer from the pack — the one that best suits your objectives. If you expect rates to move up before closing, consider the lender’s offer (if extended) to lock your rate for a predetermined period, usually 45 to 90 days.

There’s likely a fee associated with this option, but the amount saved by even marginally reducing your final interest rate will probably offset it. Assuming everything goes smoothly during closing, you shouldn’t need more than 45 days — and certainly not more than 90 days — to finish the deal.

Proceed to Closing

Once you’ve closed on the loan, that’s it — you’ve refinanced your mortgage. Your refinance lender pays off your first mortgage and originates your new loan.

Moving forward, you send payments to your refinance lender, their servicer, or another company that purchases the loan.


Final Word

If you own a home, refinancing your mortgage loan is likely the easiest route to capitalize on low interest rates. It’s probably the most profitable too.

But low prevailing interest rates aren’t the only reason to refinance your mortgage loan. Other common refinancing goals include avoiding the first upward adjustment on an ARM, reducing the monthly payment to a level that doesn’t strain your growing family’s budget, tapping the equity you’ve built in your home, and banishing FHA mortgage insurance.

And a refinance loan doesn’t need to achieve only one goal. Some of these objectives are complementary, such as reducing your monthly payment while lowering your interest rate (and lifetime borrowing costs).

Provided you make out on the deal, whether by reducing your total homeownership costs or taking your monthly payment down a peg, it’s likely worth the effort.

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Source: moneycrashers.com

HARP Now Extended Through 2016

The program, which helps underwater borrowers refinance, won’t be ending any time soon.

Since it first launched in 2009, the Home Affordable Refinance Program (HARP) has helped 3.2 million borrowers across the country lower their monthly payments by refinancing at historically low interest rates. Friday, FHFA Director Melvin Watt announced this relief won’t be ending any time soon.

HARP will continue through the end of 2016, allowing homeowners who owe more than their homes are worth and regularly make mortgage payments to refinance. To help eligible borrowers take advantage of this program, Zillow remains the only marketplace supporting HARP and FHA Streamline refinances.

The FHFA has started a 10-day Twitter campaign using the hashtag #HARPfacts to help spread the word. They’re targeting Chicago first, where nearly 40,000 Chicago-area homeowners could save an average $189 per month or $2,300 a year with HARP.

Get answers to your HARP questions here.

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Source: zillow.com