The Conference of State Bank Supervisors (CSBS) and the Federal Housing Finance Agency (FHFA) have signed onto a memorandum of understanding to formally share information between each other related to nonbank mortgage companies.
“The [MOU] establishes substantive information sharing protocols between state financial regulators and FHFA, improving the ability to coordinate on market developments, identify and mitigate risks, and ultimately, further protect consumers, taxpayers, and the nation’s housing finance system,” a joint announcement from CSBS and FHFA said.
The agreement, signed on Tuesday, is significant due to the regulatory roles of both bodies. CSBS is a conference of the primary regulators of nonbank mortgage companies at the state level, while FHFA is both regulator and conservator to the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, the most important counterparties for nonbank mortgage entities.
“While each supervisory agency maintains specific authorities related to the mortgage industry, only state financial regulators have complete prudential authority over nonbank mortgage companies,” the joint announcement said.
The MOU should lead to a more collaborative relationship between CSBS entities and FHFA according to Lise Kruse, North Dakota’s commissioner for financial institutions and CSBS board chair.
“Information sharing between state regulators and federal supervisors is common sense given our shared interest in a vibrant, stable mortgage marketplace,” Kruse said. “Establishing information sharing opens the door to a more collaborative oversight process that is beneficial to all involved.”
The MOU is seen as an important step for maintaining oversight over all the involved entities according to Sandra Thompson, the director of FHFA.
“The development of an information sharing framework is an important milestone that will better equip both FHFA and state regulators to oversee our respective regulated entities,” Thompson said. “Improved communication leads to better coordination, which in turn leads to better outcomes for consumers, market participants, and taxpayers.”
CSBS entered into a nondepository-focused MOU with the Consumer Financial Protection Bureau (CFPB) in 2011 which covers all 50 states, the District of Columbia and Puerto Rico. It also entered into a similar MOU with the U.S. Department of Housing and Urban Development (HUD) in 2013.
FHFA also routinely collaborates on information sharing with the CFPB through multiple MOUs, and entered into a formal MOU with HUD overseeing the GSEs in 2021 signed between Thompson and Former HUD Secretary Marcia Fudge with a focus on fair housing enforcement.
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.
Portions of this article were drafted using an in-house natural language generation platform. The article was reviewed, fact-checked and edited by our editorial staff.
Key takeaways
Portfolio loans are a type of mortgage that lenders originate and retain instead of selling on the secondary mortgage market.
Portfolio loans offer more flexible underwriting standards and faster funding times than conventional loans, but often come with higher interest rates, closing costs and down payments.
Borrowers who don’t qualify for traditional loans may be eligible for portfolio loans.
With most mortgages, the lender who originates the loan doesn’t actually hold onto it. Instead, it sells the mortgage on the secondary mortgage market, which helps free up capital so it can loan money to more borrowers. There are, however, some exceptions to the rule: loans that don’t wind up being bought and sold. These are called portfolio loans.
What is a portfolio loan?
A portfolio loan is a kind of mortgage that a lender originates and retains instead of offloading or selling on the secondary mortgage market. A portfolio loan stays in the lender’s portfolio, or “on the books,” for its full term.
Why does that matter? With a portfolio loan, the lender gets to set the standards — what kind of credit score it’ll approve and how much money it’ll offer to the borrower, for example. The lender does not have to adhere to the Federal Housing Finance Agency’s (FHFA) standards used by Freddie Mac and Fannie Mae, the government-sponsored enterprises (GSEs) that back and buy most mortgage loans in the U.S.
How portfolio loans work
A portfolio loan has plenty in common with non-portfolio mortgages. You’re still going to apply to borrow a chunk of money, and a lender will assign you a risk level based on the likelihood that you’ll pay it back. That risk level helps determine the loan interest rate and other terms. If you agree to these terms and take out the mortgage, you’ll receive a lump sum that you agree to repay in monthly installments over a set time.
While the application process is largely the same, portfolio loans can offer faster access to financing, more flexible repayment terms and potentially higher loan amounts than other mortgage types.
How do portfolio loans differ from traditional mortgages?
It depends somewhat on how you define “traditional mortgage.” Like most mortgages that originate in the U.S., portfolio loans are conventional loans — that is, issued and funded by a private lender. However, they do vary from the most common types of conventional loans. Here’s how portfolio loans differ from other conventional loans:
They are non-conforming loans. Most conventional loans — around 70 percent — are conforming loans. That means they follow the criteria set by the FHFA, which makes them eligible to be purchased by Fannie Mae and Freddie Mac. Since portfolio loans don’t aim to be bought by the GSEs, they are often non-conforming, meaning they don’t necessarily meet the FHFA criteria.
They are non-qualifying loans. Portfolio loans are also a type of non-qualifying loan (non-QM loan for short). Such loans differ from the norm in that they don’t adhere to the home loan standards set by the Consumer Financial Protection Bureau (CFPB). These standards mandate certain features mortgages may or may not have, and certain underwriting practices lenders must follow, to ensure borrowers can repay the debt.
Eligibility requirements for portfolio loans are less strict. In general, portfolio loans offer more lenient underwriting standards for borrowers. As a result, portfolio loans may be more accessible for aspiring homeowners who are struggling to get approved for a mortgage.
Portfolio loans often have higher interest rates and more fees. With more lenient standards can come higher interest rates, larger down payment requirements, bigger closing costs and additional fees. All this reflects the risk the portfolio mortgage lender is taking by keeping the loan on their books, and not selling — or being able to sell it — on the secondary mortgage market.
What are the expected interest rates, fees, and payment terms for portfolio loans?
In the case of portfolio loans, mortgage fees and closing costs are often a little higher than with traditional loans to compensate the lender for their added risk. Here’s what you can expect to pay:
Interest rates: A portfolio loan usually comes with the same features as a traditional mortgage: a fixed interest rate over a 30-year term that reflects the financial profile and assessed creditworthiness of the borrower. But the interest rate is almost always greater than that of comparable government-backed or conventional loans, varying from 0.50 to 5 percent above market rates.
Payment terms: Most portfolio loans offer similar repayment terms to traditional mortgages (15-year or 30-year repayment terms).
Fees: Fees vary by lender, but often portfolio loans have higher fees than traditional mortgages. For example, an origination fee might be as high as 4 to 5 percent (in contrast, qualifying loan fees are capped at 3 percent). Points are negotiable, especially if you are the type of depositor they want as a customer
Other costs: Additional costs, such as the down payment requirements may differ. A portfolio loan will typically require more upfront money than other types of mortgages — often at least 20 percent. In comparison, FHA loans allow down payments as low as 3.5 or 10 percent. You may also find higher fees for prepayment penalties, grace periods for missing payments and the right to assign a loan (that is, for the borrower to let someone else assume the mortgage).
Who is a portfolio loan best for?
Portfolio loans allow borrowers who don’t meet Fannie and Freddie’s conforming loan requirements the ability to still qualify for a loan. This borrower might be someone who doesn’t have earned income but does have significant assets; a real estate investor; a small business owner or a self-employed worker. Borrowers with high debt-to-income ratios (DTIs) or credit scores below 580 may still be eligible for portfolio loans, and those who have declared bankruptcy might qualify in a shorter time.
For example, North American Savings Bank‘s website features a portfolio loan that requires a 20 percent down payment (vs. 3 to 10 percent for conventional loans), a debt-to-income ratio of 48 percent (vs. the standard 43 percent for conforming/qualified loans), and two years of seasoning after bankruptcy (vs. four years for conventional loans).
Pros and cons of portfolio loans
There are benefits and drawbacks to portfolio lending to consider, including:
Pros
Bigger loan options: Borrowers who need an outsized mortgage or other special terms might find more flexibility with a portfolio option.
Flexible underwriting requirements: Borrowers who don’t have a stable earned income, holes in their credit histories or scores that don’t fit other standard criteria might qualify for a portfolio loan.
More hands-on or personalized service: Many portfolio lenders are community banks with a connection to the area. That can mean better customer service or more willingness to find creative solutions.
Cons
Potential for a much higher interest rate: Remember that with a portfolio loan, the lender is losing the chance to resell the debt in the secondary market. That’s an opportunity cost, and the lender might charge you a higher interest rate to make up for it.
Bigger fees: The lender might also charge more or more onerous fees in exchange for its flexible underwriting and additional risk.
Still some standards to meet: Sometimes, lenders still want the option to sell the portfolio loan down the line. In that case, you might have to meet many of the usual underwriting requirements imposed by Fannie and Freddie.
How to get a portfolio loan
Portfolio loans aren’t advertised outright; you won’t find a lender simply by comparing mortgage rates. Follow these steps to find a portfolio mortgage loan:
Search for lenders: Check first with any banks you already have accounts at, personal or business, to see if they can give you a good deal for being an existing customer. You can also check with a local community bank or online lenders. You might need to work with a mortgage broker who can match your specific needs with a lender who specializes in, or at least offers, portfolio loans.
Verify your lender: Predatory lenders often advertise portfolio and other kinds of non-traditional loans. Make sure any institution you deal with is an FDIC member and listed with the Nationwide Mortgage Licensing System (NMLS). You can also ask for blank copies of the mortgage documents the lender will use for your loan, and have a real estate attorney review it for any unusual features, charges or conditions.
Make sure you qualify: Portfolio loans often have looser requirements for borrowers, but they still have eligibility requirements. Make sure you fit the criteria needed to get a portfolio mortgage. Lenders usually look at your credit score, job history, income and debt-to-income (DTI) ratio.
Apply for a portfolio loan: Once you find a portfolio lending option, you’ll need to fill out an application, either online or in person. Gather all the necessary documents, such as pay stubs, personal identification, recent tax returns and W-2 forms.
Wait for approval: Once you submit your application, the lender will review all your information to determine whether to approve you for the loan. If you are not approved, the lender must indicate why. Depending on the reason, you might be able to adjust your application for approval, like applying for a smaller loan amount.
Rep. Scott Fitzgerald (R-Wis.) has introduced a bill to the U.S. House of Representatives that would codify the “tri-merge” credit model into law, a rebuke to the Federal Housing Finance Agency (FHFA)’s recent efforts to transition to a “bi-merge” model that would require only two credit reports to be pulled instead of three.
This is according to an official log of the proposed bill, designated as House Resolution (HR) 7857 and which Fitzgerald is calling the “Accurate Credit Reporting for Homebuyers Act.”
The bill is designed to “require the director of the [FHFA] to issue a rule to condition the purchase of a residential mortgage loan on the delivery of credit reports and credit scores from each consumer reporting agency that compiles and maintains files on consumers on a nationwide basis,” the official description reads.
Since there are currently three credit reporting agencies that offer such information, this would effectively codify the current process if passed into law.
“President Biden’s financial regulators seem to rely more on ideology than facts and data, and the FHFA’s proposal to shift from tri-merge to bi-merge credit reporting requirement is just the latest example,” said Rep. Fitzgerald in a statement. “The FHFA’s proposal could be the obstacle that keeps borrowers from obtaining a mortgage if they have lower FICO scores but are otherwise credit-worthy.”
Shortly after being introduced to the House, it was referred to the House Financial Services Committee for further deliberation, according to the official congressional log.
TransUnion, one of the major credit reporting agencies, has come out in support of the measure according to a statement shared with HousingWire.
“This legislation reflects growing recognition that the current tri-merge credit reporting system provides consumers with the most access to mortgages, while preserving the safety and soundness of the mortgage ecosystem,” said Allison Shuster, head of U.S. government relations at TransUnion.
