Mortgage rates rose slightly in January. 30-year fixed rates are now well above 3% and 15-year rates are above 2.5%. Data from Freddie Mac shows that rates are starting to rise. 30-year rates are now back to where they were before the COVID-19 pandemic began, and 15-year rates are almost at that point.
Rates are expected to continue to rise this year. The Federal Reserve announced that it plans to raise the federal funds rate three times in 2022 and that it will reduce its asset purchases twice as fast as it had previously planned. This means that interest rates are expected to rise in 2022.
Mortgage rates today
Mortgage refinance rates today
Use our free mortgage calculator to see the impact of today’s mortgage rates on your monthly payments. By plugging in different rates and terms, you’ll also understand how much you’ll pay over the life of your mortgage.
Your estimated monthly payment
- pay one 25% a higher down payment would save you $8,916.08 on interest charges
- Lower the interest rate by 1% would save you $51,562.03
- Pay an extra fee $500 each month would reduce the term of the loan by 146 month
Click “More Details” for tips on how to save money on your long-term mortgage.
What is a mortgage rate?
A mortgage rate is the interest you pay on money you borrow from a lender to buy or refinance your home. It’s basically the fees you pay to borrow, expressed as a percentage. For example, you can take out a mortgage of $200,000 plus an interest rate of 2.75%.
There are two types of mortgage rates: fixed and adjustable.
A fixed rate mortgage fixes your rate for the life of your mortgage. Even if US market rates go up or down, your rate will stay the same. This is particularly interesting right now, as rates are globally at historically low levels.
A adjustable rate mortgage keeps your rate the same for a pre-determined amount of time, then changes it periodically. A 5/1 ARM locks your rate for the first five years, then the rate fluctuates once a year. It’s a riskier approach these days because you risk your rate going up later since rates are low right now.
How are mortgage rates determined?
Mortgage rates are determined by a combination of factors — some you can control and some you can’t.
The main external factor is the economy. Interest rates tend to be higher when the US economy is booming and lower when it is struggling. The two main economic factors that influence mortgage rates are employment and inflation. When the number of jobs and inflation increase, mortgage rates tend to rise.
You can control your finance, although. The better your credit score, debt ratio and down payment, the lower your rate should be.
Finally, your mortgage rate depends on what type of mortgage you obtain. Government-backed mortgages (like FHA, VA, and USDA loans) charge the lowest rates, while jumbo mortgages charge the highest rates. You will also benefit from a lower rate with a shorter mortgage term.
How to choose a mortgage lender?
First, think about the type of mortgage you want. The best mortgage lender will be different for an FHA mortgage than for a VA mortgage.
A lender should be relatively affordable. You shouldn’t need a very high credit score or down payment to get a loan. You also want them to offer good rates and charge reasonable fees.
Once you’re ready to start shopping for homes, get pre-approved with your top three or four choices. A pre-approval letter indicates that the lender wants to lend you up to a certain amount, at a specific interest rate. When you are pre-approved, your mortgage rate is locked in for 60-90 days. With a few pre-approval letters in hand, you can compare each lender’s offer.
When you apply for pre-approval, a lender does a credit check. A bunch of tough inquiries on your report can hurt your credit score, unless it’s to hunt for the best rate.
If you limit your rate purchases to about a month, the credit bureaus will understand that you’re looking for a home and shouldn’t hold each individual claim against you.