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Wall Street Journal
3 hours ago
- Business
- Wall Street Journal
Mortgage Rates Today, June 20, 2025: 30-Year Rates Drop to 6.82%
Mortgage rates are down and still under 7%. Today's national average on a 30-year fixed-rate mortgage is 6.82%, according to Bankrate. If you choose a 15-year fixed-rate mortgage, the average rate is 6.00%. Interest rates for new mortgages and refinances continue to hover near 7%, contributing to a stifling summer for the economy. The labor market appears to have stalled, with many companies opting not to fill open positions. At the same time, rising costs have put pressure on consumer spending, contributing to a weak real estate market during the spring and summer. These risks have many business owners hunkering down for an uneasy few months ahead. The economic uncertainty has some analysts making the case that it's time for the Fed to cut interest rates, but Fed officials kept rates unchanged at their June meeting. The policymakers held the federal-funds rate to a range of 4.25% to 4.50%, but indicated that rate cuts might be possible later in the year. Future cuts will depend on whether the jobs market weakens significantly or it becomes more evident that prices won't spike due to tariffs. 'There are many, many different scenarios…where inflation does or doesn't prove out to be at the levels we think, where the labor market does or doesn't soften,' Federal Reserve Chair Jerome Powell told reporters. Top mortgage rates today Current mortgage rates are down and lower than they were seven days ago but lower than in early 2025, when the average 30-year fixed-rate mortgage reached above 7%. Even though Federal Reserve policy doesn't directly impact today's mortgage rates, they have been easing since the Fed began cutting rates in late 2024. Mortgage rates change regularly, so compare offers and consider the personal and market factors that influence your quoted mortgage rate. Term Today's average mortgage rate Last week's average mortgage rate Average mortgage rate change 30-year fixed 6.82% 6.87% -0.05% 15-year fixed 6.00% 6.04% -0.04% 5/1 ARM 6.15% 6.26% -0.11 30-year fixed jumbo 6.89% 6.92% -0.03 Source: Data reflects interest rates, not APRs. Term Today's average mortgage rate Last week's average mortgage rate Average mortgage rate change 30-year fixed 6.79% 6.83% -0.04% 15-year fixed 6.11% 6.14% -0.03% 30-year fixed jumbo 6.77% 6.69% -0.08% Source: Data reflects interest rates, not APRs. During the last three years, mortgage rates have been on the rise. In early 2022, the average 30-year fixed rate was 4.72% and the 15-year fixed rate was 3.91%. Rates reached a recent peak in late 2023 at 7.79% for 30-year fixed-rate mortgages and 7.03% for 15-year fixed-rate mortgages. Since then, rates have fallen as far as 6.08% (30-year fixed) and 5.15% (15-year fixed), but then began moving higher again. While these rates represent relatively recent heights for mortgage rates, average 30-year rates peaked above 16% in the early 1980s. The lowest-ever 30-year fixed rate, slightly below 3%, appeared in 2021. Today's mortgage rates are influenced by economic and market conditions, as well as personal factors. The rate you're quoted by a lender might be higher or lower than the national average. Here are some of the items considered when calculating your mortgage rate: 10-year Treasury yield: Current mortgage rates, especially on a 30-year fixed-rate mortgage, are related to movements in the 10-year Treasury yield. Current mortgage rates, especially on a 30-year fixed-rate mortgage, are related to movements in the 10-year Treasury yield. Mortgage-backed securities: The rate investors earn on mortgage-backed securities also plays a role. Spreads between mortgage-backed securities and Treasury yields, as well as between what lenders offer borrowers and mortgage-backed security rates, impact current mortgage rates. The rate investors earn on mortgage-backed securities also plays a role. Spreads between mortgage-backed securities and Treasury yields, as well as between what lenders offer borrowers and mortgage-backed security rates, impact current mortgage rates. Investor sentiment: Perceptions about