United Wholesale Mortgage has rolled out a series of products, most recently announcing one that aims to incentivize borrowers with Federal Housing Administration and the Department of Veterans Affairs-backed loans to refinance.
The product, dubbed Govy125, is a 125 basis point incentive on any note rate for VA IRRRLS and non-credit qualifying FHA streamlines. The wholesale lender giant says the “incentive aims to help UWM partners create more refinances with their past VA and FHA borrowers, as well as attract new clients.”
“Govy125 pricing will help more borrowers secure a lower rate and save money on their monthly payments at a time when they may not have thought possible,” it noted in a press release.
In order to qualify, broker partners must use UWM’s Title Review and Closing plus, or TRAC+, which lets the wholesale lender handle title reviews, closing and disbursement for a flat $1,850 fee. Clients who use the TRAC+ service “receive up to an additional 60 basis points for a total of up to 185 basis points,” UWM said.
Another way to use the product is to sign up for PA+, a service that provides a UWM coordinator to work with the LO and borrower to help a loan clear.
“Govy125 is designed to help you expand your reach, grow your business and wow your borrowers,” the wholesale lender touted. The product is available on new locks from July 10 to Sept. 3.
The new incentive comes after UWM rolled out a number of other initiatives including its 0% down payment mortgage product and TRAC+ in mid-May.
Its 0% down program has received some mixed reviews, with a recent media analysis calling the mortgage a “red flag” akin to the risky home loans which caused the Great Financial Crisis. The wholesale lender has defended its product, arguing that it’s a tool that can make it easier for borrowers to become homeowners.
United Wholesale Mortgage (UWM) announced on Wednesday that it will temporarily give a 125-basis points incentive in some government refinancing programs, another step to guarantee the retention and attraction of home borrowers looking to lower their mortgage rates.
The Govy125 program includes any note rate, any occupancy for the U.S. Department of Veterans Affairs interest rate reduction refinance loans (IRRRLs), and non-credit qualifying Federal Housing Administration (FHA) streamlines.
The incentive is available on new locks through Sept. 2, with a maximum lock of 60 days.
The program has some limitations. The incentive is available to brokers who use the lender’s services that handle all the title work on refinances (TRAC+) and/or offer additional loan processing support (PA+).
Pontiac, Michigan-based UWM launched the TRAC+ in May to manage title review, closing, and disbursement for its brokers. It comes as the federal government pushes title insurance alternatives designed to save consumers money.
The company said that those who use the service will have an additional up to 60 bps in the Govvy125 program, with the incentive reaching up to 185 bps.
The top U.S. mortgage lender also reduced the PA+ full-service fee to $595 from $895 for FHA streamlines and VA IRRRLs.
Regarding its purchase loan offerings, UWM recently announced a zero-down payment loan. It gives qualified borrowers 3% in a down payment assistance loan up to $15,000.
The loan will not accrue interest and will not require a monthly payment. The company said that borrowers pay the second lien loan by the end of the loan term but have flexibility in when and how often they make payments.
The current average interest rate for a fixed-rate, 30-year conforming mortgage loan in the United States is 6.960%, according to the most recent data available from mortgage technology and data company Optimal Blue. Read on to see average rates for different types of mortgages and how the current rates compare with the last reported day prior.
Type of Mortgage
Current Rate
Rate Last Reported
30-year conforming
6.960%
6.992%
30-year jumbo
7.160%
7.269%
30-year FHA
6.737%
6.743%
30-year VA
6.500%
6.532%
30-year USDA
6.795%
6.696%
15-year conforming
6.431%
6.553%
30-year conforming
6.960%
6.992%
30-year jumbo
7.160%
7.269%
30-year FHA
6.737%
6.743%
30-year VA
6.500%
6.532%
30-year USDA
6.795%
6.696%
15-year conforming
6.431%
6.553%
30-year mortgage rates
30-year conforming
The average interest rate, per the most current data available as of this writing, is 6.960%. That’s down from 6.992% the last reported day prior.
30-year jumbo
What exactly is a “jumbo mortgage” or “jumbo loan”? Simply put, it exceeds the maximum amount for a normal (conforming) mortgage. Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency set this maximum.
The average jumbo mortgage rate, per the most current data available as of this writing, is 7.160%. That’s down from 7.269% the last reported day prior.
30-year FHA
The Federal Housing Administration provides mortgage insurance to certain lenders, and the lenders in turn can offer the consumer a better deal on aspects such as being able to qualify for a mortgage, potentially making a smaller down payment, and possibly getting a lower rate.
The average FHA mortgage rate, per the most current data available as of this writing, is 6.737%. That’s down from 6.743% the last reported day prior.
30-year VA
A VA home loan is offered by a private lender, but the Department of Veterans Affairs guarantees part of it (reducing risk for the lender). They are accessible if you’re a U.S. military servicemember, a veteran, or an eligible surviving spouse. Such loans may sometimes allow the purchase of a house with no down payment at all.
The average VA home loan rate, per the most current data available as of this writing, is 6.500%. That’s down from 6.532% the last reported day prior.
30-year USDA
The U.S. Department of Agriculture operates programs to help low-income applicants achieve homeownership. Such loans can help U.S. citizens and eligible noncitizens purchase a home with no down payment. Note that there are stringent requirements to be able to qualify for a USDA home loan, such as income limits and the home being in an eligible rural area.
The average USDA home loan rate, per the most current data available as of this writing, is 6.795%. That’s up from 6.696% the last reported day prior.
15-year mortgage rates
A 15-year mortgage will typically mean higher monthly payments but less interest paid over the life of the loan. The average rate for a 15-year conforming mortgage, per the most current data available as of this writing, is 6.431%. That’s down from 6.553% the last reported day prior.
