Thousands of veterans are facing foreclosure as pandemic-era forbearances end. The new loan program is only available to eligible veterans
WASHINGTON – The Department of Veterans Affairs announced a last-resort program that provides 2.5% interest rate home loans to more than 40,000 veterans who are facing foreclosure.
Through the Veterans Affairs Servicing Purchase (VASP) program, the VA will purchase defaulted VA loans from mortgage servicers, modify the loans and place them in the VA-owned portfolio as direct loans. This allows the VA to work directly with eligible homeowner so the loans and the monthly payments can be adjusted. Borrowers – eligible veterans, active-duty service members and surviving spouses with VA-guaranteed home loans who are experiencing severe financial hardship – will have a fixed 2.5% interest rate.
The program comes after thousands of veteran homeowners were told to pay a lump sum to rectify their pandemic-era forbearances or refinance at higher interest rates. An NPR investigation found upwards of 6,000 borrowers with VA loans in the program are in foreclosure and 34,000 others are delinquent. In December, the VA called on mortgage servicers to pause foreclosures on VA-backed loans.
Consumer advocates at the National Consumer Law Center (NCLC) and the Center for Responsible Lending (CRL) expressed support for the new program and urged the VA to extend the foreclosure pause, currently set to expire on May 31, until the VASP program is widely available.
“The VASP program is badly needed as veteran borrowers have had no meaningful alternatives to foreclosure for over a year,” said Steve Sharpe, an NCLC senior attorney. “The VA must extend the foreclosure pause until VASP is implemented so that all eligible borrowers have fair access to the new program. We also urge VA to eliminate any rules that unnecessarily limit access to VASP for borrowers who previously received unaffordable loan modifications.”
The VA said mortgage servicers will identify qualified borrowers beginning May 31 and submit requests based on a review of all available home retention options and qualifying criteria. Veterans facing financial hardship should work with their mortgage servicers to explore available options, the VA said.
“When a veteran falls on hard times, we work with them and their loan servicers every step of the way to help prevent foreclosure — including offering repayment plans, loan modifications, and more,” said Under Secretary for Benefits Josh Jacobs. “But some veterans still need additional support after those steps, and that’s what VASP is all about. This program will help ensure that when a veteran goes into default, there is an additional affordable payment option that will work in a higher interest rate environment — so they can keep their homes.”
Average mortgage rates inched lower yesterday. But all that did was wipe out last Friday’s similarly tiny rise.
Earlier this morning, markets were signaling that mortgage rates today might barely budge. However, these early mini-trends often alter direction or speed as the hours pass.
Current mortgage and refinance rates
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Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.302%
7.353%
+0.01
Conventional 15-year fixed
6.757%
6.836%
+0.01
30-year fixed FHA
7.064%
7.111%
-0.07
5/1 ARM Conventional
6.888%
8.036%
+0.12
Conventional 20-year fixed
7.199%
7.257%
+0.05
Conventional 10-year fixed
6.663%
6.737%
+0.06
30-year fixed VA
7.292%
7.332%
+0.01
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?
This morning’s Financial Times reports, “While the base case remains a reduction in borrowing costs, the options market shows a 20% probability of an increase.” That means most investors think the Federal Reserve will cut general interest rates this year, but they reckon there’s a 20% chance of the central bank actually hiking them. That’s new and scary.
Although the Fed doesn’t directly determine mortgage rates it has a huge influence on the bond market that does. And I very much doubt mortgage rates will fall consistently before the Fed signals that a cut in general interest rates is imminent. And a Fed rate hike is likely to send mortgage rates much higher: maybe back up to 8% or beyond.
So my personal rate lock recommendations remain:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
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 edged down to 4.6% from 4.64%. (Good for mortgage rates.) 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 decreased to $81.59 from $82.06 a barrel. (Good for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices fell to $2,333 from $2,350 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 — climbed to 40 from 33 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 be unchanged or close to unchanged. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
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What’s driving mortgage rates today?
Today
This morning’s two April purchasing managers’ indexes (PMIs) will likely be good for mortgage rates. These “flashes” (initial readings and subject to revision) are both from S&P.
Here are this morning’s actual numbers in bold, alongside the prepublication consensus forecasts, according to MarketWatch, together with the March actual figures:
Services PMI — 50.9 actual; 52 expected; 51.7 in March
Manufacturing PMI — 51.1 actual; 52 expected; 51.9 in March
You can see that the PMIs were worse than expected, which is typically good news for mortgage rates.
Tomorrow
Tomorrow’s durable goods orders for March rarely affect mortgage rates. And they’d need to contain some pretty shocking data to do so tomorrow.
Markets are expecting those orders to have risen by 2.6% in March compared to a 1.3% increase in February. They’ll probably need to be significantly higher than 2.% to exert upward pressure on mortgage rates and appreciably lower to push them downward.
The rest of this week
Nothing has changed since yesterday concerning economic reports due on Thursday and Friday. So, I’ll repeat what I wrote yesterday:
We’re due the first reading of gross domestic product (GDP) for the January-March quarter on Thursday. And that could have a larger effect than PMIs and durable goods orders, depending on the gap between expectations and actuals.
But Friday’s personal consumption expenditures (PCE) price index for March is this week’s star report. That’s the Federal Reserve’s favorite gauge of inflation. And it could certainly affect mortgage rates, possibly appreciably.
The next meeting of the Fed’s rate-setting committee is scheduled to start on Apr. 30 and last two days. So, the PCE price index will be the last inflation report it sees before making decisions.
And index that shows inflation cooling could change the mood at that meeting. True, it’s vanishingly unlikely that a cut to general interest rates will be unveiled on May 1 no matter what.
But a PCE price index that shows inflation cooling could help the Fed to move forward with cuts earlier than expected, which should cause mortgage rates to fall. Unfortunately, one that suggests inflation remains hot or is getting hotter could send those rates higher.
I’ll brief you more fully on each potentially significant report on the day before it’s published.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
Recent trends
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Apr. 18 report put that same weekly average at 7.1%, up from the previous week’s 6.88%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Mar. 19 and the MBA’s on Apr. 18.
Forecaster
Q1/24
Q2/24
Q3/24
Q4/24
Fannie Mae
6.7%
6.7%
6.6%
6.4%
MBA
6.8%
6.7%
6.6%
6.4%
Of course, given so many unknowables, both these forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Verify your new rate
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Verify your new rate. Start here
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
Check your refinance rates today. Start here
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also, pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
So, for the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
Indeed, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
Verify your new rate. Start here
Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account as evidence of their financial circumstances. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. And this gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders. And it could save you thousands in the long run.
Time to make a move? Let us find the right mortgage for you
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Those mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
A lower credit score doesn’t necessarily mean a lender will deny you a home equity loan. It does mean the loan will be more expensive, as you won’t get the lowest interest rate.
It’s possible to get a home equity loan with a fair credit score — as low as 620 — as long as other requirements around debt, equity and income are met.
Strategies for getting a loan despite your bad credit include taking on a co-signer, applying to a place where you currently bank, and writing a letter of explanation to the lender.
Alternatives to a home equity loan include personal loans, cash-out refinances, reverse mortgages and shared equity agreements.
Can you get a home equity loan with bad credit?
Yes, you can. A lower credit score doesn’t necessarily mean a lender will deny you a home equity loan. Some home equity lenders allow for FICO scores in the “fair” range (the lower 600s) as long as you meet other requirements around debt, equity and income.
That’s not to say it’ll be easy: Lenders tend to be stringent, even more so than they are with mortgages. Still, it’s not impossible. Here’s how to get a home equity loan (even) with bad credit.
Requirements for home equity loans
Not all home equity lenders have the exact same borrowing criteria, of course. Still, general guidelines do exist. Typical requirements for home equity loan applicants include:
A minimum credit score of 620
At least 15 percent to 20 percent equity in your home
A maximum debt-to-income (DTI) ratio of 43 percent, or up to 50 percent in some cases
On-time mortgage payment history
Stable employment and income
To learn the requirements for a home equity loan with a specific lender, you’ll need to do some research online or contact a loan officer directly. If you aren’t ready to apply for the loan just yet, ask for a no-credit check prequalification to avoid having the loan inquiry affect your credit score.
What are “good” and “bad” scores for home equity loans?
First, let’s define our terms. Here’s how FICO — the most popular credit scoring model — categorizes different scores:
Score
Classification
Source: MyFico.com
300-579
Poor
580-669
Fair
670-739
Good
740-799
Very Good
800-850
Excellent
When it comes to home equity loans, lenders set a high bar for creditworthiness — higher, even, than mortgages. That’s because they are considered riskier than mortgages: You, the applicant, are already carrying a big debt load. Should you default and your home get seized, the home equity loan — as a “second lien” — only gets paid after the primary (the original) mortgage.
Furthermore, home equity loans don’t have government backing, like some mortgages do. The lender bears all the risk.