fiscal policy and economic conditions can affect how Treasuries move, as well as how much risk lenders feel comfortable taking on. Perceptions about fiscal policy and economic conditions can affect how Treasuries move, as well as how much risk lenders feel comfortable taking on. Personal credit history: The information in your credit report and your credit score influence your mortgage rate quote. The information in your credit report and your credit score influence your mortgage rate quote. Income: Lenders look at your income relative to your potential mortgage payment and other debts you have. If it appears you can handle your mortgage payments with relative ease, they feel more comfortable lending you money. Lenders look at your income relative to your potential mortgage payment and other debts you have. If it appears you can handle your mortgage payments with relative ease, they feel more comfortable lending you money. Down payment: Your mortgage rate might be lower if you make a larger down payment; often, the best results are when you put at least 20% down. Your mortgage rate might be lower if you make a larger down payment; often, the best results are when you put at least 20% down. Points paid: Mortgage points, also known as discount points, are fees paid upfront as a way to directly reduce your rate and lower your monthly payments. Each point, which represents 1% of your loan amount, can potentially reduce your rate by up to 0.25 percentage points. Mortgage points, also known as discount points, are fees paid upfront as a way to directly reduce your rate and lower your monthly payments. Each point, which represents 1% of your loan amount, can potentially reduce your rate by up to 0.25 percentage points. Loan term: A 15-year mortgage rate is usually lower than a 30-year rate. By choosing a shorter term, you might be able to get a lower interest rate, but your monthly payment might be higher. How to choose the right mortgage for your financial goals When considering a mortgage, review your financial situation and goals. Often, 30-year fixed-rate mortgages are chosen because they spread a large payment over a longer period of time, making monthly payments more affordable. Even though the loan costs more overall, it might be more affordable on a day-to-day basis. If your main concern is becoming debt-free sooner while paying less interest and you can afford a higher monthly payment, a shorter-term loan might make sense. Let's say you get a $350,000 loan. Here's what you might pay with different mortgage terms: 30-year loan (6.97%): Monthly payment of $2,321.51 and total interest amount of $485,744.05 Monthly payment of $2,321.51 and total interest amount of $485,744.05 20-year loan (6.74%): Monthly payment of $2,659.19 and total interest amount of $288,206.46 Monthly payment of $2,659.19 and total interest amount of $288,206.46 15-year loan (6.20%): Monthly payment of $2,991.45 and total interest amount of $188,461.10 Monthly payment of $2,991.45 and total interest amount of $188,461.10 10-year loan (6.16%): Monthly payment of $3,913.90 and total interest amount of $119,667.88 These scenarios don't include other costs, like insurance and property taxes, that you might also be subject to. It's important to consider those costs as well. For example, you might think you can afford the payments on a 20-year or 15-year mortgage, but once you add in other homeownership costs, your budget might feel tight. Don't forget other homeownership costs that might impact your monthly budget, including maintenance, repairs, utilities and other expenses that might be higher once you move into a house. When choosing a mortgage, the principal and interest payments aren't the only considerations. One strategy might be to choose a longer loan, but make extra payments to pay down the debt faster and reduce the amount of interest you pay. With this approach, you can choose to pay extra each month, but if you need to cut back due to emergency, you can revert to the required lower monthly payment with a lower risk of not being able to meet the obligation. If you lock into a shorter loan term with a higher payment, you can't scale back payments later without risking the loss of the home.