Why do mortgage rates fluctuate?
While your personal credit score largely determines the mortgage rate you receive, several external factors also play a role. Important considerations include:
Actions by the Federal Reserve: When the Federal Reserve raises or lowers the federal funds rate, lenders typically adjust their interest rates in response. This strategy helps the Fed control the money supply and influence borrowing costs for both consumers and businesses.
Inflation levels: Although related, inflation and the Fed’s actions are distinct factors. The Fed raises or lowers rates to control inflation, but lenders may also adjust rates independently to protect their profits when inflation is high.
General economic conditions: Lenders consider factors like economic growth and housing supply and demand when setting mortgage rates. These are just a couple of the many puzzle pieces that can influence mortgage rate changes.
Learn more: How are mortgage interest rates set by lenders?
Choosing the right mortgage for you
There is no one-size-fits-all mortgage. While most mortgages are conventional, government-backed loans (FHA, VA and USDA home loans) can be a more affordable option if you qualify.
Here are a couple other terms you may encounter in your mortgage research:
Jumbo mortgages: These aptly named jumbo loans are ideal for purchasing homes that exceed the limits of conforming mortgages, although they may be more expensive in terms of interest paid over the long run.
Adjustable-rate mortgages (ARMs): ARMs typically offer low initial rates that can increase over time. Consider this option carefully.
The rate data provided in this article reflect averages for fixed-rate mortgages.
If you’re uncomfortable comparison shopping for rates on your own, a mortgage broker can assist you (for a fee) in finding the best mortgage offer for your situation.
How high have mortgage rates been in the past?
While mortgage rates may feel sky-high these days compared to the sub-3% rates some homebuyers scored in 2020 and 2021, what we’re seeing currently isn’t that strange when compared with historical data on mortgage rate averages. Below are a couple charts from the Federal Reserve Economic Data (FRED for short) online database for context.
30-year fixed-rate mortgage historical trends
If you think rates between 6% and 8% today are scary, consider September through November of 1981, which saw the average rate hovering between 18% and 19%, according to FRED.
Check out the FRED 30-year mortgage rate chart:
15-year fixed-rate mortgage historical trends
Rates today on 15-year mortgages, as shown in the Optimal Blue data above, are roughly on par or even slightly lower than what we see during many previous periods. For example, take a look at FRED data for the end of 1994 and beginning of 1995, when rates neared 9%.
See the FRED 15-year mortgage rate chart:
Frequently asked questions
What’s a good mortgage rate in 2024?
With current market conditions, applicants with excellent credit can expect rates between 6% and 8%. Those with lower credit scores, particularly in the low 600s, might see rates above 8%.
Keep in mind that credit score is just one factor affecting your mortgage rate. Other factors include your down payment, location, and loan term.
Learn more: Easy ways to check your credit score.
How does a mortgage rate lock work?
Due to potential daily fluctuations in mortgage rates, a mortgage rate lock (or lock-in) can help secure a favorable rate. These locks usually last 30, 45, or 60 days and can be extended if necessary.
However, rate locks have potential downsides. If rates decrease, you won’t benefit from the lower rates, and extending a lock can be costly if the initial period isn’t long enough.
Additionally, a rate lock doesn’t guarantee your rate won’t change. Factors like changes in your credit score or unexpected appraisal values can still affect your mortgage rate.
Why are interest rate and APR different?
The interest rate is the cost of borrowing, while the APR (annual percentage rate) includes any additional fees, making it higher. Although these terms are distinct for mortgages, they are often used interchangeably for credit card rates.
Mortgage lock volumes pulled back in June, as pervasive market sluggishness kept a grip on the housing market, according to a new report.
Rate locks finished 7.84% lower compared to May, Mortgage Capital Trading said in its latest report. On a year-over-year basis, though, volumes increased by 6.11%.
Among loan categories, purchase locks fell 8.99%. On the other hand, the refinance market saw an 11.56% jump in rate-and-term transactions, but cash-outs inched down 0.36% between May and June.
The latest reading comes after lock volume rose by 6.78% the previous month, with every loan type posting increases, after interest rates hit a 2024 high in early May, then slid downward.
The June decline in activity occurred as the 30-year fixed rate hovered near 7% throughout the month, displaying less volatility than shown earlier this year. Typical seasonal patterns also contributed to the decline, with purchase momentum slowing after the initial surge in spring home buying seen every year, MCT said.
But June’s reversal continues to show the effects of persistent market headwinds as well and suggests “a continuing stalemate between limited housing supply and higher interest rates.”
Although last month’s interest rates were, on average, lower than May’s levels, they ran higher than what the typical homeowner holds today, according to data from Freddie Mac’s weekly Primary Mortgage Market survey.
Limited interest among homeowners to list their properties and take on higher-rate loans, in combination with still-rising prices, means mortgage activity will likely move sideways over the summer, MCT added.
“Market supply likely peaked at the start of summer, and with rates remaining steady, significant changes in volume are not expected in the near term,” the report said.
Borrower interest in refinancing, though, has come in stronger in recent months, albeit from historically low levels, driven by buyers who made their purchases in the past year, ICE Mortgage Technology reported this week.
Lending momentum is likely to pick up when the Federal Reserve makes its first interest rate cut, a decision many mortgage industry stakeholders have been awaiting in hopes of driving demand. Investors and lenders will be closely eyeing June jobs numbers, which came out Friday, and the month’s inflation numbers for possible signs.
Should they continue to point to a slowing economy, “we could see one or two rate cuts by the end of the year,” said Andrew Rhodes, senior director and head of trading at MCT, in a press release.
June’s Consumer Price Index data is scheduled to be released on Thursday, July 11.
Fewer prospective mortgage borrowers pulled the trigger in June, according to a new report from Mortgage Capital Trading.