So home equity lenders set stricter criteria, demanding scores squarely in the “fair” range. A score in the 500s – good enough for an FHA mortgage — will have a tough time qualifying for a home equity loan. Some lenders have loosened their standards of late and are approving applicants with scores as low as 620. But a “good” score, preferably above 700, remains the threshold for many institutions. It can vary even within one lender, depending on factors like the loan amount or other loan terms.
And of course — as with any loan — the lower your credit score, the less likely you will qualify for the best interest rates.
How to apply for a bad credit home equity loan
Before applying for a home equity loan, remember that it’s not just a question of getting the financing, but also how you can overcome a lower credit score to get the best possible rate. Here are some steps to take:
1. Check your credit report
While it’s possible to get a home equity loan with bad credit, it’s still wise to do all you can to improve your score before you apply (more on that below). A better credit score gets you a better rate. It can also help you get a bigger loan (up to the tappable amount of your equity, of course).
Check your credit reports at AnnualCreditReport.com to get a sense of where you stand. If there are any errors, like incorrect contact information, contact the credit bureau — Equifax, Experian or TransUnion — to get it updated as soon as possible.
2. Determine your equity level
To qualify for a home equity loan, lenders typically require at least 15 percent or 20 percent equity. The amount of equity you have, your home’s appraised value and combined loan-to-value (CLTV) ratio help determine how much you can borrow.
Home Equity
Bankrate’s home equity loan calculator can quickly estimate your potential home equity loan amount.
To estimate your home’s equity, take the value of your home and subtract the balance left on your mortgage. While lenders will only consider the official appraised value of your home when determining how much you can borrow, you can get an idea of your home’s value through Bankrate or a real estate listing portal or brokerage. Let’s say your home is worth $420,000 and you have $250,000 to pay on your mortgage:
$420,000 – $250,000 = $170,000
In this example, you’d have $170,000 in home equity. That doesn’t mean you can borrow $170,000, however. If the lender requires you to maintain at least 20 percent equity, you’d need to preserve $84,000 ($420,000 * 0.20). That leaves you with a home equity loan of up to $86,000 ($170,000 – $84,000).
Say you want to add a $60,000 home equity loan to the mix. That would increase your total mortgage debt — for both your first mortgage and the home equity loan — from $250,000 to $310,000.
That 20 percent equity requirement also means you’d need a CLTV ratio of 80 percent or lower. To calculate your CLTV ratio, divide the total mortgage debt ($310,000) by the value of your home ($420,000):
($250,000 + $60,000) / $420,000 = 73.8%
In this example, you’d be under the lender’s 80 percent CLTV requirement.
3. Find out your DTI ratio
The DTI ratio is a measure lenders use to determine whether you can reasonably afford to take on more debt. To calculate your DTI ratio, simply divide your monthly debt payments by your gross monthly income. For example, say you bring in $6,000 a month in income and have a $2,200 monthly mortgage payment and a $110 monthly student loan payment:
$2,310 / $6,000 x 100 = 38.5%
To make things even easier, you can use Bankrate’s DTI calculator.
For a home equity loan, most lenders look for a DTI ratio of no more than 43 percent.
4. Consider a co-signer
If your credit disqualifies you for a home equity loan, a co-signer with better credit might be able to help, in some cases.
“A co-signer can help with credit and income issues for an applicant who has a lower credit score, but ultimately the main applicant or primary borrower will have to have at least the bare minimum credit score that is required based on the bank’s underwriting guidelines,” says Ralph DiBugnara, president of Home Qualified, a real estate platform for buyers, sellers and investors.
A co-signer is just as responsible for repaying the loan as the primary borrower, even if they don’t actually intend to make payments. If you fall behind on loan payments, their credit suffers along with yours.
5. Try a lender you already work with
If your bank, credit union or mortgage lender offers home equity products, it might be able to extend some flexibility, or at least help with your application, since you’re an existing customer.
“A loan officer familiar with the details of an applicant’s situation can help them present it to an underwriter in the best possible way,” says DiBugnara.
6. Write a letter to the lender
Write a letter of explanation describing why your credit score is low, especially if it has taken a recent hit. This letter should matter-of-factly explain credit issues — avoid catastrophizing — and include any relevant paperwork, like bankruptcy documentation. If your credit score was impacted by late payments due to job loss, for example, but you’re employed now, your lender can take this context into consideration.
Lenders that offer home equity loans with bad credit
There are home equity lenders that offer loans to borrowers with lower credit scores. Here are some to consider, along with requirements:
Lender
Bankrate Score (scale of 1-5)
Loan types
Credit score minimum
Maximum CLTV
Maximum DTI
Figure
4.37
HELOC
640
75%-90%
Undisclosed
Guaranteed Rate
3.3
HELOC
620
90%-95%
50%
Spring EQ
2.7
Home equity loan, HELOC
620 for home equity loans, 680 for HELOCs
Up to 97.5%
43%
TD Bank
4.0
Home equity loan, HELOC
660
Undisclosed
Undisclosed
Connexus Credit Union
3.5
Home equity loan, HELOC
640
90%
Undisclosed
Discover
4.4
Home equity loan
660
90%
43%
Pros and cons of getting a home equity loan with bad credit
Getting a home equity loan with bad credit has its benefits and drawbacks. You can tap your equity to help with expenses, but it’s also risky.
Pros
You’ll pay a fixed rate: Home equity loans are for a fixed sum at a fixed interest rate, so you’ll know exactly how much your payment is each month. This can help you budget for and reliably pay down debt, which can help boost your credit score.
You could get out of costlier debt: If you have high-interest debt — like credit card debt — you could pay it off with a lower-rate home equity loan, then repay that loan, with one payment, for less.
Cons
You’re taking on more debt: If you’ve had trouble managing money in the past, it might not be wise to take on more debt with a home equity loan, even if you qualify.
It’ll be more expensive: A lower credit score won’t qualify you for the best home equity loan rates, meaning you’ll pay more in interest.
You could lose your home: If you fall behind on loan payments, you’ll further damage your credit. Even worse: If you’re eventually unable to pay back the loan, your home could go into foreclosure.
What to do if your home equity loan application is denied
If your application for a home equity loan is rejected, don’t despair. First, ask the lender for specific reasons why your application was denied. The answer can help you address any issues before applying in the future.
If your credit was one of the deciding factors, you can improve your score by making on-time payments and paying down any outstanding debt. If you don’t have enough equity in your home, wait until you’ve built a bigger stake (mainly by making your monthly mortgage payments) before submitting a new application.
Both these approaches may take a half-year to a year to make a significant difference in your credit profile. If you’re in more of a hurry, consider applying to other lenders, as their criteria may differ. Just bear in mind that more lenient terms often mean higher interest rates or fees.
And of course, you can consider other forms of financing.
Home equity loan alternatives if you have bad credit
If you need cash but have bad credit, a home equity loan is just one option. Here are some alternatives:
Personal loans
Personal loans can be easier to qualify for than a home equity product, and they aren’t tied to your home. This means that if you fail to repay the loan, the lender can’t go after your house. Personal loans have higher interest rates, however, and shorter repayment terms. This translates to a more expensive monthly payment compared to what you might get with a home equity loan.
Cash-out refinance
In a cash-out refinance, you take out a brand-new mortgage for more than what you owe on your existing mortgage, pay off the existing loan and take the difference in cash. Most lenders require you to maintain at least 20 percent equity in your home in order to cash out.
A caveat, however: A cash-out refi makes the most sense when you can qualify for a lower rate than what you have on your current mortgage, and if you can afford the closing costs. With bad credit, getting that lower rate might not be possible.
Reverse mortgage
Reverse mortgages allow homeowners over the age of 62 to tap their home’s equity as a source of tax-free income. These types of loans need to be repaid upon your death or when you move out or sell the home. You can use reverse mortgages for anything from medical expenses to home renovations, but you must meet some requirements to qualify.
Shared equity agreement
Home equity investment companies might work with you even if you have a lower credit score, often lower than what traditional lenders would accept. These companies offer shared equity agreements in which you receive a lump sum in exchange for an ownership percentage in your home and/or its appreciation.
Unlike with home equity lines of credit (HELOCs) or home equity loans, you don’t make monthly repayments in a shared equity arrangement. Some companies wait until you sell your home, then collect what they’re owed; others have multi-year agreements in which you’ll pay the balance in full at the end of a stated period.
Make sure you understand all the terms of this complex arrangement. Technically, you’re not borrowing money, you’re selling a stake in your home — to a financial professional who naturally wants to see a return on their investment.
How to get a HELOC with bad credit
Applying for a HELOC is pretty much the same as applying for a home equity loan, but if you have bad credit, a loan might have a slight edge over the line of credit. That’s because home equity loans have fixed interest rates and fixed payments, so you’ll know exactly what you need to repay each month. This predictability could help you better manage your budget and keep up with payments.
A HELOC, on the other hand, has a variable rate, which can cause unexpected increases in your monthly payments. For this reason, lenders often have higher credit score criteria for HELOCs than home equity loans.
Tips for improving your credit before getting a home equity loan
To increase your chances of getting approved for a home equity loan, work on improving your credit score well before applying — at least several months. Here are three tips to help you improve your score:
Pay bills on time every month. At the very least, make the minimum payment, but try to pay the balance off completely, if possible — and don’t miss that due date.