CNET
8 hours ago
- Business
- CNET
Mortgage Refinance Rates Fall: Today's Refinance Rates, June 20, 2025
For the vast majority of homeowners, there's currently little financial incentive to refinance their mortgages. So far in 2025, average mortgage rates have remained elevated, consistently hovering between 6.5% and 7% due to ongoing economic uncertainty. "If rates fall below 6%, we could see a big jump in refinance activity," said Jeb Smith, licensed real estate agent and member of CNET Money's expert review board. Yet economists and housing market experts aren't expecting a dramatic drop-off in rates in the immediate future. Mortgage refinance rates fluctuate daily based on a range of economic and political factors. For more insights on where rates might be headed, check out our weekly mortgage rate forecast. When mortgage rates start to fall, be ready to take advantage. Experts recommend shopping around and comparing multiple offers to get the lowest rate. Enter your information here to get a custom quote from one of CNET's partner lenders. About these rates: Bankrate's tool features rates from partner lenders that you can use when comparing multiple mortgage rates. Current refinance rate trends At the start of 2025, many expected inflation to keep cooling down and the Federal Reserve to cut interest rates, which would have gradually lowered mortgage refinance rates. However, after three interest rate reductions in 2024, the Fed has left borrowing rates unchanged this year to assess the economic fallout from President Trump's policies on trade, immigration and government spending. The central bank is expected to resume cutting rates as early as September, but this will not immediately result in lower mortgage rates. While the Fed's policy decisions guide borrowing costs across the economy, they don't have a 1:1 relationship with mortgage rates, which are set in the bond market. As of now, the Fed is expected to make two 0.25% rate reductions this year. If inflation increases due to tariffs, policymakers may hold off on easing borrowing costs until later, which would keep upward pressure on mortgage refinance rates. Refinance rate predictions Most housing forecasts still call for a modest decline in mortgage rates, with average 30-year fixed rates expected to end the year around below 6.5%. For refinancing to become significantly more affordable, though, we need to see multiple interest rate cuts and weaker economic data. Overall, it's unlikely we'll see another refinancing boom like the one in 2020-21 when mortgage rates were exceptionally low around 3%. Nevertheless, refinancing might be beneficial for other reasons, like changing the type of home loan, term length or taking someone off the mortgage. Refinancing 101 When you refinance your mortgage, you take out another home loan that pays off your initial mortgage. With a traditional refinance, your new home loan will have a different term and/or interest rate. With a cash-out refinance, you'll tap into your equity with a new loan that's bigger than your existing mortgage balance, allowing you to pocket the difference in cash. Refinancing can be a great financial move if you score a low rate or can pay off your home loan in less time, but consider whether it's the right choice for you. Reducing your interest rate by 1% or more is an incentive to refinance, allowing you to cut your monthly payment significantly. But refinancing your mortgage isn't free. Since you're taking out a whole new home loan, you'll need to pay another set of closing costs. If you fall into that pool of homeowners who purchased property when rates were high, consider reaching out to your lender and running the numbers to see whether a mortgage refinance makes sense for your budget, said Logan Mohtashami, lead analyst at HousingWire. How to choose the right refinance type and term The rates advertised online often require specific conditions for eligibility. Your personal interest rate will be influenced by market conditions as well as your specific credit history, financial profile and application. Having a high credit score, a low credit utilization ratio and a history of consistent and on-time payments will generally help you get the best interest rates. 