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Here are the average annual percentage rates (APR) today on 30-year, 15-year and 5/1 ARM mortgages:
Today’s Current Mortgage Rates
The average APR rose on a 30-year fixed mortgage today, inching up to 6.66% from 6.52%. Meanwhile, the average APR on the 15-year fixed mortgage sits at 5.93%. This same time last week, the 15-year fixed-rate mortgage APR was at 5.99%. Rates are quoted as APR.
The average APR on the 30-year fixed-rate jumbo mortgage sits at 6.65%. The average APR on a 5/1 ARM is 7.45%. Last week, the average APR on a 5/1 ARM was 7.40%.
Read in-depth mortgage rates analysis by day
Mortgage Interest Rates Forecast 2023
Experts are forecasting that the 30-year, fixed-mortgage rate will stay in the 5% to 6% range in 2023, though some predict it might get higher.
Experts expect the Federal Reserve’s ongoing monetary policies to continue to put some upward pressure on mortgage rates in the coming months. While mortgage rates are directly impacted by U.S. Treasury bond yields, rising inflation and the Fed’s actions to contain it by hiking the federal funds rate, tend to push mortgage rates upward.
Here are more detailed predictions from economists, as of January 2023:
Compass U.S. region president, Neda Navab: There have been signals that mortgage interest rates may be at or near their peak, given recent encouraging news around inflation and a corresponding drop in the U.S. Treasury yields that help set mortgage rates. A sustained drop could push mortgage rates into the 5% range late in the second quarter or in the second half of 2023, but that’s definitely not guaranteed.
Mortgage Bankers Association (MBA): “Long-term rates have already peaked. We expect that 30-year mortgage rates will end 2023 at 5.2%.”
National Association of Realtors (NAR) senior economist and director of forecasting, Nadia Evangelou: “If inflation continues to slow down–and this is what we expect for 2023–mortgage rates may stabilize below 6% in 2023.” Many buyers want to believe that the 3% may come again, however, we don’t expect to see that.
Freddie Mac: Forecasts the average 30-year mortgage rate to start at 6.6% in Q1 2023 and end up at 6.2% in Q4 2023.
Check your rates today with Better Mortgage.
Faster, easier mortgage lending
What the Forecast Means for You
Lending has become increasingly more costly for homeowners and borrowers alike as mortgage rates continue to rise. Mortgage rates doubled in 2022, with peaks not seen in more than 20 years. And higher interest rates means higher monthly payments for borrowers.
This also means time is running out for homeowners who hope to lock in a lower interest rate by refinancing.
Today’s Mortgage Interest Rates
How are Mortgage Rates Determined?
Mortgage rates, in general, are determined by a wide range of economic factors, including the yield U.S. Treasury bonds, the economy, mortgage demand and the Federal Reserve monetary policy.
Borrowers have no control over the wider economy, but they can control their own financial picture to get the best rate available. Typically, borrowers with higher FICO scores, lower debt-to-income (DTI) ratios and a larger down payment can lock in lower rates.
Mortgage rates can change drastically and often—or stay the same for many weeks. The important thing for borrowers to know is the current average rate. You can check Forbes Advisor’s mortgage rate tables to get the latest information.
The lower the rate, the less you’ll pay on a mortgage. Depending on your financial situation, the rate you’re offered might be higher than what lenders advertise or what you see on rate tables.
If you’re hoping to get the most competitive rate your lender offers, talk to them about what you can do to improve your chances of getting a better rate. This might entail improving your credit score, paying down debt or waiting a little longer to strengthen your financial profile.
Check your rates today with Better Mortgage.
Faster, easier mortgage lending
Best Mortgage Lenders
There are many ways to search for the best mortgage lenders, including through your own bank, a mortgage broker or shopping online. To help you with your search, here are some of the top mortgage lenders based on our list of this month’s best mortgage lenders.
How to Compare Mortgage Rates
Borrowers who comparison shop tend to get lower rates than borrowers who go with the first lender they find. You can compare rates online to get started. However, to get the most accurate quote, you can either go through a mortgage broker or apply for a mortgage through various lenders.
The advantage of going with a broker is you do less of the work and you’ll also get the benefit of their lender knowledge. For example, they might be able to match you with a lender who’s suited for your borrowing needs, this could be anything from a low down payment mortgage to a jumbo mortgage. However, depending on the broker, you might have to pay a fee.
Applying for a mortgage on your own is straightforward and most lenders offer online applications, so you don’t have to drive to an office or branch location. Additionally, applying for multiple mortgages in a short period of time won’t show up on your credit report as it’s usually counted as one query.
Finally, when you’re comparing rate quotes, be sure to look at the APR, not just the interest rate. The APR reflects the total cost of your loan on an annual basis.
Forbes Advisor’s Insight On the Housing Market
Predictions indicate that home prices will continue to rise and new home construction will continue to lag behind, putting buyers in tight housing situations for the foreseeable future.
To cut costs, that could mean some buyers would need to move further away from higher-priced cities into more affordable metros. For others, it could mean downsizing, or foregoing amenities or important contingencies like a home inspection. However, be careful about giving up contingencies because it could cost more in the long run if the house has major problems not fixed by the seller upon inspection.
Another important consideration in this market is determining how long you plan to stay in the home. People who are buying their “forever home” have less to fear if the market reverses as they can ride the wave of ups and downs. But buyers who plan on moving in a few years are in a riskier position if the market plummets. That’s why it’s so important to shop at the outset for a realtor and lender who are experienced housing experts in your market of interest and who you trust to give sound advice.
Frequently Asked Questions (FAQs)
What is the best type of mortgage loan?
The best type of mortgage loan depends on your personal financial profile, lifestyle goals and the type of property you want to own.
For example, a 30-year mortgage might be better for someone who prefers the lowest monthly payments and plans to live in the house for a long period of time. However, if you want to pay off the home quickly, you can opt for a 10-, 15- or 20-year mortgage. The monthly payments will be higher, but the house will be paid off faster.
If interest rate cost is an important factor for you, you might also consider an adjustable-rate mortgage (ARM). The most popular ARM is called the 5/1 ARM, which has a fixed rate for the first five years of the loan and then switches to an adjustable rate for the remainder of the 30-year loan term. When the loan hits the adjustable-rate period, it typically adjusts annually.
This can be a good option if you feel ARM rates are likely to stay lower than fixed rates in the future. For example, the 30-year fixed rate has dramatically increased since the start of 2022, which has made the ARM rate a lower, more attractive option right now.
However, if ARM rates exceed fixed rates in a couple years, it could mean you face higher mortgage payments when the 5/1 mortgage reaches the adjustable-rate period. So it’s important to be prepared for changes in mortgage costs when applying for a 5/1 ARM or other ARMs.
What’s the difference between APR and interest rate?
The interest rate is the cost of borrowing money whereas the APR is the yearly cost of borrowing as well as the lender fees and other expenses associated with getting a mortgage.
The APR is the total cost of your loan, which is the best number to look at when you’re comparing rate quotes. Some lenders might offer a lower interest rate but their fees are higher than other lenders (with higher rates and lower fees), so you’ll want to compare APR, not just the interest rate. In some cases, the fees can be high enough to cancel out the savings of a low rate.
When will mortgage rates drop?
Mortgage rates are expected to level off in 2023 after reaching a 20-year high in late 2022 of more than 7% for the 30-year fixed rate. One key factor in where mortgage rate are headed will depend on the economy and whether the Federal Reserve can lower inflation through its rate hikes, which tends to place upward pressure on mortgage rates.
When should you lock in your mortgage rate?
When you receive a mortgage loan offer, a lender will usually ask if you want to lock in the rate for a period of time or float the rate. If you lock it in, the rate should be preserved as long as your loan closes before the lock expires.
If you don’t lock in right away, a mortgage lender might give you a period of time—such as 30 days—to request a lock, or you might be able to wait until just before closing on the home.
Once you find a rate that is an ideal fit for your budget, it’s best to lock in the rate as soon as possible, especially when mortgage rates are predicted to increase. While it’s not certain whether a rate will go up or down between weeks, it can sometimes take several weeks to months to close your loan.
If you don’t lock in your rate, rising interest rates could force you to make a higher down payment or pay points on your closing agreement in order to lower your interest rate costs.
How long can you lock in a mortgage rate?
Locks are usually in place for at least a month to give the lender enough time to process the loan. If the lender doesn’t process the loan before the rate lock expires, you’ll need to negotiate a lock extension or accept the current market rate at the time.