Mortgage rate locks decreased 7.84% in June compared to the previous month.
This drop follows a brief uptick in volume at the beginning of the traditional buying season, suggesting a continuing stalemate between limited housing supply and higher interest rates (they were 7.11% on Friday), MCT said this week.
While purchase locks fell 8.99%, refinances increased by 11.56%. Overall, on a year-over-year basis, volumes in June increased 6.11%.
In a statement, MCT’s Andrew Rhodes, the company’s head of trading, said June’s economic reports are expected to play a critical role in shaping the Federal Reserve‘s next moves.
“If the upcoming nonfarm payroll report and Consumer Price Index (CPI) continue to align with predictions, and these economic indicators continue to show progress, we could see one or two rate cuts by the end of the year,” he said.
On Friday, the jobs report showed 206,000 new jobs were created, above the expected figure of 189,000 but a meaningful decline from prior months.
Traders on Friday were pricing in two rate cuts in 2024, starting in September.
Mortgage data provider Optimal Blue this week announced the launch of Competitive Data License, a product that is designed to help lenders price loans accurately and drive profitability.
In its announcement, the Texas-based company described the product as “a collection of key national mortgage pricing data that enables lenders to price products competitively, operate more profitably, and react swiftly to changing market conditions.“
Competitive Data License draws upon data from the Optimal Blue product pricing engine (PPE), which the company said is used to price and lock more than 35% of mortgages in the U.S. The product offers insights into loan markups, loan-level pricing adjustments, service-released premiums, concessions, loan officer compensation and more.
“We often hear from our lenders how difficult it is to make informed pricing decisions given the lack of visibility into detailed market data,” Brennan O’Connell, director of data solutions at Optimal Blue, said in a statement.
“Competitive Data License ensures that our PPE customers have full transparency into the granular pricing components needed for a full price trace from buy-side to sell-side — giving Optimal Blue clients a strategic advantage in benchmarking their entire pricing strategy.”
The data license product allows lenders to see which loan locks were completed using the dataset and which loan officers locked the loan. Lenders can “feed the raw data from Competitive Data License into their own business intelligence platforms to assess their performance relative to competitors and adjust pricing strategies — such as repricing or hedging optimization — based on market shifts,“ Optimal Blue explained.
The new product is available only to Optimal Blue PPE users, but the firm noted that its Market Data License product will remain available to lenders not using the PPE.
Earlier this month, Optimal Blue landed a big name in the industry when it hired Joe Tyrrell as its CEO to succeed Scott Smith.
In an interview with HousingWire shortly after the announcement, Tyrrell explained his reasoning behind the move after previous career stops at ICE Mortgage Technologyand Medallia.
“What lenders really need is the ability to maximize their profitability on every single loan, so that they can just stay in business and then continue to reinvest their business to help more people,“ Tyrrell said. “There is nobody in this industry that’s more critical in that than Optimal Blue: a secondary marketing platform that’s the only end-to-end solution.“
The current average interest rate for a fixed-rate, 30-year conforming mortgage loan in the United States is 6.853%, according to the most recent data available from mortgage technology and data company Optimal Blue. Read on to see average rates for different types of mortgages and how the current rates compare with the last reported day prior.
Type of Mortgage
Current Rate
Rate Last Reported
30-year conforming
6.853%
6.848%
30-year jumbo
7.129%
7.198%
30-year FHA
6.679%
6.680%
30-year VA
6.514%
6.393%
30-year USDA
6.760%
6.816%
15-year conforming
6.158%
6.229%
30-year conforming
6.853%
6.848%
30-year jumbo
7.129%
7.198%
30-year FHA
6.679%
6.680%
30-year VA
6.514%
6.393%
30-year USDA
6.760%
6.816%
15-year conforming
6.158%
6.229%
30-year mortgage rates
30-year conforming
The average interest rate, per the most current data available as of this writing, is 6.853%. That’s up from 6.848% the last reported day prior.
30-year jumbo
What exactly is a “jumbo mortgage” or “jumbo loan”? Simply put, it exceeds the maximum amount for a normal (conforming) mortgage. Fannie Mae, Freddie Mac, and the Federal Housing Finance Agency set this maximum.
The average jumbo mortgage rate, per the most current data available as of this writing, is 7.129%. That’s down from 7.198% the last reported day prior.
30-year FHA
The Federal Housing Administration provides mortgage insurance to certain lenders, and the lenders in turn can offer the consumer a better deal on aspects such as being able to qualify for a mortgage, potentially making a smaller down payment, and possibly getting a lower rate.
The average FHA mortgage rate, per the most current data available as of this writing, is 6.679%. That’s down from 6.680% the last reported day prior.
30-year VA
A VA home loan is offered by a private lender, but the Department of Veterans Affairs guarantees part of it (reducing risk for the lender). They are accessible if you’re a U.S. military servicemember, a veteran, or an eligible surviving spouse. Such loans may sometimes allow the purchase of a house with no down payment at all.
The average VA home loan rate, per the most current data available as of this writing, is 6.514%. That’s up from 6.393% the last reported day prior.
30-year USDA
The U.S. Department of Agriculture operates programs to help low-income applicants achieve homeownership. Such loans can help U.S. citizens and eligible noncitizens purchase a home with no down payment. Note that there are stringent requirements to be able to qualify for a USDA home loan, such as income limits and the home being in an eligible rural area.
The average USDA home loan rate, per the most current data available as of this writing, is 6.760%. That’s down from 6.816% the last reported day prior.
15-year mortgage rates
A 15-year mortgage will typically mean higher monthly payments but less interest paid over the life of the loan. The average rate for a 15-year conforming mortgage, per the most current data available as of this writing, is 6.158%. That’s down from 6.229% the last reported day prior.