30-year fixed-rate refinance The current average interest rate for a 30-year refinance is 6.79%, a decrease of 3 basis points over this time last week. (A basis point is equivalent to 0.01%.) A 30-year fixed refinance will typically have lower monthly payments than a 15-year or 10-year refinance, but it will take you longer to pay off and typically cost you more in interest over the long term. 15-year fixed-rate refinance The average rate for a 15-year fixed refinance loan is currently 6.11%, a decrease of 3 basis points over last week. Though a 15-year fixed refinance will most likely raise your monthly payment compared to a 30-year loan, you'll save more money over time because you're paying off your loan quicker. Also, 15-year refinance rates are typically lower than 30-year refinance rates, which will help you save more in the long run. 10-year fixed-rate refinance The current average interest rate for a 10-year refinance is 6.07%, a decrease of 4 basis points over last week. A 10-year refinance typically has the lowest interest rate but the highest monthly payment of all refinance terms. A 10-year refinance can help you pay off your house much quicker and save on interest, but make sure you can afford the steeper monthly payment. To get the best refinance rates, make your application as strong as possible by getting your finances in order, using credit responsibly and monitoring your credit regularly. And don't forget to speak with multiple lenders and shop around. Reasons you might refinance your home Homeowners usually refinance to save money, but there are other reasons to do so. Here are the most common reasons homeowners refinance: To get a lower interest rate: If you can secure a rate that's at least 1% lower than the one on your current mortgage, it could make sense to refinance. If you can secure a rate that's at least 1% lower than the one on your current mortgage, it could make sense to refinance. To switch the type of mortgage: If you have an adjustable-rate mortgage and want greater security, you could refinance to a fixed-rate mortgage. If you have an adjustable-rate mortgage and want greater security, you could refinance to a fixed-rate mortgage. To eliminate mortgage insurance: If you have an FHA loan that requires mortgage insurance, you can refinance to a conventional loan once you have 20% equity. If you have an FHA loan that requires mortgage insurance, you can refinance to a conventional loan once you have 20% equity. To change the length of a loan term: Refinancing to a longer loan term could lower your monthly payment. Refinancing to a shorter term will save you interest in the long run. Refinancing to a longer loan term could lower your monthly payment. Refinancing to a shorter term will save you interest in the long run. To tap into your equity through a cash-out refinance: If you replace your mortgage with a larger loan, you can receive the difference in cash to cover a large expense. If you replace your mortgage with a larger loan, you can receive the difference in cash to cover a large expense. To take someone off the mortgage: In case of divorce, you can apply for a new home loan in just your name and use the funds to pay off your existing mortgage.
