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Business Insider
5 hours ago
- Business
- Business Insider
Trump's housing director rips the Fed, says the slow pace of rate cuts is fueling America's home-inventory problem
Federal Reserve Chairman Jerome Powell's decision to keep rates unchanged earlier this week on Wednesday was widely expected by the market, but it was bashed by the president and his administration. In addition to Donald Trump, the critics of the latest Fed decision include Bill Pulte, the director of the Federal Housing Finance Agency and chairman of Fannie Mae and Freddie Mac. Many naysayers argue inflation has come down enough for the Fed to cut rates, but Pulte takes another issue: he believes sustained high rates are kneecapping America's housing market and exacerbating the affordability crisis. On Wednesday, prior to the Fed meeting, Pulte posted on X that Powell needed to "lower interest rates today," or immediately resign, arguing that Fannie Mae and Freddie Mac could help more Americans afford a house if rates came down. Because President Trump has crushed inflation, