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Mortgage and refinance rates have ticked up across the board since last week. However, rates remain at historic lows overall.
If you’re aiming to buy a home or refinance, you may think about going for a fixed-rate mortgage instead of an adjustable-rate mortgage.
Darrin English, Senior Community Development Loan Officer at Quontic Bank, told Insider fixed-rate mortgages are often a better deal than adjustable-rate mortgages currently.
These days, ARM rates start higher than fixed rates, and there’s the possibility of a rate increase in the future. You may consider locking in a low rate on a fixed-rate mortgage soon, provided your financial situation is under control.
Rates from Money.com
All mortgage rates have increased since last week, with rates on adjustable mortgages going up sharply. Rates on 10/1 ARMs have shot up by 49 basis points since last Friday and by 84 basis points since last month.
We’re displaying the average rates nationwide for conventional mortgages, which may be what you think of as “regular mortgages.” You may be eligible for an improved rate with a government-backed mortgage through the FHA, VA, or USDA.
Rates from Money.com
Since last Wednesday, refinance rates for both fixed and adjustable mortgages have risen. All rates are also up from this point last month.
Overall, refinance rates are still at striking lows. Low rates commonly signify an economy in distress. As the US continues to face the economic fallout from the COVID-19 pandemic, rates will likely remain low.
Since last week, all fixed and adjustable mortgage rates have increased — though they remain at all-time lows. You might think about locking in a low mortgage rate now.
If you’re thinking about getting a mortgage or refinancing, you may want to act to get a good rate. However, there’s no need to hurry, as rates will probably stay low for the next few months, if not years.
To lock in the lowest rate, consider some of the following steps before applying:
- Boost your credit score by making payments on time or paying down debt. You can ask for a copy of your credit report to search for any errors that could be lowering your score.
- Save more for a down payment. The minimum down payment you’ll need depends on which type of mortgage you want. But if you can put down more than the minimum required of you, you’ll probably get a better rate.
- Lower your debt-to-income ratio. Your DTI ratio is the amount you pay toward debts each month, divided by your gross monthly income. Most lenders want to see a ratio of 36% or less. To improve your ratio, pay down debts or look for ways to increase your income.
- Choose a government-backed mortgage. You might think about a USDA loan (designed for low-to-moderate-income borrowers buying in a rural area), a VA loan (for military members and veterans), or an FHA loan (not designated for any particular group). These mortgages frequently come with lower interest rates than conventional mortgages. As a bonus, down payments aren’t needed for USDA or VA loans.
You can secure a low rate now if your finances are in order, but there’s no need to rush to get a mortgage or refinance if you’re not ready.
If you get a 15-year fixed mortgage, it will take you a decade and a half to pay off your mortgage, and you’ll pay the same interest rate the entire time.
A 15-year term will be less expensive than a longer term. You’ll pay off your mortgage in half the time and you’ll get a lower interest rate to boot.
On the other hand, you’ll cough up higher monthly payments with a 15-year fixed mortgage than a 30-year fixed mortgage because you’re paying the same loan principal over fewer years.
With a 30-year fixed mortgage, you’ll pay down your mortgage over 30 years, and you’ll have a locked-in interest rate for the life of the loan. A 30-year term comes with a higher interest rate than a shorter term.
Your monthly payments will be smaller with a 30-year fixed mortgage than with a 15-year fixed mortgage because you’re dividing up your payments over a longer period.