Why do mortgage rates fluctuate?
While your personal credit profile significantly influences the mortgage rate you’re offered, various external factors also play a role. Key influences include:
Federal Reserve actions: When the Federal Reserve adjusts the federal funds rate, lenders typically follow suit by raising or lowering the interest rates on their financial products. Essentially, the Fed uses this tool to control the money supply, making it easier or harder for consumers and businesses to borrow.
Inflation levels: You might wonder if inflation and the Fed’s actions in responding to it are essentially the same factor, but they’re not. The Fed manipulates rates to manage inflation, but lenders also respond independently. For instance, they might hike rates to maintain profitability when inflation is high.
Economic conditions: Lenders consider things like overall economic growth as well as housing supply and demand when determining mortgage rates. These are just a few examples of the factors that can influence lenders to make rate adjustments.
Learn more: How are mortgage interest rates set by lenders?
Which type of mortgage should you choose?
There’s no universal answer as to which is the best type of mortgage. Most mortgages are conventional, but government-backed loans can be more affordable if you qualify.
Meanwhile, jumbo mortgages are suitable for purchasing more expensive homes that exceed the limits of conforming mortgages, though they may cost more over the loan’s duration.
Adjustable-rate mortgages (ARMs) generally start with low, attractive rates that later increase. If you’re considering this option, make sure you’re comfortable with that possibility.
The rates in this article reflect averages for fixed-rate mortgages.
If you’re uncomfortable shopping for rates independently, a mortgage broker can help (for a fee) find the best mortgage deal for your situation.
How high have mortgage rates been in the past?
While mortgage rates may feel sky-high these days compared to the sub-3% rates some homebuyers scored in 2020 and 2021, what we’re seeing currently isn’t that strange when compared with historical data on mortgage rate averages. Below are a couple charts from the Federal Reserve Economic Data (FRED for short) online database for context.
30-year fixed-rate mortgage historical trends
If you think rates between 6% and 8% today are scary, consider September through November of 1981, which saw the average rate hovering between 18% and 19%, according to FRED.
Check out the FRED 30-year mortgage rate chart:
15-year fixed-rate mortgage historical trends
Rates today on 15-year mortgages, as shown in the Optimal Blue data above, are roughly on par or even slightly lower than what we see during many previous periods. For example, take a look at FRED data for the end of 1994 and beginning of 1995, when rates neared 9%.
See the FRED 15-year mortgage rate chart:
Frequently asked questions
What’s a good mortgage rate?
With current market conditions, those with good to excellent credit can expect interest rates between 6% and 8%. If your credit score is in the low 600s, rates above 8% might be more likely.
Remember, credit score is just one of several factors affecting your mortgage rate, including your down payment amount, state of residence, and loan term length.
Learn more: Easy ways to check your credit score.
What is a mortgage rate lock?
Given the potential for daily rate fluctuations, a mortgage rate lock (or lock-in) can secure a favorable rate for you. These locks typically last 30, 45, or 60 days, with options to extend if necessary.
However, rate locks have potential drawbacks. If rates drop, you could miss out on an even better rate. Additionally, if your initial lock period is insufficient, extending it could be costly.
Finally, rate locks don’t absolutely guarantee your rate. Changes in your credit score or unexpected appraisal values can still alter your mortgage rate.
What’s an APR vs. an interest rate?
The interest rate is a pretty self-explanatory part of borrowing, while the APR (annual percentage rate) includes any additional fees, making it higher. Although they’re distinct for mortgages, the terms are often used interchangeably for credit card rates.
Refinancing a mortgage is a decision that can have a significant impact on your financial journey. It’s a process where you replace your existing mortgage with a new one, often with different terms and interest rates.
This move can potentially save you money, adjust your payment schedule, or allow you to tap into your home’s equity. However, it’s not a decision to be taken lightly. Refinancing comes with its own set of closing costs and considerations that need careful evaluation.
In this article, we’ll dive deep into the world of mortgage refinancing. We’ll explore the reasons why refinancing might be a good idea, the different types of refinancing options available, and, importantly, the closing costs associated with the process.
Whether you’re looking to lower your monthly payment, change your mortgage type, or access some cash, it’s essential to understand the nuts and bolts of refinancing. We aim to provide you with the knowledge and tools needed to make an informed decision about whether refinancing your mortgage aligns with your financial goals.
Why refinance a mortgage?
Homeowners might consider refinancing their mortgage for various compelling reasons. Each situation is unique, but there are a few common motivators that lead many to explore the refinancing path. Understanding these reasons can help you assess whether refinancing aligns with your financial objectives.
Lower interest rates: Perhaps the most straightforward reason to refinance is to take advantage of lower interest rates. When interest rates drop, refinancing can lead to significant savings, both in terms of monthly payments and the total interest paid over the life of the loan.
Switch from ARM to fixed-rate mortgage: If you currently have an Adjustable-Rate Mortgage (ARM), you might face uncertainty regarding future payment amounts. Refinancing to a Fixed-Rate Mortgage locks in a consistent interest rate, bringing stability and predictability to your payments.
Cashing out equity: For homeowners who have built up substantial equity in their homes, a cash-out refinance can be a way to access that capital. This option allows you to borrow more than what you owe on your current mortgage and use the difference for other financial needs, such as home improvements, debt consolidation, or education expenses.
Altering loan terms: Some homeowners might refinance to change the terms of their loan. Whether it’s extending the loan duration to lower monthly payments or shortening it to pay off the mortgage faster, refinancing can adjust the loan to better fit current financial situations and goals.
Debt consolidation: Refinancing can also be a strategic move to consolidate debt. By rolling high-interest debts into a mortgage with a lower rate, you can simplify your finances and potentially reduce overall monthly expenses.