Yahoo
13 hours ago
- Business
- Yahoo
HELOCs rise but home equity loans are steady as Fed leaves interest rates unchanged
The Federal Reserve stood pat on interest rates for the fourth meeting in a row, and home equity loans were flat — but HELOCs bumped up a bit. The average rate on the $30,000 HELoan remained at 8.25 percent for the third straight week. Meanwhile, the average rate on a $30,000 home equity line of credit rose five basis points to 8.27 percent, according to Bankrate's national survey of lenders. While the central bank took a cautionary stance on inflation and the impact of President Trump's tariffs this time, it also signaled that two interest rate cuts could be in the cards by the end of 2025. Forecasts by the CME FedWatch tool predict the Fed lowering lower rates by a half point by year's end. 'That would likely push home equity loan and line of credit rates down by a similar amount,' says Ted Rossman, senior industry analyst at Bankrate. 'There's a good chance rates will remain pretty flat through the summer and cuts could come into play more in the September to December timeframe.' Current 4 weeks ago One year ago 52-week average 52-week low HELOC 8.27% 8.20% 9.17% 8.58% 7.90% 5-year home equity loan 8.25% 8.23% 8.60% 8.42% 8.23% 10-year home equity loan 8.41% 8.38% 8.74% 8.55% 8.38% 15-year home equity loan 8.31% 8.32% 8.73% 8.49% 8.32% Keep your financial options open and put your equity to use with a flexible HELOC. Explore HELOC offers Rates on HELOCs and home equity loans are being driven primarily by two factors: lender competition for new customers and the Federal Reserve's actions. The Fed especially impacts the cost of variable-rate products like HELOCs. While they've ticked up lately, HELOCs and home equity loans have fallen substantially from the highs they hit at the beginning of 2024, with HELOC rates in particular reaching lows not seen since 2023. Bankrate Chief Financial Analyst Greg McBride forecasts that rates will continue to decline in 2025 — especially those on HELOCs, potentially to their lowest level in three years. Learn more: How the Federal Reserve affects HELOCs and home equity loans Because HELOCs and home equity loans use your home as collateral, their rates tend to be much less expensive — more akin to current mortgage rates — than the interest charged on credit cards or personal loans, which aren't secured. Average rate HELOC 8.27% Home equity loan 8.25% Credit card 20.12% Personal loan 12.65% Of course, the individualized offer you receive on a particular HELOC or new home equity loan reflects additional factors like your creditworthiness and financials. Then there's the value of your home and your ownership stake. Lenders generally limit all your home-based loans (including your mortgage) to a maximum 80 to 85 percent of your home's worth. Even if you are able to secure a good rate from a lender, home equity products are still relatively high-cost debt, notes Rossman. 'With average home equity loan and line of credit rates in the 8 percent range right now, that's close to the border of what distinguishes between lower- and higher-cost debt,' he says. 'It's not nearly as low as the sub-4 percent rates we saw three years ago, but not as high as the 10+ percent rates that we observed a year and a half ago.' Home equity trends Real estate is Americans' second-most popular long-term investment, according to Bankrate's 2025 Long-Term Investment Survey. 1.2 million homeowners with mortgages have negative equity in their homes (the outstanding loan balance totals more than their homes are worth), according to Cotality. Originations of home equity products (HELOCs, home equity loans and cash-out refinances) rose 11% in the fourth quarter of 2024, according to TransUnion. U.S. mortgage-holders collectively possessed $11.5 trillion worth of tappable home equity in the second quarter of 2025, according to the latest ICE Mortgage Monitor. Methodology The national survey of large lenders is conducted weekly. To conduct the National Average survey, Bankrate obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets. In the national survey, our Market Analysis team gathers rates and/or yields on banking deposits, loans and mortgages. We've conducted this survey in the same manner for more than 30 years, and because it's consistently done the way it is, it gives an accurate national apples-to-apples comparison. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
15 hours ago
- Business
- Yahoo
How to buy a house with bad credit
You can get a mortgage with a credit score as low as 620, 580 or even 500, depending on the type of loan. While you might be eligible for a mortgage with a low credit score, you'll pay a higher interest rate for the loan. Some mortgage lenders offer free credit counseling to help you improve your score before applying for a loan. Want to buy a house but worried that your credit isn't good enough to make it happen? You're not alone. Twenty-four percent of Americans who don't currently own a home point to their credit not being good enough as why, according to Bankrate's 2025 Home Affordability Report. While your credit score is the first factor mortgage lenders consider when determining whether you're eligible for a loan, it's not the only piece of the puzzle. Read on to learn how to borrow the money you need to buy a house with bad credit. You can get a mortgage with a lower or bad credit score, but to do so, you'll need to prepare financially to ensure you get the best possible loan terms. Your preparations should include working to improve your credit score before applying, as this will increase your approval odds and put you in the best spot to secure a competitive interest rate. Here are some steps to take: Checking your credit report for errors