Don’t close credit cards after you pay them off. Either leave them open or charge just enough to have a small, recurring payment every month. That’s because closing a card reduces your credit utilization ratio, which can decrease your score. The recommended utilization ratio: no more than 30 percent.
Be cautious with new credit. Getting a higher credit limit on a card or getting a new card can lower your credit utilization ratio — but not if you immediately max things out or blow through the bigger balance. Treat the newly available funds as sacred savings.
FAQ on getting a home equity loan with bad credit
In general, it’s better to get a home equity loan with bad credit. A home equity loan often has a lower credit score requirement compared to a HELOC, and it comes with a fixed interest rate, so your payment will be the same every month, making it easier to plan for.
Yes — in fact, this is the rule for any type of loan, including a home equity product. The higher your credit score, the lower your interest rate.
Average mortgage rates rose very slightly yesterday. I’m afraid it’s a sign that Wednesday’s moderate fall wasn’t necessarily the start of much happier times.
Earlier this morning, markets were signaling that mortgage rates today could barely budge. However, these early mini-trends frequently alter direction or speed as the hours pass.
Current mortgage and refinance rates
Find your lowest rate. Start here
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.29%
7.34%
+0.03
Conventional 15-year fixed
6.744%
6.822%
+0.04
30-year fixed FHA
7.129%
7.179%
+0.21
5/1 ARM Conventional
6.682%
7.918%
-0.01
Conventional 20-year fixed
7.15%
7.207%
+0.07
Conventional 10-year fixed
6.607%
6.68%
+0.02
30-year fixed VA
7.28%
7.324%
+0.2
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock your mortgage rate today?
I reckon it’s likely to be some months before we begin to see consistently falling mortgage rates. The economy is currently too robust and inflation is too warm for a sustained downward trend. And there are few signs of that changing until the summer or fall — or perhaps even later.
So my personal rate lock recommendations remain:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
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 ticked lower to 4.62 from 4.63%. (Good for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were mixed this morning. (Neutral for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices decreased to $82.77 from $82.98 a barrel. (Neutral for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices rose to $2,398 from $2,393 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Because gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — nudged down to 32 from 35 out of 100. (Good for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So, lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic, post-pandemic upheavals, and war in Ukraine, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today look likely to be unchanged or close to unchanged. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Find your lowest rate. Start here
What’s driving mortgage rates today?
Today
There are no economic reports scheduled for release today. And the words of the sole senior Federal Reserve official with a speaking engagement, Chicago Fed President Austan Goolsbee, are unlikely to affect markets. His boss, Fed Chair Jerome Powell, laid out the central bank’s position on future cuts to general interest rates as recently as Tuesday.
Of course, mortgage rates can still move on days like today. But they’re generally driven by market sentiment or occasionally by important news that affects the economy.
Next week
Next Monday is much like today: zero economic reports on the schedule. Tuesday’s purchasing managers’ indexes (PMIs) could produce some movement in mortgage rates. But that’s typically limited and temporary, a description that applies to Wednesday’s durable goods orders data, too.
Things could warm up next Thursday when the first reading of gross domestic product (GDP) for the January-March quarter is due.
And next Friday should bring the March personal consumption expenditures (PCE) price index. That’s the Federal Reserve’s favorite gauge of inflation. So, it can certainly affect mortgage rates.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
Recent trends
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Apr. 18 report put that same weekly average at 7.1%, up from the previous week’s 6.88%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Mar. 19 and the MBA’s on Apr. 18.
Forecaster
Q1/24
Q2/24
Q3/24
Q4/24
Fannie Mae
6.7%
6.7%
6.6%
6.4%
MBA
6.8%
6.7%
6.6%
6.4%
Of course, given so many unknowables, both these forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Verify your new rate
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Verify your new rate. Start here
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
Check your refinance rates today. Start here
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also, pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
So, for the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
Indeed, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
Verify your new rate. Start here
Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account as evidence of their financial circumstances. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. And this gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders. And it could save you thousands in the long run.
Time to make a move? Let us find the right mortgage for you
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Those mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
Average mortgage rates edged higher yesterday. It was a modest increase by any standards but tiny by comparison with Wednesday’s big jump.
First thing, it was looking as if mortgage rates today could fall. But that could change later in the day.
Current mortgage and refinance rates
Find your lowest rate. Start here
Our table is having technical problems. But we’re working hard to fix them.
Program
Mortgage Rate
APR*
Change
30-year fixed VA
7.222%
7.262%
+0.05
Conventional 20-year fixed
7.007%
7.058%
+0.07
Conventional 10-year fixed
6.51%
6.584%
+0.09
Conventional 30-year fixed
7.127%
7.173%
+0.07
30-year fixed FHA
7.056%
7.1%
+0.09
Conventional 15-year fixed
6.64%
6.713%
+0.1
5/1 ARM Conventional
6.785%
7.888%
+0.08
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?
Markets have turned gloomy over the prospects of the Federal Reserve cutting general interest rates over the next few months. And that’s been pushing mortgage rates higher.
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 fell to 4.50% from 4.55%. (Good for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were falling this morning. (Good 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 $87.42 from $85.57 a barrel. (Bad for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices climbed to $2,414 from $2,361 an ounce. (Good 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 — fell to 51 from 54 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 decrease. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Find your lowest rate. Start here
What’s driving mortgage rates today?
Today
Two economic reports are scheduled for this morning.
The March import price index (IPI) landed at 8:30 a.m. Eastern. And that would normally be bad for mortgage rates. Markets had been expecting it to hold steady at 0.3% and it came in at 0.4%.
So, how come mortgage rates were falling first thing? Well, it’s too early to be sure. But those rates often move in the opposite direction after a sharp movement one way or the other. That’s simply markets reflecting on the change and deciding they over-reacted.
This morning’s other report isn’t due until 10 a.m. Eastern. And that means I won’t have time before my deadline to assess its likely impact on markets. They were expecting the preliminary consumer sentiment index for April to improve slightly to 79.9% from 79.4%.
A lower figure may help mortgage rates to fall while a higher one could push them upward. But this is one of those reports that rarely move those rates far unless they contain shockingly good or bad data.
Mortgage rates might also be affected by earnings reports later from three of the biggest U.S. banks, JPMorgan Chase, Wells Fargo and Citigroup. If they all tell a really positive story, stock market reactions could spill over into the bond market that largely determines mortgage rates.
Next week
We’ve had April’s two most important reports over the last six days. And, taken together, they were pretty bad for mortgage rates.
Next week’s reports aren’t typically as influential by a long way. But a couple of them (retail sales and industrial production) could move mortgage rates higher if they feed markets’ current pessimism over Fed rate cuts — or push them downward if they contradict it.
Don’t forget you can always learn more about what’s driving mortgage rates in the most recent weekend edition of this daily report. These provide a more detailed analysis of what’s happening. They are published each Saturday morning soon after 10 a.m. (ET) and include a preview of the following week.
Recent trends
According to Freddie Mac’s archives, the weekly all-time lowest rate for 30-year, fixed-rate mortgages was set on Jan. 7, 2021, when it stood at 2.65%. The weekly all-time high was 18.63% on Sep. 10, 1981.
Freddie’s Apr. 11 report put that same weekly average at 6.88%, up from the previous week’s 6.82%. But note that Freddie’s data are almost always out of date by the time it announces its weekly figures.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the four quarters of 2024 (Q1/24, Q2/24 Q3/24 and Q4/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. Fannie’s were updated on Mar. 19 and the MBA’s on Mar. 22.
Forecaster
Q1/24
Q2/24
Q3/24
Q4/24
Fannie Mae
6.7%
6.7%
6.6%
6.4%
MBA
6.8%
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.
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors’ opinions or evaluations.
As we head into peak home-buying season, signs of life have begun to spring up in the housing market.
Even so, still-high mortgage rates and home prices amid historically low housing stock continue to put homeownership out of reach for many.
Moreover, the National Association of Realtors agreed to a monumental $418 million settlement on March 15 following a verdict favoring home sellers in a class action lawsuit. Still subject to court approval, the settlement requires changes to broker commissions that will upend the buying and selling model that has been in place for years.
Housing Market Forecast for 2024
Elevated mortgage rates, out-of-reach home prices and record-low housing stock are the perennial weeds that experts say hopeful home buyers can expect to contend with this spring—and beyond.
“The housing market is likely to continue to face the dual affordability constraints of high home prices and elevated interest rates in 2024,” said Doug Duncan, senior vice president and chief economist at Fannie Mae, in an emailed statement. “Hotter-than-expected inflation data and strong payroll numbers are likely to apply more upward pressure to mortgage rates this year than we’d previously forecast.”
Despite ongoing affordability hurdles, Fannie Mae forecasts an increase in home sales transactions compared to last year. Experts also anticipate a slower rise in home prices this year compared to recent years, but price fluctuations will continue to vary regionally and depend strongly on local market supply.