Eliminating private mortgage insurance (PMI): If your home value has increased, refinancing might allow you to drop PMI, which is typically required when your down payment is less than 20% of the home’s value. This can lead to substantial savings over time.
Each of these reasons reflects a different financial need or goal. Refinancing a mortgage can be a powerful tool, but it’s essential to weigh the benefits against the costs and long-term implications. The right choice depends on your personal circumstances and financial objectives.
Types of Refinancing Options
Refinancing your mortgage isn’t a one-size-fits-all solution. There are several types of refinancing options available, each with its own set of features, benefits, and drawbacks. Understanding these can help you determine which option best suits your financial needs and goals.
Cash-Out Refinance
A cash-out refinance allows you to replace your existing mortgage with a new loan for more than you owe on your home. The difference is paid to you in cash, which can be used for various purposes like home renovations, debt consolidation, or other financial needs.
Pros:
Access to cash for large expenses.
Potential to secure a lower interest rate than your current mortgage.
Consolidates debt into a single payment, often at a lower rate.
Cons:
Increases the amount you owe, potentially extending the time to pay off your mortgage.
Can lead to higher interest costs over the life of the loan.
Requires sufficient home equity to qualify.
Home Equity Line of Credit (HELOC)
A HELOC is a revolving line of credit that lets you borrow against the equity in your home. It works similarly to a credit card, where you can draw funds as needed and pay them back over time.
Pros:
Flexible access to funds; borrow as much or as little as needed.
Only pay interest on the amount you draw.
Can be a lower-cost option for accessing home equity.
Cons:
Variable interest rates can increase over time.
Temptation to overspend due to easy access to funds.
Could put your home at risk if you cannot repay the borrowed amount.
ARM to Fixed-Rate Mortgage Refinance
This type of refinancing involves switching from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage. It offers a stable interest rate and a predictable monthly mortgage payment for the life of the loan.
Pros:
Stability and predictability in monthly payments.
Protection against rising interest rates in the future.
Easier budgeting and financial planning.
Cons:
May come with a higher interest rate than the initial rate of an ARM.
Closing costs and refinance fees.
Fixed-rate might be higher than current ARM rates if interest rates are rising.
Each refinancing option serves different financial scenarios and objectives. So, analyze your financial situation, consider the long-term implications, and perhaps talk to a financial advisor to choose the most appropriate path for your needs.
Understanding Mortgage Refinance Closing Costs
When considering refinancing your mortgage, be aware of the various fees and costs involved. Each of these costs plays a role in the overall financial equation of refinancing, and they can vary significantly based on your lender, loan terms, and even geographic location.
As a general rule of thumb, expect to pay around 2% – 6% of your loan balance in closing costs. This percentage can give you a ballpark figure to start with when estimating the expenses involved in your refinancing process.
Application Fee
This is a charge by the lender for processing your new mortgage application. It generally ranges from $75 to $300 and covers the cost of credit checks and administrative expenses.
Loan Origination Fee
Often the most significant cost, the origination fee, is charged by the lender for evaluating and preparing your mortgage loan. It’s typically calculated as a percentage of the loan amount (ranging from 0% to 1.5%). This fee can vary greatly among lenders, so it’s wise to compare offers.
Points
Points, also known as discount points, are optional fees paid at closing to reduce your interest rate. Each point is typically equal to 1% of the loan amount. While this can save you money over the life of the loan, it increases your upfront costs.
Appraisal Fee
This fee, ranging from $300 to $700, pays for a professional appraisal of your home to assess its current value. Lenders require this to ensure the loan amount is not more than the home’s worth.
Inspection Fee
Ranging between $175 to $350, this fee covers the cost of a professional inspection of the property to identify any structural or mechanical issues.
Attorney Review/Closing Fee
This fee, usually between $500 to $1,000, is for the services of an attorney or a title company during the closing process to ensure all legal documents are correct and in order.
Homeowner’s Insurance
If you’re not already insured, or if additional coverage is needed, this cost can range from $300 to $1,000. It ensures the property is insured before the lender approves the refinancing.
FHA, VA, or Private Mortgage Insurance Fees
For certain loan types, like FHA or VA loans, there are specific fees or insurance premiums. For example, FHA loans include a 1.5% upfront fee and a yearly premium. VA loans have a funding fee that varies based on the loan type and down payment.
Title Search and Title Insurance
Costing between $700 to $900, this covers the title search and insurance, ensuring there are no liens or problems with the ownership of the property.
Survey Fee
If required, this fee ranges from $150 to $400 and pays for a survey to confirm the property’s boundaries and structure.
Prepayment Penalty
Not all loans have this, but some might charge a prepayment penalty for paying off your current mortgage early. This could range from one to six months of interest payments.
Each of these fees contributes to the total cost of refinancing your mortgage. To get a clear picture of how much refinancing will cost you, it’s important to obtain detailed estimates from potential lenders and consider how these costs weigh against the potential savings or benefits of refinancing.
State and Lender Variability in Closing Costs
The closing costs associated with refinancing a mortgage can vary significantly depending on your location (state) and the lender you choose. This variability is influenced by local regulations, market conditions, and individual lender practices.
By state: Different states have varying regulations and fees, which can affect the overall closing costs. For instance, states with higher real estate values or specific local taxes and fees might have higher refinancing costs.
By lender: Lenders have different pricing models. Some may offer lower interest rates but charge higher closing costs, while others might have higher rates but lower upfront fees or offer to waive certain charges.
Real-Life Examples and Case Studies
To better understand the impact of refinancing, let’s explore a few real-life scenarios. These examples will highlight how different refinancing options can play out financially.
Scenario 1: Lowering Interest Rates
John and Sarah’s Story:
Original mortgage: $200,000 at 5% interest, 30-year term.