The current version of the bill is only supported by one side of the aisle, with Republican Reps. Daniel Meuser (Penn.) and Alexander Mooney (W.V.) listed as co-sponsors. At a hearing last year discussing the proposal, lawmakers from both parties questioned FHFA Director Sandra Thompson on the viability of such a model in meeting consumers’ needs.
“We believe after analysis that moving from three credit scores to two is going to be beneficial for the borrowers, and it will encourage competition from the credit reporting agencies,” Thompson said during the hearing. “And it would lower costs for the borrowers because instead of three credit reports, they only pull two, and then the lender picks which two those are. Right now, we’re working through the process with the GSEs on trying to figure out whether or not there is going to be the median or the average.”
Late last year, FHFA announced that the move to a bi-merge system from a tri-merge system had been pushed back, and subsequently announced last month that the transition is now scheduled to occur in late 2025.
A bill codifying the tri-merge system would conceivably halt that process, but Congress is very narrowly divided. The House Republican majority currently only has a one seat advantage over Democrats in the chamber should they remain united on voting for a particular bill.
This could complicate the path to passage in the House, to say nothing of overcoming a Democratic majority in the Senate and a Democratic president in the months before hotly-contested elections for both Congress and the White House this fall.
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.
Federal Home Loan Bank reform is in the air in Washington D.C.
The White House recently endorsed a plan to double FHLBanks’ mandatory contributions to affordable housing programs from 10 to 20% of their net income, following a recommendation by the Federal Housing Finance Agency. And the Coalition for Federal Home Loan Bank Reform, a group that I chair and started as a small group of D.C. insiders, has become a true coalition of nine national organizations representing hundreds of thousands of Americans.
Despite billions of dollars in public support, few Americans know about FHLBanks. The Federal Home Loan Bank system is made up of 11 regional banks that pass on discounted loans to their membership of banks, credit unions, and insurance companies. As a government-sponsored enterprise (GSE), the FHLBank system is Congressionally chartered to receive unique subsidies, tax exemptions, and powers, in exchange for providing the public benefits of supporting affordable housing and community development.
The Congressional Budget Office published a new report, which for the first time in two decades put a dollar amount on the public subsidies that FHLBanks receive, estimating that in 2024 the FHLBank system will receive $7.3 billion dollars(!) in government subsidies.
As I show in Figure 1, this subsidy partly flows from the FHLBanks’ tax-free status and regulatory exemptions. But the bulk of the subsidy comes from the way GSE status confers an “implied federal guarantee” on FHLBank debt: the perception that the federal government will stand for FHLBank debt if the system fails. CBO concluded that GSE status reduced FHLBanks borrowing costs by 0.4% and noted that if the system was “private instead of public” its credit rating would fall to AA or A instead of the current AA+ rating. None of these subsidies require Congressional appropriations but rely on federal guarantees, including the high costs of public bailout, were the FHLBanks to fail.
Under the current system, most of these billions in public subsidies flow on as private profits, rather than support public benefits. Congress mandates that FHLBanks devote 10% of their net income every year to affordable housing programs, which support affordable housing development and downpayment assistance. But that meant that in 2023, FHLBanks only paid $355 million towards Affordable Housing Programs while paying out nearly 10x that amount, or $3.4 billion, as dividends! Through these payouts, FHLBanks are redistributing a public subsidy as a profit to banks and insurance companies.
FHLBanks still believe in trickle-down economics. They claim that their discounted loans and dividends to members may trickle down to consumers in the form of discounted mortgage rates. However, many of their members are not even in the mortgage business anymore: a Bloomberg investigation found that 42% of FHLBank members had not originated a single mortgage over the last five years. It is unclear how cheap loans and big dividend payouts to insurance companies help Americans buy their first house or find an affordable rental.
