049-cnet-finance-mortgage-home-purchase

Jim Lane/Getty Images

If you’re looking to lock in a competitive mortgage rate, now may be a good time to get it done. No one can predict the future, but a number of converging macroeconomic trends seem to be increasing the likelihood of the Federal Reserve pushing interest rates up from the historic lows they’ve been at since 2020. 

Fifteen-year fixed and 30-year fixed rates both inched up today — as did the average 5/1 adjustable-rate — none of which is anything to panic about. And, to be certain, today’s rates are quite low relative to where they were several years ago. Still, with Congress playing chicken with the debt ceilinginflation pushing prices higher and a key Fed meeting scheduled for early November, there’s a considerable amount of macroeconomic anxiety pulsing through the US. Bottom line: If you’re in a position to lock in a mortgage rate right now, that wouldn’t be a bad idea. 

30-year fixed-rate mortgages

The average interest rate for a standard 30-year fixed mortgage is 3.18%, which is an increase of 15 basis points as of seven days ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most common loan term. A 30-year fixed rate mortgage will usually have a smaller monthly payment than a 15-year one — but usually a higher interest rate. You won’t be able to pay off your house as quickly and you’ll pay more interest over time, but a 30-year fixed mortgage is a good option if you’re looking to minimize your monthly payment.

15-year fixed-rate mortgages

The average rate for a 15-year, fixed mortgage is 2.46%, which is an increase of 17 basis points compared to a week ago. You’ll definitely have a larger monthly payment with a 15-year fixed mortgage compared to a 30-year fixed mortgage, even if the interest rate and loan amount are the same. However, if you can afford the monthly payments, there are several benefits to a 15-year loan. These include typically being able to get a lower interest rate, paying off your mortgage sooner and paying less total interest in the long run.

5/1 adjustable-rate mortgages

A 5/1 ARM has an average rate of 3.20%, an uptick of 16 basis points from seven days ago. For the first five years, you’ll typically get a lower interest rate with a 5/1 adjustable-rate mortgage compared to a 30-year fixed mortgage. But you could end up paying more after that time, depending on the terms of your loan and how the rate adjusts with the market rate. For borrowers who plan to sell or refinance their house before the rate changes, an ARM may be a good option. But if that’s not the case, you might be on the hook for a much higher interest rate if the market rates shift.

Mortgage rate trends

We use data collected by Bankrate, which is owned by the same parent company as CNET, to track rates changes over time. This table summarizes the average rates offered by lenders nationwide:

Current average mortgage interest rates

Loan type Interest rate A week ago Change
30-year fixed rate 3.18% 3.03% +0.15
15-year fixed rate 2.46% 2.29% +0.17
30-year jumbo mortgage rate 2.79% 2.79% N/C
30-year mortgage refinance rate 3.15% 3.01% +0.14

Updated on Oct. 1, 2021.

How to shop for the best mortgage rate

When you’re ready to apply for a loan, you can reach out to a local mortgage broker or search online. In order to find the best home mortgage, you’ll need to take into account your goals and current finances. A range of factors — including your down payment, credit score, loan-to-value ratio and debt-to-income ratio — will all affect the interest rate on your mortgage. Generally, you want a good credit score, a larger down payment, a lower DTI and a lower LTV to get a lower interest rate. 

Apart from the mortgage rate, additional costs including closing costs, fees, discount points and taxes might also affect the cost of your home. Be sure to comparison-shop with multiple lenders — such as credit unions and online lenders in addition to local and national banks — in order to get a loan that’s the best fit for you.

How does the loan term impact my mortgage?

One important thing you should consider when choosing a mortgage is the loan term, or payment schedule. The most common loan terms are 15 and 30 years, although 10-, 20- and 40-year mortgages also exist. Mortgages are further divided into fixed- and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are fixed for the duration of the loan. For ARMs, interest rates are the same for a certain number of years (commonly five, seven or 10 years), then the rate fluctuates annually based on the current interest rate in the market.

One thing to think about when choosing between a fixed- and adjustable-rate mortgage is how long you plan on staying in your home. Fixed-rate mortgages might be a better fit if you plan on living in a home for quite some time. While ARMs can sometimes offer lower interest rates upfront, fixed-rate mortgages are more stable over time. However, you might get a better deal with an ARM if you’re only planning to keep your home for a few years. There is no best loan term as an overarching rule; it all depends on your goals and your current financial situation. Make sure to do your research and understand what’s most important to you when choosing a mortgage.



Source Google News