Even if you have a lock in place, your interest rate could change because of factors related to your application such as:
A new down payment amount
The home appraisal came in different from the estimated value in your application
There was a sudden decrease in your credit score because you are delinquent on payments or took out an unrelated loan after you applied for a mortgage
There’s income on your application that can’t be verified
Talk with your lender about what timelines they offer to lock in a rate as some will have varying deadlines. An interest rate lock agreement will include: the rate, the type of loan (such as a 30-year, fixed-rate mortgage), the date the lock will expire and any points you might be paying toward the loan. The lender might tell you these terms over the phone, but it’s wise to get it in writing as well.
How do you shop for mortgage rates?
First, start by comparing rates. You can check rates online or call lenders to get their current average rates. You’ll also want to compare lender fees, as some lenders charge more than others to process your loan.
Thousands of mortgage lenders are competing for your business. So to make sure you get the best mortgage rates is to apply with at least three lenders and see which offers you the lowest rate.
Each lender is required to give you a loan estimate. This three-page standardized document will show you the loan’s interest rate and closing costs, along with other key details such as how much the loan will cost you in the first five years.
How do you get preapproved for a mortgage?
Borrowers can get preapproved for a mortgage by meeting the lender’s minimum qualifications for the type of home loan you’re interested in. Different mortgages have different requirements. For example, a conventional mortgage usually has higher credit score and down payment requirements than government loans, such as Federal Housing Administration (FHA) and Veterans Affairs (VA) mortgages.
The most important task for a prospective homeowner seeking a preapproval letter is to gather all the financial paperwork needed to give the lender a solid picture of your income, debts and credit history. This information helps underwriters estimate how much of a loan you can afford and the costs of the loan.
The preapproval process will cover:
Stable income. You’ll be expected to provide recent pay stubs, often the last two pay periods, that indicate how much you make and prove employment.
Total assets. Your bank statements and investment accounts will provide a larger picture of how much money you might have available to cover your mortgage.
Credit. A lender will run a hard credit check to look at your current score and the last several years of your credit history. Keep in mind that mortgage lenders look at a score from all three credit bureaus, which could be different than the FICO score you see on free score checking websites.
Total debts. You will need to list the debts you have which helps the lender understand your DTI ratio, which is vital to determining how much of a mortgage loan you can afford.
How do you calculate a mortgage payment?
In addition to your principal and interest payments, a monthly mortgage payment may also include several fees, like private mortgage insurance (PMI), taxes and homeowners association (HOA) fees.
Your lender will be able to provide you with a line-item breakdown of your mortgage payment. Using a mortgage calculator is an easy way to find out what your monthly payments will be. You can also look at an amortization schedule, which shows you how much you’ll pay over time.
How much house can I afford?
Income is the most obvious factor in how much house you can buy: The more you make, the more house you can afford.
However, it also depends on how much of your income is already spoken for through debt payments as well as your credit score and history. The more debt you have, the less likely you will be approved for a mortgage or one at a lower interest rate. Your credit score also plays a role in that the higher your score, the better loan rate and terms you will receive.
And of course, if you have a larger down payment, it will help you in all these factors for affording a home.
How do lenders calculate my DTI?
At a minimum, lenders will total up all the monthly debt payments you’ll be making for at least the next 10 months Sometimes they will even include debts you’re only paying for a few more months if those payments significantly affect how much monthly mortgage payment you can afford.
Lenders primarily look at your DTI ratio. There are two types of DTI: front-end and back-end.
Front end only includes your housing payment. Lenders usually don’t want you to spend more than 31% to 36% of your monthly income on principal, interest, property taxes and insurance. For example, if your total monthly income is $7,000, then your housing payment shouldn’t be more than $2,170 to $2,520.
Back-end DTI adds your existing debts to your proposed mortgage payment. Lenders want this DTI to be no higher than 41% to 50%. Let’s say your car payment, credit card payment and student loan payment add up to $1,050 per month. That’s 15% of your income. Your proposed housing payment, then, could be somewhere between 26% and 35% of your income, or $1,820 to $2,450.
What are points on a mortgage rate?
Mortgage points represent a percentage of an underlying loan amount—one point equals 1% of the loan amount. Mortgage points are a way for the borrower to lower their interest rate on the mortgage by buying points down when they’re initially offered the mortgage. For example, by paying upfront 1% of the total interest to be charged over the life of a loan, borrowers can typically unlock mortgage rates that are about 0.25% lower.
It’s important to understand that buying points does not help you build equity in a property—you simply save money on interest.
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