U.S. home prices declined in January for the third consecutive month due to high borrowing costs, according to the latest S&P CoreLogic Case-Shiller Home Price Index. But prices year-over-year jumped 6%—the fastest annual rate since 2022.
Chief economist at First American Financial Corporation Mark Fleming predicts a “flat stretch” ahead.
“If the 2020-2021 housing market was too hot, then the 2023 market was probably too cold, but 2024 won’t yet be just right,” Fleming said in his 2024 forecast.
Will the Housing Market Finally Recover in 2024?
For a housing recovery to occur, several conditions must unfold.
“For the best possible outcome, we’d first need to see inventories of homes for sale turn considerably higher,” says Keith Gumbinger, vice president at online mortgage company HSH.com. “This additional inventory, in turn, would ease the upward pressure on home prices, leveling them off or perhaps helping them to settle back somewhat from peak or near-peak levels.”
And, of course, mortgage rates would need to cool off—which experts say is imminent despite rates edging back up toward 7%. For the week ending April 11, the 30-year fixed mortgage rate stood at 6.88%, according to Freddie Mac.
However, when mortgage rates finally go on the descent, Gumbinger says don’t hope they cool too quickly. Rapidly falling rates could create a surge of demand that wipes away any inventory gains, causing home prices to rebound.
“Better that rate reductions happen at a metered pace, incrementally improving buyer opportunities over a stretch of time, rather than all at once,” Gumbinger says.
He adds that mortgage rates returning to a more “normal” upper 4% to lower 5% range would also help the housing market, over time, return to 2014-2019 levels. Yet, Gumbinger predicts it could be a while before we return to those rates.
Nonetheless, Kuba Jewgieniew, CEO of Realty ONE Group, a real estate brokerage company, is optimistic about a recovery this year.
“[W]e’re definitely looking forward to a better housing market in 2024 as interest rates start to settle around 6% or even lower,” says Jewgieniew.
NAR Settlement Rocks the Residential Real Estate Industry
Following years of litigation, the National Association of Realtors (NAR) has agreed to pay $418 million to settle a series of antitrust lawsuits filed in 2019 on behalf of home sellers.
The plaintiffs claimed that the leading national trade association for real estate brokers and agents “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”
Though the landmark settlement is subject to court approval, most consider it a done deal.
The settlement requires NAR to enact new rules, including prohibiting offers of broker compensation on multiple listing services (MLS), the private databases that allow local real estate brokers to publish and share information about residential property listings. The rule is set to take effect in mid-July, once the settlement receives judge approval.
Moreover, sellers will no longer be required to pay buyer broker commissions and real estate agents participating in the MLS must establish written representation agreements with their buyer clients.
NAR denies any wrongdoing and maintains that its current policies benefit buyers and sellers. The organization believes it’s not liable for seller claims related to broker commissions, stating that it has never set commissions and that commissions have always been negotiable.
How Will the New Rules Impact the Buying and Selling Process?
Per the settlement’s terms, the costs associated with buying and selling a home are set to change dramatically.
“The primary things that will change are the decoupling of the seller commission and the buyer commission in the MLS,” says Rita Gibbs, a Realtor at Realty One Group Integrity in Tucson. “It’s gonna cause some chaos.”
While sellers will no longer be able to offer broker compensation in the MLS, there’s no rule prohibiting off-MLS negotiations. Because of this, Gibbs suspects buyers and sellers will continue offering broker compensation off the MLS.
The Department of Justice confirmed it will permit listing brokers to display compensation details on their websites. However, buyer agents will need to undergo the tedious task of visiting countless broker websites to find who’s offering what.
Michael Gorkowski, a Virginia-based real estate agent with Compass, is also trying to figure out how to manage the potential ruling.
“We often work with buyers for many months and sometimes years before they find exactly what they’re looking for,” Gorkowski says. “So in a case where a seller isn’t offering a co-broker commission, we will have to negotiate that the buyer pays an agreed-upon commission prior to starting their search.”
The Changes Will Impact These Home Buyers Most
“In the short term, it is absolutely going to injure buyers, especially FHA and VA buyers,” Gibbs says. “With rare exception, these buyers are not in a position to pay for their own agent.”
Gibbs says that if sellers don’t offer compensation, many buyers who can’t otherwise afford to pay a broker will choose to go unrepresented.
Gorkowski notes that veterans taking out VA loans face a unique challenge under the new rules. “[P]er the VA requirements, buyers cannot pay so it must be negotiated with the seller for now.”
As a result, NAR is calling on the U.S. Department of Veterans Affairs to revise its policies prohibiting VA buyers from paying broker commissions. Even so, there’s skepticism that the federal government will be able to implement changes in time for the July deadline.
Gibbs and Gorkowski are among the many agents especially concerned about first-time home buyers. After July, first-time and VA buyers will be required to sign a buyer-broker agreement stating that they will compensate their broker—but Gibbs says many won’t have the means to do so.
In this situation, agents would likely only show buyers homes where sellers are offering compensation.
“This is a very troubling situation,” Gorkowski says.
Housing Inventory Forecast for 2024
With many homeowners “locked in” at ultra-low interest rates or unwilling to sell due to high home prices, demand continues to outpace housing supply—and likely will for a while—even as some homeowners may finally be forced to sell due to major life events such as divorce, job changes or a growing family.
“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low 5% range, so probably not in 2024,” says Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm.
Housing stock remains near historic lows—especially entry-level supply—which has propped up demand and sustained ultra-high home prices. Here’s what the latest home values look like around the country.
Yet, some hopeful housing stock signs have begun to sprout:
Existing inventory is showing signs of loosening as impatient buyers and sellers have begun to accept the reality of mortgage rates oscillating between 6% and 7%.
Home-builder outlook also continues to get sunnier, trending back up amid declining mortgage rates and better building conditions.
The most recent National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which tracks builder sentiment, saw a fourth consecutive monthly rise, surpassing a crucial threshold with an increase from 48 to 51 in March. A reading of 50 or above means more builders see good conditions ahead for new construction.
At the same time, new single-family building permits ticked up 1% in February—the 13th consecutive monthly increase—according to the latest data from the U.S. Census Bureau and U.S. Department of Housing and Urban Development (HUD).
Residential Real Estate Stats: Existing, New and Pending Home Sales
Though some housing market data indicates signs of growth are in store this spring home-buying season, persistently high mortgage rates may hinder activity from fully flourishing.
Here’s what the latest home sales data has to say.
Existing-Home Sales
Existing-home sales came to life in February, shooting up 9.5% from the month before, according to the latest data from the NAR. Sales dipped 3.3% from a year ago.
Experts attribute the monthly jump to a bump in inventory.
“Additional housing supply is helping to satisfy market demand,” said Lawrence Yun, chief economist at NAR, in the report.
Existing inventory rose 5.9%—logging 1.07 million unsold homes at the end of February. However, there are still only 2.9 months of inventory at the current sales pace. Most experts consider a balanced market falling between four and six months.
Meanwhile, existing home prices continue to soar to unprecedented heights, reaching $384,500, which marks the eighth consecutive month of yearly price increases and a February median home price record.
New Home Sales
Sales of newly constructed single-family houses ticked down by a nominal 0.3% compared to January, but outpaced February 2023 sales by 5.9%, according to the latest U.S. Census Bureau and HUD data.
Amid a high percentage of homeowners still locked in to low mortgage rates, home builders have been picking up the slack.
“New construction continues to be an outsized share of the housing inventory,” said Dr. Lisa Sturtevant, chief economist at Bright MLS, in an emailed statement.
Sturtevant notes that declining new home prices are coming amid a recent trend of builders introducing smaller and more affordable homes to the market.
The median price for a new home in February was $400,500, down 7.6% from a year ago.
Source: U.S. Census Bureau and U.S. Department of Housing and Urban Development
Pending Home Sales
NAR’s Pending Homes Sales Index rose 1.6% in February from the month prior even as mortgage rates approached 7% by the end of the month. Pending transactions declined 7% year-over-year.
A pending home sale marks the point in the home sales transaction when the buyer and seller agree on price and terms. Pending home sales are considered a leading indicator of future closed sales.
The Midwest and South saw monthly transaction gains while the Northeast and West saw declines due to affordability challenges in those higher-cost regions.
“While modest sales growth might not stir excitement, it shows slow and steady progress from the lows of late last year,” said Yun, in the report.
Ongoing Affordability Challenges Could Throw Cold Water on Spring Home-Buying Hopes
Though down from its 2023 high of 7.79%, the average 30-year fixed mortgage rate in 2024 remains well over 6% amid rising home values. As a result, home buyers continue to face affordability challenges.
According to data from its first-quarter 2024 U.S. Home Affordability Report, property data provider Attom found that median-priced single-family homes remain less affordable than the historical average in over 95% of U.S. counties.
For one, the data uncovered that expenses are eating up more than 32% of the average national wage. Common lending guidelines require monthly mortgage payments, property taxes and homeowners insurance to comprise 28% or less of your gross income.
At the same time, home prices and homeownership expenses continue to outpace wage growth.