Even the technocratic, impartial CBO questions this twisted system when it dryly noted in its report: “Other stakeholders of FHLBs, including the executives and owners of banks, might also realize benefits.” That is, parts of today’s public subsidy simply go towards supporting seven-figure executive pay at the 11 FHLBanks.
Whether it is coming from the White House, the FHFA, the Congressional Budget Office, or the Coalition, the status quo at FHLBanks is unacceptable. Wasteful government spending, especially amidst a national housing crisis where both parties are seeking solutions to our housing supply shortage, is a bipartisan issue.
Congress should demand greater accountability on how these public subsidies support public benefits. They can start by passing legislation that greatly improves the Affordable Housing Program contributions that FHLBanks make, from the current meager 10% to at least 30% – a set-aside that FHLBanks have shown they can sustainably make when they paid REFCORP contributions from 1989 to 2011.
I think it is time that the public learned about FHLBanks and how they are skirting their responsibility to help support our nation’s housing troubles. There is so much untapped potential here: imagine having the full leverage of $7.3 billion in public subsidies to truly support imaginative housing solutions.
Sharon Cornelissen is the chair of the Coalition for Federal Home Loan Bank Reform and Director of Housing at the Consumer Federation of America, a national pro-consumer advocacy and research non-profit.
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 moved gradually over the past few weeks, with the 30-year fixed-rate mortgage reaching 7.20% APR today, after standing at 7.45% a month ago, according to data from Curinos analyzed by MarketWatch Guides.
Rates moved upward just before last week’s meeting of the Federal Reserve. While the Fed kept interest rates steady, Chairman Jerome Powell indicated in a press conference Wednesday that the board still expected to cut interest rates three times in 2024 despite “seasonal effects” causing a temporary rise in inflation.
Last month’s home prices rose 9.5% month-over-month for February, the largest increase in a year. The median home price increased 5.7% from last year, to $384,500, the National Association of Realtors reported on Thursday.
Here are today’s average mortgage rates:
30-year fixed mortgage rate: 7.20%
15-year fixed mortgage rate: 6.46%
5/6 ARM mortgage rate: 6.99%
Jumbo mortgage rate: 7.10%
Current Mortgage Rates
Product
Rate
Last Week
Change
30-Year Fixed Rate
7.20%
7.19%
+0.01
15-Year Fixed Rate
6.46%
6.48%
-0.02
5/6 ARM
6.99%
6.98%
+0.01
7/6 ARM
7.17%
7.14%
+0.03
10/6 ARM
7.20%
7.22%
-0.02
30-Year Fixed Rate Jumbo
7.10%
7.09%
+0.01
30-Year Fixed Rate FHA
6.93%
6.90%
+0.03
30-Year Fixed Rate VA
6.98%
6.98%
0.00
Disclaimer: The rates above are based on data from Curinos, LLC. All rate data is accurate as of Friday, March 29, 2024. Actual rates may vary.
>> View historical mortgage rate trends
Mortgage Rates for Home Purchase
30-year fixed-rate mortgages are up, +0.01
The average 30-year fixed-mortgage rate is 7.20%. Since the same time last week, the rate is up, changing +0.01 percentage points.
At the current average rate, you’ll pay $678.79 per month in principal and interest for every $100,000 you borrow. You’re paying more compared to last week when the average rate was 7.19%.
15-year fixed-rate mortgages are down, -0.02
The average rate you’ll pay for a 15-year fixed-mortgage is 6.46%, a decrease of-0.02 percentage points compared to last week.
Monthly payments on a 15-year fixed-mortgage at a rate of 6.46% will cost approximately $868.91 per $100,000 borrowed. With the rate of 6.48% last week, you would’ve paid $870.01 per month.
5/6 adjustable-rate mortgages are up, +0.01
The average rate on a 5/6 adjustable rate mortgage is 6.99%, an increase of+0.01 percentage points over the last seven days.