can help identify any items that may be lowering your credit score. Several factors make up your credit score, including your payment history, amounts owed on current credit and how long you've had credit accounts. Your credit mix and new credit accounts also play a role in your score. If you see a mistake or outdated item related to any one of these factors, contact Equifax, Experian or TransUnion. Each credit bureau has a process for correcting errors and out-of-date information. When working toward buying a home with bad credit, try to pay down what you already owe. Lowering your debt load might not only boost your credit score but also make you eligible for a bigger mortgage, thanks to a better debt-to-income (DTI) ratio. Every mortgage lender is different, and some offer lower rates and fees than others. Research shows that getting multiple rate quotes can save you thousands over a 30-year mortgage. Check out different types of lenders, including banks and online lenders, to see where you get the best offer. Learn more: Best mortgage lenders for bad credit If you have bad credit, consider asking a family member or friend with better credit to co-sign your mortgage. This can help give your application a boost — but only if the co-signer is able and willing to take on the debt. (Note that co-signing is different from co-borrowing.) If you see ads promising 'guaranteed' approval for a mortgage regardless of credit, it's a red flag. Under federal rules, a lender must verify the ability of a borrower to repay a mortgage, so there can't be a 'guarantee' unless that happens. Even if you get that guaranteed approval, it usually comes with excessive or inflated costs. Credit report changes can take time to go through the system, so improved scores might not show up in time for a mortgage application. In this case, you can try getting a rapid rescore through your lender. In this process, your lender submits proof to a credit agency that an applicant has made recent changes or updates to their account that are not yet reflected on their credit report. You'll need to pay for this service, but the expense might be a worthwhile trade-off to get a better interest rate. Loan type Credit score minimum Conventional loan 620 or 660 depending on program FHA loan 580 (or 500 with a minimum 10 percent down payment) VA loan No official requirement, but typically 620 USDA loan No official requirement, but typically 640 Fannie Mae and Freddie Mac each back conventional loans with a lower minimum credit score of 620 and 660, respectively. Both of these loans require just 3 percent down and may offer either a fixed or variable interest rate. Conventional mortgages, however, may have stricter qualification criteria than other types of mortgages, such as FHA or VA loans. The Federal Housing Administration (FHA) insures FHA loans, which allow mortgage lenders to accept a credit score as low as 580 with a 3.5 percent down payment, or 500 with a 10 percent down payment. While FHA loans have more lenient qualifying criteria, they come with mortgage insurance premiums (upfront and annual) that you'll need to pay no matter your down payment size. If you're a military member, veteran or married to someone who has served in the armed forces, you could benefit from a VA loan backed by the U.S. Department of Veterans Affairs. You don't have to meet a specific credit score minimum to qualify, although many lenders do require a score of at least 620. No down payment is necessary with this loan, but you'll need to pay the VA funding fee. If you have a lower income and want to buy a home in a particular rural area, look into a USDA loan. While not a hard-and-fast rule, most USDA-approved lenders require a minimum credit score of just 640. Like VA loans, USDA loans come with no down payment requirement. Lenders rely on data from the three main credit reporting bureaus, Equifax, Experian and TransUnion. Typically, a lender looks at the middle credit score of the three when considering you for a mortgage. In addition to your scores, the lender will look at your credit report, including total debt and any issues like defaults or late payments. Mortgage lenders most often use the FICO credit scoring model to assess creditworthiness. Here's how those ratings work: Credit score range Rating Below 580 Poor 580-669 Fair 670-739 Good 740-799 Very good 800 or above Excellent Bankrate insight The average credit score of outstanding mortgages in the U.S. as of the fourth quarter of 2024 was 741, according to the Federal Housing Finance Agency. A poor credit score will primarily cost you in the way of a higher interest rate. Here's an example assuming a 30-year conventional loan for $400,000: FICO score APR* Monthly payment Total interest paid 760-850 7.072% $2,681 $565,009 700-759 7.314% $2,746 $588,593 680-699 7.428% $2,777 $599,779 660-679 7.482% $2,792 $605,095 640-659 7.58% $2,819 $614,769 620-639 7.711% $2,855 $627,755 Will you pay more for mortgage insurance with bad credit? It depends on the type of mortgage. Private mortgage insurers — which offer mortgage insurance for conventional loans, known as PMI — base their rates on credit score, among other factors. Generally, if you have a lower credit score, you'll pay more for PMI. On the other hand, if you're getting an FHA loan, your credit score won't impact how much mortgage insurance you pay — those rates depend on the loan term, loan amount and the size of your down payment. Are mortgage rates higher with bad credit? Yes. Generally, if you don't have good credit, that's a sign you're a riskier borrower. To compensate for taking on that risk, your lender will charge you a higher interest rate. Sign in to access your portfolio
Yahoo
a day ago
- Business
- Yahoo
How much is a down payment on a house?