Consequently, the latest expense-to-wage ratio is hovering at one of the highest points over the past decade, according to the Attom report, despite some slight affordability improvements over the last two quarters.
“Affording a home remains a financial stretch, or a pipe dream, for so many households,” said Rob Barber, CEO at Attom.
Pro Tips for Buyers and Sellers
Here are some expert tips to increase your chances for an optimal outcome in this tight housing market.
Pro Tips for Buying in Today’s Real Estate Market
Hannah Jones, a senior economic research analyst at Realtor.com, offers this expert advice to aspiring buyers:
Know your budget. Instead of focusing on price, figure out how much you can afford as a monthly payment. Your monthly housing payment is influenced by the price of the home, your down payment, mortgage rate, loan term, home insurance and property taxes.
Be flexible about home size and location. Perhaps your budget is sufficient for a small home in your perfect neighborhood, or a larger, newer home further out. Understanding your priorities and having some flexibility can help you move quickly when a suitable home enters the market.
Keep an eye on the market where you hope to buy. Determine the area’s available inventory and price levels. Also, pay attention to how quickly homes sell. Not only will you be tuned in when something great hits the market, you can feel more confident moving forward with purchasing a well-priced home. A real estate agent can help with this.
Don’t be discouraged. Purchasing a home is one of the largest financial decisions you’ll ever make. Approaching the market confidently, armed with good information and grounded expectations will take you far. Don’t let the hustle of the market convince you to buy something that’s not in your budget, or not right for your lifestyle.
Pro Tips for Selling in Today’s Real Estate Market
Gary Ashton, founder of The Ashton Real Estate Group of RE/MAX Advantage, has this expert advice for sellers:
Research comparable home prices in your area. Sellers need to have the most up-to-date pricing intel on comparable homes selling in their market. Know the market competition and price the home competitively. In addition, understand that in some price points it’s a buyer’s market—you’ll need to be prepared to make some concessions.
Make sure your home is in top-notch shape. Homes need to be in great condition to compete and create a strong “online curb appeal.” Well-maintained homes and attractive front yards are major features that buyers look for.
Work with a local real estate agent. A real estate agent or team with a strong local marketing presence and access to major real estate portals can offer significant value and help you land a great deal.
Don’t put off issues that require attention. Prepare the home by making any repairs or improvements. Removing any objections that buyers may see helps focus the buyer on the positive attributes of the home.
Will the Housing Market Crash in 2024?
Despite some areas of the country experiencing monthly price declines, the likelihood of a housing market crash—a rapid drop in unsustainably high home prices due to waning demand—remains low for 2024.
“[T]he record low supply of houses on the market protects against a market crash,” says Tom Hutchens, executive vice president of production at Angel Oak Mortgage Solutions, a non-QM lender.
Moreover, experts point out that today’s homeowners stand on much more secure footing than those coming out of the 2008 financial crisis, with many borrowers having substantial home equity.
“In 2024, I expect we’ll see home appreciation take a step back but not plummet,” says Orphe Divounguy, senior macroeconomist at Zillow Home Loans.
This outlook aligns with what other housing market watchers expect.
“Comerica forecasts that national house prices will rise 2.9% in 2024,” said Bill Adams, chief economist at Comerica Bank, in an emailed statement.
Divounguy also notes that several factors, including Millennials entering their prime home-buying years, wage growth and financial wealth are tailwinds that will sustain housing demand in 2024.
Even so, with fewer homes selling, Dan Hnatkovskyy, co-founder and CEO of NewHomesMate, a marketplace for new construction homes, sees a price collapse within the realm of possibility, especially in markets where real estate investors scooped up numerous properties.
“If something pushes that over the edge, the consequences could be severe,” said Hnatkovskyy, in an emailed statement.
Will Foreclosures Increase in 2024?
In February, total foreclosure filings were down 1% from the previous month but up 8% from a year ago, according to Attom.
“These trends could signify evolving financial landscapes for homeowners, prompting adjustments in market strategies and lending practices,” said Barber, in a report.
Lenders began foreclosure on 22,575 properties in February, up 4% from the previous month and 11% from a year ago. Meanwhile, real estate-owned properties, or REOs, which are homes unsold at foreclosure auctions and taken over by lenders, spiked year-over-year in three states: South Carolina (up 51%), Missouri (up 50%) and Pennsylvania (up 46%).
Despite foreclosure activity trending up nationally and certain areas of the country seeing notable annual increases in REOs, experts generally don’t expect to see a wave of foreclosures in 2024.
“Foreclosure activity is still only at about 60% of pre-pandemic levels … and isn’t likely to be back to 2019 numbers until sometime in mid-to-late 2024,” says Sharga.
The biggest reasons for this, Sharga explains, are the strength of the economy—we’re still seeing low unemployment and steady wage growth—along with excellent loan quality.
Massive home price growth in homeowner equity over the past few years has also helped reduce foreclosures.
Sharga says that some 80% of today’s homeowners have more than 20% equity in their property. So, while there may be more foreclosure starts in 2024—due in part to Covid-era mortgage relief programs phasing out—foreclosure auctions and lender repossessions should remain below 2019 levels.
When Will Be the Best Time To Buy a Home in 2024?
Buying a house—in any market—is a highly personal decision. Because homes represent the largest single purchase most people will make in their lifetime, it’s crucial to be in a solid financial position before diving in.
Use a mortgage calculator to estimate your monthly housing costs based on your down. But if you’re trying to predict what might happen next year, experts say this is probably not the best home-buying strategy.
“The housing market—like so many other markets—is almost impossible to time,“ Divounguy says. “The best time for prospective buyers is when they find a home that they like, that meets their family’s current and foreseeable needs and that they can afford.”
Gumbinger agrees it’s hard to tell would-be homeowners to wait for better conditions.
“More often, it seems the case that home prices generally keep rising, so the goalposts for amassing a down payment keep moving, and there’s no guarantee that tomorrow’s conditions will be all that much better in the aggregate than today’s.”
Divounguy says “getting on the housing ladder” is worthwhile to begin building equity and net worth.
Frequently Asked Questions (FAQs)
Will declining mortgage rates cause home prices to rise?
Declining mortgage rates will likely incentivize would-be buyers anxious to own a home to jump into the market. Expect this increased demand amid today’s tight housing supply to put upward pressure on home prices.
What will happen if the housing market crashes?
Most experts do not expect a housing market crash in 2024 since many homeowners have built up significant equity in their homes. The issue is primarily an affordability crisis. High interest rates and inflated home values have made purchasing a home challenging for first-time homebuyers.
Is it smart to buy real estate before a recession?
If you’re in a financial position to buy a home you plan to live in for the long term, it won’t matter when you buy it because you will live in it through economic highs and lows. However, if you are looking to buy real estate as a short-term investment, it will come with more risk if you buy at the height before a recession.
When you pay off your mortgage, you may have some paperwork and account switching (such as property taxes) to take care of. And you may look forward to greater cash flow.
But is paying off a mortgage always the right move? In some cases, a person who is about to pay off a mortgage may want to consider a couple of options that could make more sense for their particular financial situation.
Learn more about the payoff path and alternatives here.
Pros and Cons of Paying Off Your Mortgage
Paying off your mortgage is a fantastic milestone to reach, but it’s not without trade-offs. Here are a few considerations to help you make the best decision for your situation.
Pros of Paying Off a Mortgage
Cons of Paying Off a Mortgage
No monthly payment
May lose tax deduction
No more interest paid to the lender
Your cash is all tied up in your home’s equity
More cash in your pocket each month
If you pay extra to pay off your home, you may miss out on investment strategies
You’ll need less income in retirement
Lost opportunity costs for other uses for your money
Greatly reduced risk of foreclosure
No tax deduction for mortgage interest, if you’re among the few who still take the deduction
💡 Quick Tip: Thinking of using a mortgage broker? That person will try to help you save money by finding the best loan offers you are eligible for. But if you deal directly with an online mortgage lender, you won’t have to pay a mortgage broker’s commission, which is usually based on the mortgage amount.
What Happens When You Pay Off Your Mortgage?
Here’s how mortgage payoff works:
• To get the amount you need to pay off your mortgage, the first thing you need to do is request a mortgage payoff letter. If you pay the amount on your last statement, you won’t have the right amount. A mortgage payoff letter will include the appropriate fees and the amount of interest through the day you’re planning to pay the loan off.
• Know that the payoff letter is only good for a set amount of time, and make sure to get your payment in on time.
• Follow the instructions you’re given about where and how to submit the payment.
• Once you’ve sent the payoff amount, your mortgage lender is responsible for sending you and the county recorder documentation to release the mortgage and lien on your home.
• You should be sent any funds remaining in escrow.
• You will want to contact your insurance company about this change if your insurance was paid along with your mortgage payment and have the bills switched over to you directly.
• If your property taxes were paid as part of your mortgage, you will want to contact your local tax collector about shifting those bills to you as well.
What Documents Do You Get After Paying Off a Mortgage?