Adjustable-rate mortgages, commonly referred to as ARMs, are mortgages with a fixed interest rate for a set period of time followed by a rate that adjusts on a regular basis. With a 5/6 ARM, the rate is fixed for the first 5 years and then adjusts every six months over the next 25 years.
Monthly payments on a 5/6 ARM at a rate of 6.99% will cost approximately $664.63 per $100,000 borrowed over the first 5 years of the loan.
Jumbo loan interest rates are up, +0.01
The average jumbo mortgage rate today is 7.10%, an increase of+0.01 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
$678.79
$678.11
+$0.68
15-Year Fixed Rate
$868.91
$870.01
-$1.10
5/6 ARM
$664.63
$663.96
+$0.67
7/6 ARM
$676.76
$674.73
+$2.03
10/6 ARM
$678.79
$680.14
-$1.35
30-Year Fixed Rate Jumbo
$672.03
$671.36
+$0.67
30-Year Fixed Rate FHA
$660.61
$658.60
+$2.01
30-Year Fixed Rate VA
$663.96
$663.96
$0.00
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.
The state of California is maintaining its mortgage relief program funded by the 2021 American Rescue Plan, which includes assistance for reverse mortgage borrowers. But the funding is running low and could soon be exhausted soon, according to estimates from state housing officials as reported by the Los Angeles Times.
After extending availability for the program to more qualified recipients in February, officials now warn that those who could benefit from the financial assistance — designed primarily as an option for homeowners who were financially impacted by the COVID-19 pandemic — will need to act quickly if they want help.
A tally on the program’s official website shows that more than $823 million of the original $1 billion allocation to California has been used and the remaining $177 million could evaporate within the next couple of months.
“When you look at who received those funds, it’s been a real success,” Rebecca Franklin, president of the California Housing Finance Agency’s Homeowner Relief Corp., told the Times, adding that “we really were successful at getting the money to those populations who really were hit harder by the pandemic.”
The average amount of assistance provided by the program stands at just over $24,000 per household, and grants have been issued to more than 33,000 households across the state. The program rolled out in California in late 2021.
The federally created Homeowner Assistance Fund (HAF) is available to all borrowers, including reverse mortgage holders, in an effort to keep them compliant with their loan obligations, which was explained to RMD in early 2021 by Biden administration officials.
“The Homeowner Assistance Fund would be a way in which to provision funds to help homeowners, including seniors with [Home Equity Conversion Mortgage (HECM)s], that may have back tax or insurance payments that need to be made due to hardships related to the pandemic,” an administration official told RMD in February 2021. “And that would be one of the measures in which seniors and the HECM portfolio can be addressed.”
But for forward and reverse mortgage borrowers across the board, the HAF has had challenges reaching full deployment nationwide. Last month’s effort in California to expand the base of qualified beneficiaries was partially done to get more aid to homeowners faster, since there has been an awareness problem across the country.
This has been particularly true of potential reverse mortgage beneficiaries. HECM servicing professionals explained at reverse mortgage industry events that there have been difficulties in making reverse mortgage borrowers aware of the available funding — which is overseen by individual states — and had requested the help of loan originators to get the word out to their clients.
The National Association of Realtors (NAR) and the Mortgage Bankers Association (MBA) are asking federal housing officials to confirm their treatment of interested party contributions (IPCs) to home purchase transactions.
In a letter addressed to Federal Housing Finance Agency (FHFA) director Sandra Thompson, Fannie Mae CEO Priscilla Almodovar, Freddie Mac CEO Michael DeVito, and Federal Housing Administration (FHA) commissioner Julia Gordon on Wednesday, the NAR and MBA wrote that it was important for the agencies and government-sponsored enterprises (GSEs) to review NAR’s commission lawsuit settlement agreement.
They asked the federal officials to “provide guidance to market participants that will ensure these new arrangements will continue to be supported by” FHA and GSE underwriting standards.