You don't need to put 20 percent down to get a mortgage, and some mortgages don't even require a down payment. You can get a conventional mortgage with 3 percent down, but with anything less than 20 percent, you'll have to pay mortgage insurance. Making a larger down payment can get you a lower interest rate. Most — but not all — mortgage loans require a down payment, a percentage of the home value you pay upfront. How much you should put toward a down payment depends on the type of loan you're applying for and your financial situation. You might have heard you're required to put down 20 percent on a home, but in truth, you don't have to pay that much upfront. Your down payment size will depend on the minimum amount required for the loan type you're getting as well as how much you have saved for the purchase that you can comfortably part with. For example, if you plan to put down 10 percent on a $400,000 conventional loan, your down payment would equal $40,000. A 3 percent down payment — the minimum requirement for a conventional loan — would come to $12,000. The median down payment for all buyers as of 2025 was 15 percent, according to the National Association of Realtors. Bankrate insight Among Bankrate users, 42 percent, or nearly 260,000 users, plan to make a down payment of less than 20 percent, according to Bankrate's 2024 Annual Data report. Learn more: What's the average down payment on a house? Loan type Minimum down payment Conventional conforming loan 3 percent Jumbo loan 10 percent FHA loan 3.5 percent VA loan None USDA loan None Second home or investment property 10-25 percent The down payment requirements for a conventional loan on a primary residence vary depending on the lender, the borrower and the property type. For example, first-time homebuyers and buyers with low to moderate incomes could qualify for a fixed-rate conventional loan with a 3 percent down payment. However, you may or may not qualify to make your lender's lowest offered down payment. The amount you must put down will depend on your: Credit score Debt-to-income ratio (DTI) Savings and other assets House of choice Whatever the minimum required down payment on your conventional loan, keep in mind that if you put down less than 20 percent, you'll have to pay for private mortgage insurance (PMI). However, once you reach 20 percent equity in your home, you can request that your lender remove PMI from your bill. Jumbo loans are a specific type of conventional mortgage for high-priced properties. In 2025, homes that cost more than $806,500 in most markets will need a jumbo loan, though in high-cost areas, the limit may be as high as $1,209,750. Because of their size, jumbo loans typically require 10 percent down or more. FHA loans require a minimum down payment of 3.5 percent with a credit score of at least 580. If you have a credit score between 500 and 579, you'll need a 10 percent down payment. No matter how large your down payment on an FHA loan, you'll be required to pay mortgage insurance premiums (MIPs). There are two types of MIP: an upfront MIP paid at closing that's 1.75 percent of the loan amount, and an annual MIP that's added to your monthly mortgage payment. The annual MIP is based on the size of your down payment, your loan amount and your loan term, but it ranges from 0.15 to 0.75 percent of your total loan amount. If you put down 10 percent or more, and you took out your FHA mortgage after June 3, 2013, this annual MIP can be removed after 11 years. Otherwise, you'll pay this expense for the life of the loan. The VA and USDA both back zero-down payment loans for qualified homebuyers. VA loans are available to qualifying members of the armed forces, veterans and their surviving spouses. USDA loans, on the other hand, are available to borrowers purchasing homes in designated rural areas. The USDA has maps on its website that show eligible areas. Neither loan program requires mortgage insurance. With VA loans, you'll pay a one-time funding fee, which ranges from 1.25 percent to 3.3 percent depending on how many VA loans you've had, your loan type and your down payment amount. USDA loans have an upfront guarantee fee of 3.5 percent of the loan amount and an annual fee of 0.5 percent of the average annual loan balance. Your lender will be charged this fee and may pass the cost on to you. If you're buying a second home or an investment property with a conventional loan, the down payment requirement is usually higher than for a primary residence. Second homes typically start at 10 percent, and investment properties can require as much as 15 to 25 percent, depending on your creditworthiness and financial situation. Beyond the requirements, how much you should put down on a house is a personal decision. Consider: Your financial goals: Is your goal to build home equity, or would you prefer to invest that money elsewhere, such as a retirement fund? How long you plan to stay in the house: Is this a starter home, or do you plan on being there long term? If you plan on selling in five to 10 years, you might not be as interested in putting a lot of money down. Your emergency savings: Don't deplete your emergency fund just to make a larger down payment on a house. You'll need the cushion for unexpected expenses. Home needs: If you need to invest in a larger home – for example, if you need home office space or a guest room — you may be stretching your budget and need to put less money down relative to your loan size. If you're downsizing, on the other hand, a big down payment may be easier to manage. Closing costs: Closing costs are a bundle of fees paid when you finalize your mortgage. They can include attorney fees and a loan origination fee, and they usually cost 2 to 5 percent of your mortgage's principal amount. If your closing costs are on