After paying off your mortgage, you should receive (or have access to) documents proving you paid off the mortgage and no longer have a lien attached to your home. These include:
• Satisfaction or release of mortgage. This document will be filed with the county recorder (or other applicable recording agency). It states that the mortgage has been satisfied and the lien released.
• A canceled promissory note. When you closed on your home, one of the documents you signed was called a promissory note. Now that the mortgage has been satisfied, you may receive this document back with a “canceled” or “paid in full,” though it’s also possible you may have to call and request the document.
• A statement on the paid-off loan balance. Your lender should send you a statement showing that your loan has been paid in full.
What Should You Do After Paying Off Your Mortgage?
After you pay off your mortgage, you’ll need to take care of a few housekeeping items (a couple are mentioned above).
• Close your escrow account. Since you’re no longer sending a mortgage payment to a mortgage servicer, you’ll need to take care of the items in your escrow account, primarily your taxes and homeowners insurance.
• Contact your county recorder’s office to double-check that the mortgage satisfaction paperwork has been filed. Once that has been filed, you will have a clear title on the property.
• Make plans for the extra money. Whether you want to make a bigger push in your retirement account, enlarge your emergency fund, or pay off other debts, you now likely have more cash to do it with. If you don’t make plans for the extra money, it might just evaporate.
Recommended: 2024 Home Loan Help Center
Is Prepaying a Good Idea?
Generally, paying off your mortgage early is a great idea. It reduces the principal, which in turn reduces the amount you’ll pay in interest over the life of your loan. Still, there are reasons that some homeowners consider not paying their mortgage off early.
Most lenders do not charge a prepayment penalty, but home loans signed before January 10, 2014, may include one. Nonconforming mortgage loans signed after that date may have a prepayment penalty that applies within the first three years of repayment. (The different types of mortgage loans include conforming and nonconforming conventional mortgages.)
The best way to find out if prepayment is subject to a penalty is to call your mortgage servicer. The terms of your mortgage paperwork should also outline whether or not you have a prepayment penalty.
Should You Refinance Instead?
Another option you may consider is refinancing your mortgage. There are several reasons you may want to refinance instead of paying off your mortgage.
Lower monthly payment. Getting a lower rate or different loan term may lower your monthly payment. Be sure to check out current rates, and use a calculator for mortgages to find out what a possible new payment would be.
Shorter mortgage term. Refinancing a 30-year mortgage to, say, a 15-year mortgage can keep you close to paying off your mortgage while also providing financial flexibility.
Spare cash. Whatever your need is — home renovations, college funding, paying off higher-interest debt — a cash-out refinance might be an option.
💡 Quick Tip: Compared to credit cards and other unsecured loans, you can usually get a lower interest rate with a cash-out refinance loan.
The Takeaway
What happens when you pay off your mortgage? After doing a jig in the living room, you’ll need to take care of a few housekeeping tasks and make plans for the extra money.
An option to consider: Would a refinance to a shorter term make more sense, or pulling cash out with a cash-out refi? It can be wise to review all your options as you move toward taking this major financial step.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
Is paying off your mortgage a good idea?
The answer depends on an individual’s situation. If you have the money and you’d love to shed that monthly obligation for good, paying off a mortgage is a good idea. But if you’re worried about funding your retirement or losing opportunities to invest, paying off your mortgage may not be a good idea for you.
What do you do after you pay off your mortgage?
Ensure that you have received your canceled promissory note, and update your property tax and insurance billers on where to bill you. Since you no longer will have a mortgage servicing company, you must pay your insurance and property taxes yourself.
Is it better to pay off a mortgage before you retire?
Paying off a mortgage could give you more money to work with in retirement. But if your retirement accounts need a boost, most financial experts contend that allocating money there is a better idea than paying off your mortgage. Paying off a mortgage when you have low cash reserves can also put you at risk.
Does paying off your mortgage early affect your credit score?
Surprisingly, paying off your mortgage early won’t affect your credit score much. Your credit score has already taken into account the years of full, on-time payments you made each month.
Photo credit: iStock/katleho Seisa
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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 have largely held steady after a stronger-than-forecasted jobs report on Friday. The 30-year fixed-rate mortgage was 7.24% APR today, down -0.02 percentage points from last week, according to data from Curinos analyzed by MarketWatch Guides.
In its monthly report on job growth, the Bureau of Labor Statistics announced an employment gain of 303,000 new jobs for March with the unemployment rate decreasing slightly from 3.9% to 3.8%. These “eye-popping” numbers could mean the Federal Reserve will hold off even longer on lowering interest rates, said Steve Wyett, chief investment strategist at BOK Financial in an email sent to MarketWatch.
While positive for the overall economy, this does not seem to be welcome news for the housing market. Joel Kan, the Mortgage Banker Association’s deputy chief economist, said in a report on Wednesday that today’s relatively high mortgage rates have continued to slow down home buying. Refinance rates are also 5% lower than last year.
Here are today’s average mortgage rates:
30-year fixed mortgage rate: 7.24%
15-year fixed mortgage rate: 6.58%
5/6 ARM mortgage rate: 7.03%
Jumbo mortgage rate: 7.20%
Current Mortgage Rates
Product
Rate
Last Week
Change
30-Year Fixed Rate
7.24%
7.26%
-0.02
15-Year Fixed Rate
6.58%
6.52%
+0.06
5/6 ARM
7.03%
7.01%
+0.02
7/6 ARM
7.24%
7.18%
+0.06
10/6 ARM
7.28%
7.22%
+0.06
30-Year Fixed Rate Jumbo
7.20%
7.14%
+0.06
30-Year Fixed Rate FHA
6.91%
6.97%
-0.06
30-Year Fixed Rate VA
6.96%
7.03%
-0.07
Disclaimer: The rates above are based on data from Curinos, LLC. All rate data is accurate as of Monday, April 08, 2024. Actual rates may vary.
>> View historical mortgage rate trends
Mortgage Rates for Home Purchase
30-year fixed-rate mortgages are down, -0.02
The average 30-year fixed-mortgage rate is 7.24%. Since the same time last week, the rate is down, changing -0.02 percentage points.
At the current average rate, you’ll pay $681.50 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 7.26%.
15-year fixed-rate mortgages are up, +0.06
The average rate you’ll pay for a 15-year fixed-mortgage is 6.58%, an increase of+0.06 percentage points compared to last week.
Monthly payments on a 15-year fixed-mortgage at a rate of 6.58% will cost approximately $875.51 per $100,000 borrowed. With the rate of 6.52% last week, you would’ve paid $872.21 per month.
5/6 adjustable-rate mortgages are up, +0.02
The average rate on a 5/6 adjustable rate mortgage is 7.03%, an increase of+0.02 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 7.03% will cost approximately $667.32 per $100,000 borrowed over the first 5 years of the loan.
Jumbo loan interest rates are up, +0.06
The average jumbo mortgage rate today is 7.20%, an increase of+0.06 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
$681.50
$682.85
-$1.35
15-Year Fixed Rate
$875.51
$872.21
+$3.30
5/6 ARM
$667.32
$665.97
+$1.35
7/6 ARM
$681.50
$677.43
+$4.07
10/6 ARM
$684.21
$680.14
+$4.07
30-Year Fixed Rate Jumbo
$678.79
$674.73
+$4.06
30-Year Fixed Rate FHA
$659.27
$663.29
-$4.02
30-Year Fixed Rate VA
$662.62
$667.32
-$4.70
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.
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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.
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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.
A home equity loan or line of credit (HELOC) leverages your ownership stake to help you finance large costs over time.
Home equity financing offers more money at a lower interest rate than credit cards or personal loans.
Some of the most common (and best) reasons for using home equity include paying for home renovations, consolidating debt and covering emergency or medical bills.
Although allowable, it’s best to avoid using home equity for discretionary purchases and expenses.
The U.S. seems to have dodged a recession, but elevated interest rates, rising prices and shrinking savings continue to imperil many Americans’ financial security. Borrowing hasn’t been this expensive in 20 years and, to add insult to injury, it’s harder to get financing or credit, too. Half of Americans who’ve applied for a loan or financial product since March 2022 (when the Fed started raising its key benchmark rate) have been rejected, according to Bankrate’s recent credit denials survey).
But amid still-high mortgage rates and home prices, there’s a silver lining for homeowners. The rise in property values has increased the worth of their home equity, or outright ownership stake. You can borrow against that equity to meet new expenses — or settle old ones.
Two options to tap into your equity are home equity loans and home equity lines of credit (HELOCs). They may not be as well-known as other financing options (in Bankrate’s credit denials survey, only 4 percent of Americans have applied for one since March 2022), but they have several advantages.
If you’re a homeowner needing cash, here are 10 reasons to use home equity — some better than others. In each case, we’ve noted the pros and cons.
$299,000
Amount the average mortgage-holder had in home equity as of year-end 2023, up $25,000 from 2022
Source:
ICE Mortgage Technology
Why use home equity?
Key terms
Home equity
Home equity is the difference between what your home is worth and how much you still owe on your mortgage. As you pay down your mortgage and your home’s value increases, your equity stake grows.
Home equity loan
A home equity loan is a type of second mortgage in which you receive a lump sum upfront and then make regular monthly repayments over the loan term, usually at a fixed interest rate.
HELOC
A HELOC is a revolving line of credit, much like a credit card, that comes with a variable rate. You can borrow, repay and then re-use funds as needed during a set draw period and then pay off your balance during a repayment period.
Tapping your home’s equity can help you cover significant expenses, improve your financial situation or achieve any other money goal. The interest rates on a home equity loan or HELOC are usually lower than those on other forms of financing, and you can often obtain more funds with an equity product compared to a credit card, which might have a lower limit, or a personal loan. Home equity loans and HELOCs are also repaid over a longer term, meaning you’ll have more manageable payments month to month.
10 reasons to use a home equity loan
There aren’t any restrictions on how to use equity in your home, but there are a few ways to make the most of a home equity loan or HELOC. Here are 10 ways to use your home equity, along with their pros and cons.
1. Home improvements
Home improvement is one of the most common reasons homeowners take out home equity loans or HELOCs. Besides making the home more comfortable, upgrades could make it more valuable.
“Home equity is a great option to finance large projects like a kitchen renovation that will increase a home’s value over time,” says Glenn Brunker, president of online lender Ally Home. “Many times, these investments will pay for themselves by increasing the home’s value.”
Another reason to consider a home equity loan or HELOC for renovations: You could deduct the interest paid on the loan, assuming you itemize your deductions on tax return.
Pros
You can reinvest your home’s equity to increase the value of your property.
If you itemize your tax return, you could deduct the interest on your home equity loan or HELOC, up to the limit.
A HELOC, which allows gradual withdrawals, in particular can be ideal for long-term projects in which you pay contractors at set intervals, or ones in which the final cost is indefinite.
Cons
The monthly payments on a home equity loan or HELOC, coupled with your monthly mortgage payments, could stretch your budget too thin.
Depending on the scope of the remodel, you might need more than what you can borrow from your equity.
If you can’t repay the home equity loan or HELOC, the lender could foreclose on your home.
2. Education costs
A home equity loan or HELOC can help you fund higher education or continuing education, whether for you, your children or other loved ones. This route typically only makes sense, however, when home equity rates are lower than student loan rates. That doesn’t happen often, especially compared to federal student loans.
Consider, too, the type of education you’re financing. Someone obtaining a teaching certification, for example, might be able to get the cost covered by their future employer. Some public service professions are also eligible for student loan forgiveness after a period of time. In these cases, it wouldn’t be smart to put your home on the line with an equity loan.
Pros
Could be a lower-interest option than a private student loan, a federal parent loan or a personal loan.
HELOC gradual withdrawal structure tailor-made for annual or semi-annual tuition payments.
Could furnish a greater sum than a student loan.
Cons
Repayment starts sooner (with a home equity loan).
Rates not as competitive as federal student loans’.
Tapping home equity is riskier: If you default, you could lose your home.
The student might be able to get financial help in other ways, such as from a future employer or via loan forgiveness.
3. Debt consolidation
Americans’ credit card debt is skyrocketing. According to Bankrate’s recent credit card survey, nearly half (49 percent) of credit card holders carry a balance from month to month, up from 39 percent in 2021. Given their average interest rate of 22.75 percent, paying down that debt can be tricky — and expensive.
A HELOC or home equity loan can be used to pay off the plastic, along with other high-interest loans. “This is another very popular use of home equity, as one is often able to consolidate debt at a much lower rate over a longer term and reduce monthly expenses significantly,” says Matt Hackett, operations manager at mortgage lender Equity Now.
Home Equity
According to Bankrate’s February 2024 credit card repayment strategies survey, only 10% of credit card-holding U.S. adults report using a home equity loan and/or line of credit to consolidate and pay off credit card debt.
Pros
You could save on interest and lower your monthly payments.
Eliminating credit card debt boosts your credit score.
Cons
You’re turning an unsecured debt, such as a credit card, into secured debt now backed by your home. If you default on your equity loan or HELOC, you could lose your house to foreclosure.
If you haven’t broken the financial habits that got you into debt in the first place, or come up with a plan for repayment, you’re simply swapping one form of debt for another.
4. Emergency expenses
Many financial experts agree you should have an emergency fund to cover three to six months of living expenses, but that’s not the reality for many Americans, according to Bankrate’s 2024 annual emergency savings survey. If you find yourself in a costly situation — maybe you’re facing large medical bills or unexpected home repairs — a home equity loan or HELOC can be one way to stay afloat.
However, this is only a viable option if you have a plan for how to repay the debt. While you might feel better knowing you could access your home equity in case of an emergency, it still makes smart financial sense to set up and start contributing to an emergency fund. Plus, the application process for a HELOC or home equity loan takes time (though it’s speeded up of late: Some online lenders, such as Better, are offering approval decisions within one day). In a true emergency when you need cash fast, you’d need to already have the loan in place to use it.
Pros
If you’re in an emergency situation and have no other means to come up with the necessary cash, a home equity loan or HELOC could be the answer.
Cons
If you don’t have a HELOC or home equity loan already established, you’ll need to complete the application process first. So these loans won’t do you any good in a time-sensitive emergency.
You’re depleting your ownership stake, diluting the worth of a major asset: your home.
5. Weddings
The average cost of a wedding in 2023 was $35,000, according to the planning site The Knot — up $5,000 from 2022. For some couples, it might make sense to take out a home equity loan or HELOC to cover this expense, rather than a wedding loan, a type of personal loan. That’s because the interest rates on personal loans are typically higher than interest rates for home equity loans and HELOCs.
The major disadvantage, however: You’d be putting your home on the line for a discretionary expense. This can be risky if you don’t have a solid plan to repay the loan. It also tacks on interest to an expense that didn’t have interest to begin with, ultimately costing you more.
If you do go this route, be careful not to take out more than you need. If you’re unsure of the total tab for your big day, a HELOC is the better option.
Pros
Rates probably cheaper than those of personal loans or credit cards.
You may be able to access more funds than you would with other loans.
Cons
It’s a questionable move to put your home on the line for what’s essentially a big party.
You’re paying interest, so your wedding will cost more than you think: You could be paying for it decades after you wed.
When the loan’s used this way, the interest isn’t tax-deductible.
6. Business expenses
Some business owners use their home equity to start or grow their company. If you need capital, you might be able to save money on interest by taking equity out of your home instead of taking out a business loan. Before you commit, though, run the numbers. A return on investment isn’t guaranteed, and you’re putting your house on the line.
Pros
You might be able to borrow money at a lower interest rate with a home equity loan than you would with a small business loan.
It might be easier to obtain capital with a home equity loan than with a loan tied to your business, especially if you’re just starting out.
Cons
If your business fails, you’d still need to make payments on what you borrowed, regardless of lack of earnings. If you can’t, you could face foreclosure.
7. Investment opportunities
It’s possible to use home equity to invest in the stock market or buy a rental property — though both propositions are risky and require serious care and consideration. A well-qualified borrower might be able to take out a home equity loan on an investment property, as well.
Consider the interest rate on home equity borrowing, especially if you’re using the funds for investment purposes. “With interest rates of 9 percent, 10 percent or even higher, this is no longer low-cost debt,” says Greg McBride, CFA, Bankrate’s chief financial analyst. “At rates that high, it is a tough hurdle to clear to get a positive return on your investment.”
Pros
Investing in the stock market or real estate can be a great way to build wealth.
Leveraging assets to invest increases your rate of return.
Cons
Investments always carry risk, but that’s especially true when you’re putting your home on the line. It’s possible that you won’t earn a high enough return to outweigh your loan debt.
You can’t take advantage of the home equity loan’s tax deduction on interest, except in a few cases, such as buying adjacent property or land.
8. Retirement income
If your retirement savings are falling short, tapping home’s equity can help supplement your income so you can better manage expenses. These funds can be used to cover bills, emergency expenses or even home improvements to make you more comfortable as you age. A big caveat: This strategy relies on your ability to repay the loan or HELOC. If you’re not yet drawing Social Security, you might be able to repay HELOC funds with the benefit money later on. If you’re fully retired and struggling to make ends meet, however, it’s possible you won’t have the means to repay the debt, even if you have a HELOC you don’t have to pay back right away.
There are other roadblocks to this strategy, too: If you’re still paying your first mortgage, tapping your equity adds to your expenses and puts you in debt that much longer. It might also be harder to even get an equity loan if your income has decreased in retirement.
Pros
Using your hard-acquired home wealth as source for retirement income can be a smart use of assets.
Cons
You’ll need to think through how to repay your loan while you’re retired, and even afterwards. Home equity debt doesn’t disappear when you pass away — your heirs will have to work with your lender if they want to keep the home.
It could be harder to qualify for a home equity loan with a lower retirement income.