At the moment, IPCs “include concessions from the seller to the buyer for items that are traditionally paid by the buyer such as loan closing costs or rate buy-downs,” but as buyer agents are customarily paid by the listing agent, their fees are excluded from caps on the IPCs.
Under existing FHA policy, for example, if sellers continue to pay buyer-side real estate agent commissions and fees as a matter of state or local laws or customs — and if the commissions and fees are reasonable in amount — these payments would not be treated as interested party contributions provided all other requirements are met.
Under the terms of NAR’s settlement agreement, the practice of cooperative compensation is still allowed, but it cannot be offered through a Multiple Listing Service (MLS). Sellers or buyers can pay the buyer’s agent’s fees.
“Consequently, once the settlement is in effect, we believe that FHA and GSE policy should continue to exclude seller or listing agent payment of buyer agents’ commission from IPCs,” the NAR and MBA wrote. “Confirming your policies and maintaining this practice will sustain the current flow of mortgage capital to home buyers without change or delay.”
The two trade organizations urge federal officials to provides this certainty now, as they feel it is needed “to prevent disruptions that may cost homebuyers and sellers money and potentially their home purchases.”
NAR also sent a letter to the U.S. Department of Veteran Affairs (VA) on Wednesday, urging it to revise policies that prohibit veterans from paying buyer broker commissions.
The current VA rule states that a borrower using a VA loan cannot pay fees or commissions to a real estate agent unless determined “by the Under Secretary for Benefits as appropriate for inclusion … as proper local variances.”
NAR told John Bell, the executive director of VA’s Loan Guaranty Service, that the current policy would put VA buyers at a disadvantage, as they would potentially be forced to forego professional representation.
On the heels of the $418 million settlement recently announced by the National Association of Realtors(NAR), mortgage trade group Community Home Lenders of America (CHLA) has called on the U.S. Department of Veteran Affairs (VA) to expedite regulatory change that would allow veterans and active-duty service members to fund buyer’s broker commissions when purchasing a home with a VA mortgage.
In a letter submitted Monday to John Bell, executive director of VA’s Loan Guaranty Service, the CHLA took issue with how the existing regulatory requirements regarding VA mortgages could put veterans and active-duty personnel at an “unfair disadvantage” when buying a home.
NAR’s settlement, which could go into effect as early as July, will eliminate the long-standing “Participation Rule” that requires listing agents to make an offer of cooperative compensation to buyers’ agents. Under the current system, the buyer agent’s commission is baked into the price paid for a home. If the settlement is finalized in its current form, buyers may have to pay upfront flat fees to agents.
The current VA rule states that a borrower using a VA loan cannot pay fees or commissions to a real estate agent unless determined “by the Under Secretary for Benefits as appropriate for inclusion . . . as proper local variances, under current VA regulations.“
“We ask that VA adopt an appropriate administrative remedy to ensure that those who have courageously served this country are not financially discriminated against in their homeownership journey,” the letter reads.
The VA has been monitoring various cases involving real estate broker commissions, including the NAR case, an official told HousingWire.
“VA is working closely with the Department of Justice to determine any potential implications for Veteran borrowers and is committed to ensuring that Veterans are neither disadvantaged in the homebuying process nor overcharged,” the official said in an e-mailed response.
The official added that the VA recognizes that potential changes may be forthcoming in the industry as a result of the proposed NAR settlement.
“VA is actively engaged with the Department of Justice to review the potential implications and evaluate how VA can best ensure that VA’s home loan program remains an attractive option for Veterans in the homebuying process.”
In December, the CHLA sent a letter to regulators and administrators at the Federal Housing Finance Agency (FHFA), the Department of Housing and Urban Development (HUD), the Department of Agriculture (USDA) and the VA warning that homebuyers who must pay broker commissions out of pocket could face further affordability challenges.
“First-time homebuyers, families with lower incomes, veterans, and minority homebuyers could be adversely affected in their ability to purchase a home because of obstacles and complications related to the need to fund the buyer’s broker commission,” the CHLA said.