Refinanced mortgage: $200,000 at 3.5% interest, 30-year term.
Outcome: By refinancing to a lower interest rate, they reduced their monthly payment and will save $55,000 in interest over the life of the loan.
Scenario 2: Switching from ARM to Fixed-Rate
The Smiths’ Experience:
Original mortgage: $250,000 5/1 ARM starting at 3%.
Refinanced mortgage: $250,000 30-year fixed at 4%.
Outcome: Although they faced a higher interest rate initially, the Smiths secured predictable monthly payments, protecting them from potential rate increases in the future.
Scenario 3: Cashing Out Equity for Home Improvements
Alex’s Decision:
Original mortgage: $150,000 remaining on a home valued at $300,000.
Refinanced mortgage: $200,000 with cash-out of $50,000.
Use of funds: Alex used the $50,000 to renovate the kitchen and bathrooms, increasing the home’s value.
These examples illustrate how refinancing can serve different needs, from reducing payments to accessing equity. The right choice depends on personal financial situations and long-term goals.
The Impact of Credit Score on a Mortgage Refinance
Your credit score plays a major role in refinancing. It affects not only your ability to qualify for refinancing, but also the interest rates you’ll be offered.
How Credit Scores Affect Refinancing:
Higher scores, lower rates: The higher your credit score, the lower the interest rates lenders are likely to offer. A strong credit score signals lower risk to lenders.
Qualification thresholds: Some refinancing options have minimum credit score requirements. Falling below these can limit your options or result in higher interest rates.
Tips for Improving Credit Scores Before Refinancing:
Check your credit report: Obtain a free report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) to check for errors or inaccuracies.
Pay down debts: Lowering your overall debt can improve your credit utilization ratio, a key factor in credit scores.
Make timely payments: Ensure all your bills and existing loan payments are up-to-date. Late payments can significantly harm your credit score.
Limit new credit applications: Each new application can cause a small, temporary dip in your credit score.
Address delinquencies: If you have any delinquencies or collections, try to resolve them. These have a major negative impact on your score.
By understanding and improving your credit score, you can position yourself for better refinancing options and terms. Remember, refinancing is a tool that, when used wisely, can align with and enhance your financial strategy.
The Refinancing Process
Refinancing a mortgage involves several steps. Here’s a general outline of the process:
Assess your financial situation: Start by reviewing your current mortgage, home equity, credit score, and overall financial goals to determine if refinancing is a beneficial move for you.
Gather necessary documents: Prepare important documents such as recent pay stubs, tax returns, bank statements, and details of your current mortgage.
Shop around for lenders: Research various lenders to compare interest rates, fees, and terms. Don’t limit your search to just your current lender; consider banks, credit unions, and online lenders.
Get a credit check: Lenders will review your credit history and score. Remember, your credit score can significantly impact the interest rate offered.
Apply for refinancing: Once you’ve chosen a lender, complete their application process. This will typically involve submitting your financial documents and possibly paying an application fee.
Lock in your interest rate: When you receive a favorable interest rate, consider locking it in to protect against market fluctuations during the processing of your refinance.
Home appraisal: Most lenders will require a home appraisal to determine the current value of your property.
Underwriting: The lender will review your application, financial documents, and home appraisal to make a final decision on your loan approval.
Closing: If approved, you’ll proceed to closing, where you’ll sign the new mortgage agreement. This will involve paying closing costs and any other fees.
Settle old mortgage: Your new lender will use the funds from the refinance to pay off your existing mortgage.
Begin new mortgage payments: Once the refinance is complete, you’ll start making payments on your new mortgage according to the agreed terms.
Remember, the refinancing process can vary in length and complexity based on individual circumstances and the lender’s requirements. It’s important to ask questions and understand each step to make informed decisions throughout the process.
Conclusion
The decision to refinance your mortgage is significant and multifaceted. It’s essential to weigh the potential benefits, such as lower interest rates or altered loan terms, against the costs and implications that come with refinancing. Each homeowner’s situation is unique, and what may be advantageous for one may not be the best choice for another.
Understanding the impact of your credit score on refinancing options, the variability in closing costs by state and lender, and the specific steps involved in the refinancing process are key to making the right decision. Remember, refinancing is more than just securing a lower interest rate; it’s about aligning the decision with your overall financial goals and long-term plans.
Before taking the leap, consider all these factors carefully. Consulting with financial advisors or mortgage specialists can provide additional clarity and guidance tailored to your personal circumstances. Refinancing can be a powerful financial move when done for the right reasons and under the right conditions, but you must take the time to fully understand and prepare.
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June 18, 2024 at 6:17 AM
Average mortgage rates continue sliding lower for popular 30-year and 15-year terms as of Tuesday, June 18, 2024.
The current average interest rate for a 30-year fixed mortgage is 7.02% for purchase and 6.96% for refinance, down 10 basis points from 7.12% for purchase and 19 basis points from 7.15% for refinance last Tuesday. For homeowners looking to refinance to a 15-year term, the average rate is 6.49% — down 22 basis points from 6.71% over the past week. The average rate on a 30-year fixed jumbo mortgage is 7.17%.