Home Equity
If you need retirement income, a reverse mortgage may be a better option than a home equity loan or HELOC. With a reverse mortgage, your lender pays you a lump sum or a series of monthly payments; how much you can get is based on your home’s value. The loan balance (plus interest) becomes due when you move out, sell the home or pass away. Most reverse mortgages include a “non-recourse” clause, which stipulates that you (or your estate) can’t owe more than the home’s value when the loan becomes due (so if the home’s depreciated and worth less than the loan balance, no one is on the hook for the difference). The advantages: There are no monthly repayments while you’re living in the home, and there are no income or credit score requirements, so you can qualify even if you’re struggling financially. However, to get a reverse mortgage, you usually need to be 62 or older and have substantial equity in your home — meaning, your primary mortgage be substantially, if not entirely, paid off.
9. Funding a vacation
Traveling can come with a steep price tag, and tapping your home’s equity could help cover the costs without having to increase your credit card debt. Even the best vacations don’t last forever, though, and home equity debt can linger for decades, so weigh your decision carefully. Is the trip worth potentially risking your house to pay for?
Pros
Home equity loans typically have lower interest rates than credit cards, which could save you money.
Cons
Putting your home on the line is an extremely risky way to finance a trip that will be over in a matter of days — and you’ll still be paying for it many years after it’s over, which could ultimately cost you more in interest.
10. Other big-ticket items
It’s possible to use your home equity for big-ticket purchases, but it doesn’t add up in many cases. Home equity loans have much longer repayment terms than auto loans, for example, resulting in lower monthly payments, but much more interest over time. Cars are also depreciating assets, meaning your car will be worth much less than you paid for it by the time you finish repaying the equity loan.
Pros
You could finance a larger purchase, like a car.
Cons
Your home’s equity isn’t worth leveraging on an expense that won’t give you a solid return. With the example of buying a car, you’ll be risking your home for an asset that will be worth less than what you paid for it by the time you’ve finished repaying the loan.
Using home equity FAQ
The amount of home equity you can borrow against depends on a number of factors, including how much the home is worth, the outstanding balance on your mortgage and your credit score. Assuming you’re well-qualified, many home equity lenders allow you to tap up to 80 percent of your equity.
As with any loan product, a home equity loan or HELOC can hurt your credit score in the short term, in part because you’re taking on more debt and potentially raising your credit utilization ratio. Over time, however, your credit score could go up as you make regular monthly payments on your home equity loan. It’s possible to get a home equity loan with bad credit, too.
It can be. You can deduct home equity loan interest if you use the funds to “buy, build or substantially improve” the home that was used to secure the loan, according to the IRS. You must itemize deductions on your tax return, and — similar to the mortgage deduction — there are limits as to how much you can deduct.
Yes. The closing costs for home equity loans and HELOCs can range from 1 percent to 5 percent of your loan amount. These can include many of the same closing costs as a typical real estate closing, such as origination, appraisal and credit report fees. HELOC lenders also often charge annual fees to keep the line open, as well as an early termination fee if you close it within three years of opening. You could also incur a charge if you decide to convert your HELOC balance to a fixed interest rate.
If you’ve just closed on a home and need cash, you can generally tap into your home equity right away. However, some lenders require borrowers to wait several months before applying for a home equity loan or HELOC. And whether there’s a waiting period or not, you’ll have to meet the lender’s eligibility requirements. These can include credit score minimums, income verification and debt-to-income (DTI) ratio maximums. Most importantly, you’ll also need at least 20 percent equity in your home to qualify, though some lenders accept 15 percent.
Along with the thrill of home shopping comes the daunting task of finding a mortgage to help pay for it. Before you become disheartened, keep this in mind: With several types of loans available, you may have more ways to qualify than you think. Each has its own down payment, credit score, and borrowing requirements.
Understanding your options can help you shop with confidence and secure the best type of financing for your needs.
These are the key categories of home loans you should be familiar with when you’re looking for a mortgage:
Conventional: A conventional loan is the most common type of mortgage. It may be right for you if your credit score is at least 620 and you wouldn’t benefit from a government loan. The Federal Housing Finance Agency sets limits for how much you can borrow with a conventional conforming loan. In 2024, the limits for a single-family or one-unit home are $766,550 in most counties.
Jumbo: If you want to borrow more than the conventional conforming limit, you can get a conventional conforming jumbo loan for up to $1,149,825 for a single-family home in high-cost counties. For even larger purchases, lenders offer nonconforming jumbo loans.
Government: This category includes FHA loans for borrowers with credit scores below 620, USDA loans for borrowers in rural areas, and VA loans for military service members, veterans, and surviving spouses. The U.S. government guarantees a portion of the borrower’s principal to encourage lenders to offer mortgages to people who might otherwise have trouble qualifying.
Fixed-rate loans: Any of the above categories of loans will typically have a fixed interest rate for the life of the loan. A fixed-rate loan provides financial predictability: Your monthly principal and interest payment will be the same each month.
Adjustable-rate loans: Conventional, government, and jumbo loans can also have an adjustable interest rate that stays the same for the first few years, then periodically changes based on market conditions.
Learn More: VA loan vs. conventional loan: How to choose
Here’s a quick overview to help you understand the differences between conforming and nonconforming mortgages.
While less common, these mortgage types can be a good fit for certain borrowers:
Piggyback loans: These loans allow you to finance 10% of the purchase price with a second mortgage to supplement your down payment. If you only have 10% saved for your down payment, you can use a piggyback loan to help you make a 20% down payment and avoid private mortgage insurance. Low-down-payment loans typically require mortgage insurance.
Physician loans: These loans are for doctors, dentists, optometrists, and certain other medical professionals who are actively or about to start practicing, completing a residency, or completing a fellowship. Physician loans account for characteristics common to these borrowers, such as high student debt, limited down payments, and high earning potential.
Balloon mortgages: With a balloon mortgage, you pay interest but no principal or less than the fully amortized amount of principal with each monthly payment. After a certain number of years, the remaining principal balance is due as a lump sum called a balloon payment.
Nonqualified mortgages: Specialty lenders offer these home loans to borrowers with less common situations that require more creative financing. Physician loans and balloon mortgages fall into this category. So do bank statement loans, large jumbo loans, investment property loans based on a property’s cash flow, and loans for borrowers with a recent bankruptcy or foreclosure.
There isn’t a single best type of mortgage, which is why lenders offer different types for different borrowers. Here’s how to choose a home loan that will meet your needs:
Know your credit score: If your score is below 620, you’ll be limited to FHA loans and nonqualified mortgages (also called non-QM loans). If you have time to work on your score before getting a mortgage, focus on getting above 620 to increase your options. If not, plan to focus on FHA and non-QM loans, but be prepared to pay mortgage insurance premiums for the life of the loan with an FHA loan or pay a higher mortgage rate and fees with a non-QM loan.
Find out what special programs you may be eligible for: If you have qualifying military service, you may be eligible for a VA loan. If you’re far from the ideal loan candidate and want to buy in a rural area, you may be eligible for a USDA loan. If your income is less than 80% of the area median for your household size, you may be eligible for down payment assistance. These programs offer significant advantages, so you’ll want to consider them if you qualify.
Take stock of your cash reserves: Estimate what your total monthly living expenses will be after you get your mortgage and multiply the result by three. Next, calculate how much money you can afford to take out of your savings for a down payment and closing costs — or factor in what you may qualify for through one of the programs mentioned above.
Know your target price range: If you want to borrow more than the conforming loan limit in your area, plan to apply for a jumbo loan, which may also mean saving at least 10% of the purchase price for your down payment. Otherwise, you’ll want to consider conventional and government loans first because they’re widely available.
Understand the risks and additional costs: Low-down-payment conventional loans and all FHA loans require borrowers to pay for mortgage insurance that protects the lender in case the borrower defaults. Making a small down payment also puts you at risk of owing more than your home is worth if home prices fall, which could be a problem if you need to move or want to refinance. Adjustable-rate loans have future payment uncertainty. Mortgages with higher interest rates can be expensive in the long run. There’s no guarantee you’ll be able to refinance into a stable fixed-rate mortgage or get a lower rate.
Find out: How to buy a house in 2024
Your mortgage lender will be able to tell you the specific reasons why you were denied a mortgage. It could be as simple as accurate information on your application or due to more complicated factors, like your credit history or income. Another possibility is that your financial profile doesn’t match the lender’s risk tolerance.
Whatever the reason, work on fixing the problems so a lender will approve you at a reasonable interest rate.
Down payment requirements depend on the type of home loan you’re seeking.
Certain loans — like VA or USDA mortgage loans — can be extended to you without a down payment. Conventional mortgages require 3% down, and FHA loans require 3.5% down.
If making a substantial down payment is difficult due to income constraints, you may qualify for a down payment assistance program through your state or lender.
If your income is low to moderate for the area where you want to buy, you may qualify for down payment assistance through a state or lender program.
The main difference between a first and second mortgage is who has first rights to the proceeds if a home is foreclosed.
If a borrower ends up in foreclosure, the proceeds from the forced sale of the home go to the first mortgage lender before the second mortgage lender gets anything. First mortgages are, therefore, less risky for lenders and have lower rates than second mortgages. For example, a home equity loan would be a second mortgage if you took it out while still paying off your first mortgage — the one you bought your home with.