the higher end of that range, they may eat into your down payment savings. Costs to upgrade and repair the home: When you move, you'll likely need to pay for repairs or home improvements and buy new furniture or appliances. Your ability to save for a down payment is a good sign you're ready for the financial commitment of homeownership. Here are some clear benefits to waiting until you can make a bigger down payment: Lower mortgage rate: The less money you borrow as a percentage of the home's value, the less risk your loan poses to the mortgage lender. As a result, larger down payments tend to correlate with lower interest rates. More equity: The greater the percentage of your home you own outright, the more equity you have. That can be handy if you're looking to finance a renovation project in the short term. You can tap your home equity through a cash-out refinance, home equity loan or home equity line of credit (HELOC). Lower monthly payments: Because you're borrowing less money and you likely have a lower interest rate, you can expect a lower monthly mortgage payment. Cheaper closing costs: The fees you pay to your lender at closing are usually calculated as a percentage of your loan's total value, so if you borrow less, your closing costs will be lower, too. More competitive offer: If you're in a seller's market and competing with several other buyers, a larger down payment can make your offer more competitive. Being able to put up more cash might give the seller confidence that your loan will close. Lower chance of becoming underwater on your mortgage: If you finance too much of your home, and it ends up losing value, you could end up owing more money than your home is worth. Even if you can afford it, making a big down payment on a house isn't always the best decision. Here are some reasons why you may want to put less money down: It gets you in the door: If a down payment is your main obstacle to homeownership, making a lower one could be smart. More money for repairs or renovations: If you're buying a home that needs some investment, and you could theoretically pay for the repairs in cash, you may choose to make a lower down payment. Buying a more expensive home: If you take advantage of a lower down payment mortgage, you could buy a bigger home with the same money you would use to put 20 percent down on a cheaper home. Not draining your savings: By putting less down, you're potentially keeping money in the bank which you can use elsewhere. If you put that money into your house, you might get it back — and then some — when you sell or refinance. Investing it elsewhere: While homes are seen as secure investments, investors may prefer to put their money into the stock market where they could see a higher return. The lower your credit score, the more you may be required to pay upfront toward your home. For example, FHA loan borrowers may have credit scores as low as 500. However, if your score is 579 or below, you'll need to make a 10 percent down payment. If you have a score of 580 or higher, you can qualify to put down only 3.5 percent. With other types of mortgages, a lower credit score may not increase your required down payment, but it is likely to increase your overall costs. If you qualify for a mortgage, you'll typically receive a higher mortgage rate than a borrower with a lower credit score — and that raises the total cost of your mortgage. Because down payments are expressed as a percentage of the home's sales price, you can multiply the sales price by your target percentage to determine how much you'll need to put down. Here are some examples of how much the down payment on a house would be at different price points: Median home price* 3% down 9% down 18% down 20% down Midwest: $313,300 $9,399 $28,197 $56,394 $62,660 South: $365,300 $10,959 $32,877 $65,754 $73,060 Northeast: $487,400 $14,622 $43,866 $87,732 $97,480 West: $628,500 $18,855 $56,565 $113,130 $125,700 You can use Bankrate's mortgage down payment calculator to get a sense of how different down payment amounts impact your monthly mortgage payment, and the interest you can save by putting more money down. How can I find down payment assistance? Down payment assistance programs help eligible first-time homebuyers — and sometimes repeat buyers — with low to moderate incomes. Assistance can come from a government agency, a nonprofit or even your mortgage lender. It might include a forgivable or deferred loan, a grant or a matched savings program. Why do mortgage lenders require a down payment? Your down payment offsets the lender's risk. The more money you put down, the less the lender stands to lose if you default on payments, especially early in the loan term. Down payments on government-backed loans tend to be lower because the loan is at least partially guaranteed by a federal agency. When do I make my down payment? Down payments are typically made in two steps. First, you'll deposit a portion of your down payment — typically about 1 percent of the home price — as earnest money shortly after the seller accepts your offer on the home. You'll make the rest of your down payment at closing, along with paying your closing costs. This total amount is referred to as your cash to close. Can you buy a house without a down payment? Yes, mortgages backed by the VA and USDA are available without a down payment. Some commercial lenders or local credit unions may also offer no-down-payment mortgages. What other costs should I anticipate when buying a house? In addition to the down payment, you'll also need to pay closing costs, which usually total between 2 and 5 percent of your loan amount. Your lender might also require you to prove that you have reserves. This means you have enough money in the bank to cover a couple of months' worth of mortgage payments.