Mortgage rates for Tuesday, June 18, 2024
30-year fixed rate — 7.02%
20-year fixed rate — 6.76%
15-year fixed rate — 6.43%
10-year fixed rate — 6.31%
5/1 adjustable rate mortgage — 6.69%
30-year fixed FHA rate — 6.86%
30-year fixed VA rate — 7.02%
30-year fixed jumbo rate — 7.17%
Mortgage rates for Tuesday, June 18, 2024
30-year fixed rate — 6.96%
20-year fixed rate — 6.77%
15-year fixed rate — 6.49%
10-year fixed rate — 6.32%
5/1 adjustable rate mortgage — 6.56%
30-year fixed FHA rate — 6.99%
30-year fixed VA rate — 7.62%
30-year fixed jumbo rate — 7.08%
Freddie Mac weekly mortgage report: Rates continue falling back
Freddie Mac reports an average 6.95% for a 30-year fixed-rate mortgage, down 4 basis points from last week’s average 6.99% for a 30-year fixed-rate mortgage, according to its weekly Prime Mortgage Market Survey of nationwide lenders published on June 13, 2024. The fixed rate for a 15-year mortgage is 6.17%, down 12 basis points from last week’s average 6.29%. These figures are higher than a year ago, when rates averaged 6.69% for a 30-year term and 6.10% for a 15-year term.
“Mortgage rates continued to fall back this week as incoming data suggests the economy is cooling to a more sustainable level of growth,” says Sam Khater, Freddie Mac’s chief economist, of the latest data. “Top-line inflation numbers were flat but shelter inflation, which measures rent and homeownership costs, increased, showing that housing affordability continues to be an ongoing impediment for buyers on the house hunt.”
Freddie Mac updates its Prime Mortgage Market Survey data weekly on Thursday mornings.
Mortgage rates for June 18, 2024
Mortgage rates are determined by many factors that include inflation rates, economic conditions, housing market trends and the Federal Reserve’s target interest rate. Lenders also consider your personal credit score, the amount available for your down payment, the property you’re interested in and other terms of the loan you’re requesting, like 30-year or 15-year offers.
Because mortgage rates can fluctuate daily, it’s best to lock in a rate when you’re comfortable with the overall conditions of your mortgage or home loan.
Mortgage rates in the news
Mortgage lenders keep a close eye on the benchmark federal funds target interest rate set by the Federal Reserve, the U.S.’s central bank. Called the Fed rate, it’s the benchmark that affects rates on deposit accounts, loans and other financial products. Typically, as the fed rate rises, so do APYs on savings products like CDs, high-yield savings accounts and money market accounts. Mortgage and home loan rates don’t follow the Fed rate as closely, but they do reflect the same elements the Fed evaluates when making decisions on the benchmark — especially inflation — which means as the Fed rate increases, mortgage rates also tend to rise.
The Federal Reserve increased the target interest rate 11 times from March 2022 to July 2023 in an effort to combat the highest inflation in four decades coming out of the pandemic.
June 12, 2024: Fed holds benchmark rate unchanged for seventh time since July 2023
At the conclusion of its fourth rate-setting policy meeting of 2024 on June 12, 2024, the Federal Reserve kept the federal funds target interest rate steady at a 23-year high of 5.25% to 5.50%, marking the seventh consecutive time the Fed’s held the benchmark rate unchanged since July 2023.
In its post-meeting statement, the Federal Reserve acknowledged “there has been modest further progress toward the Committee’s 2 percent inflation objective,” but also that the “economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.”
The Federal Reserve is focused on a 2% inflation goal that’s ideal for keeping employment high and prices low. Despite speculation in March of three rate cuts by the end of the year, the Fed reiterated from its May statement that its rate-setting committee “does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”
Officials now estimate one rate cut this year with an additional four cuts anticipated in 2025.
What to expect at the Fed’s July policy meeting
It’s too early to predict what the Federal Reserve will decide at its next policy meeting on July 30 and July 31, 2024, though officials have signaled a cut to the key interest rate later this year.
Inflation appears to be cooling, falling from a peak of 9.1% in June 2022 to rates that have ranged from 3% and 4% since May 2023. The Consumer Price Index released on June 12 revealed consumer prices rose 3.3% year over year, unchanged from 3.3% in April, which was celebrated as “unequivocally good” by economists and puts pressure on the Fed’s timetable for rate cuts. Producer Price Index data released on June 13 reports a 0.2% increase in wholesale prices — or the prices manufacturers pay to producers of goods and services — from April’s 0.5% increase, adding evidence to cooling inflation.
Adding to the good news is the June 7 jobs report that showed a surge in hiring, with employers adding 272,000 jobs in May — higher than the 175,000 positions added in March.
When asked at a post-meeting press conference whether new inflation data changes the timeline on rate cuts, Federal Reserve Chair Jerome Powell said while it’s “plausible” a cut could come as early as September, “We want to gain further confidence. Certainly, more good inflation readings will help with that.”
The Powell-led rate-setting panel will announce a rate decision at the conclusion of its meeting on July 31 at 2 p.m. ET.
NAR settlement offers ray of hope to summer homebuyers
While high mortgage rates could convince current homeowners to delay selling their properties, resulting in low housing inventory, a major change in the way Americans buy and sell homes may offer a ray of sunshine to prospective homebuyers. On April 23, a judge granted preliminary approval to a $418 million antitrust settlement with the National Association of Realtors that ends customary real estate broker commissions of up to 6% of a home’s purchase price starting in July. The settlement isn’t expected to affect mortgage rates, yet it paves the way for consumers to negotiate what they pay for an agent’s services, saving homebuyers money in the long run.
Dig deeper: When’s the next Federal Reserve meeting? The FOMC — and how it affects your finances
4 top factors that affect your mortgage rate
The difference of even half a percentage point on your interest rate can save you hundreds of dollars a month and thousands of dollars over the life of your mortgage, but the mortgage rate you’re ultimately offered depends on the mortgage you’re interested in, payments you’re willing to pay up front and your overall financial health.
Your credit score. Knowing your credit score can help you shop around for lenders you’re likely to get approval through, as well as understand the type of mortgage for your lifestyle and income. The best mortgage rates go to borrowers with good to excellent credit — typically a FICO credit score of at least 670 — though even with fair credit, you may be able to find a mortgage offering decent rates.
Your down payment. The more money you can put down toward your home, the better it benefits your interest rate. Paying at least 20% of your home’s purchase price up front generally results in a lower interest rate — and you can avoid mortgage insurance, which increases your total cost.
Your loan term. While the 30-year mortgage remains a popular way for Americans to purchase homes, you can find terms of 20 years, 15 years and 10 years. Shorter loan terms usually come with lower interest rates, though with higher monthly payments. Longer mortgage terms can result in smaller monthly payments, though you’ll pay higher total interest over the life of your loan.
Interest rate type. Mortgage rates come with two basic types of rates — fixed and variable. Fixed-rate mortgages offer a consistent interest rate over the life of your loan, whereas adjustable-rate mortgages (ARMs) often start with a lower fixed rate for an agreed-on time and then adjust to a variable rate based on market conditions for the remainder of your term. Choosing between these two rates depends on your financial goals and tolerance for risk.
Frequently asked questions about mortgage rates
What are mortgage lenders?
Lenders are financial institutions that loan money to homebuyers. A lender is different from a loan servicer, which typically handles the operational tasks of your loan, like processing payments, talking directly with borrowers and sending monthly statements.
What does it mean to refinance a mortgage?
Refinancing is a process of trading in your current mortgage to another lender for lower rates and better terms than your current loan. With a refinance, the new lender pays off your old mortgage and you then pay your monthly statements from the new lender.
What is an adjustable-rate mortgage?
An adjustable-rate mortgage — commonly called an ARM — is a type of home loan with a variable rate. Unlike a fixed-rate mortgage, which locks in an interest rate and predictable payments that apply over the full loan term, an ARM starts at an initial fixed rate for a period of three years or longer, after which it adjusts to a higher rate and then further adjusts periodically over the remaining life of the loan.
For a 5/1 adjustable-rate mortgage, the first number indicates the number of years at the fixed rate — or five years — and the second number indicates the rate at which the mortgage rate readjusts after — in this case, each year or annually.
Why are mortgage rates so high?
Mortgage rates are influenced by complicated factors like inflation, employment rates, the bond market and the overall economy. While the Federal Reserve doesn’t set mortgage rates, this central bank of the U.S. sets benchmark rates that indirectly affect rates on financial products like mortgages, personal loans and deposit accounts.
March inflation data came in higher than expectations, which is among the main concerns driving mortgage rates higher in April.
Can I negotiate my mortgage rate?
It’s not likely — lenders consider the market conditions and other financial factors when determining rates. You can, however, ask about how you can reduce costs in other ways when comparing mortgage lenders. For instance, many lenders offer lower rates in exchange for “mortgage points” — upfront fees you pay to your lender. A mortgage point could cost 1% of your mortgage amount, which means about $5,000 on a $500,000 home loan, with each point lowering your interest rate by about 0.25%, depending on your lender and loan.
Editor’s note: Rates shown are as of Tuesday, June 18, 2024, at 6:15 a.m. ET. APYs and promotional rates for some products can vary by region and are subject to change.
Sources
Primary Mortgage Market Survey, Freddie Mac. Accessed June 14, 2024.
Employment Situation Summary, U.S. Bureau of Labor and Statistics. Accessed June 7, 2024.
Consumer Price Index Summary, U.S. Bureau of Labor and Statistics. Accessed June 12, 2024.
Producer Price Index News Release summary, U.S. Bureau of Labor and Statistics. Accessed June 13, 2024.
Mortgage Industry Insights, Bankrate. Accessed June 18, 2024.
Rate-and-term refinances rose 25.6% in May as mortgage rates trended down, according to a new report by Optimal Blue. The spike was a response to a modest drop in the 30-year conforming mortgage rate, which dropped to 6.8% on May 15 but ultimately ended the month at 7.02% on the Optimal Blue Mortgage Market Indices (OBMMI).
“The sharp increase in demand for rate-and-term refinances following a dip in rates indicates that homeowners with rates above 7% feel pinched and are sensitive to even modest interest rate movements in the current economic landscape,” Brennan O’Connell, director of data solutions at Optimal Blue, said in a prepared statement. “For context, since Optimal Blue began tracking the 30-year conforming rate as a market index in January 2017, interest rates only exceeded 7.02% on 120 market days. Based on other measures, buyers who locked loans on those days have the highest mortgage rates of the past two decades.”
Total volume rose by 5.3% in May month over month and 1.8% year over year. Such gains were driven by a 4.1% increase in month-over-month purchase lock volume, a 7.2% rise in cash-out refinances, and the big rise in rate-and-term refinances. There was, however, a year-over-year decline in purchase lock counts, a “key market health indicator that controls for home price appreciation and refinance volatility, were down 4% year-over-year.”
Despite the 25.6% monthly increase from April, rate-term refinances remained at a value of 6 on the market volume index (total volume indexed to 100 in January 2018). Cash-out refinances were 9 and purchase mortgages registered at 94.
Conforming loans were 57.2% of the pie, with FHA at 18.4%, VA at 10.8% and nonconforming loans at 13.0%, according to Optimal Blue data.
The purchase pull-through rate was 79.9% in May, down 184 bps from April. The refinance pull-through rate was 59.4% in May, down 115 basis points from April and 295 bps from February. In May 2023, the refi pull-through rate was about 65%.
Nationally, markets in the Northeast showed the largest increase in lock volume, according to Optimal Blue. The Boston-Cambridge-Newton, MA-NH metro had a 17.8% increase in rate locks and the New York-Newark-Jersey City metro wasn’t far behind at 16.4%.
The Washington, D.C., Dallas, Denver, Miami and Phoenix metros all showed declines in lock volume in May.
The average loan amount in May remained flat at $374,500 and the average home purchase price rose for the fifth consecutive month to $480,300 from $477,900.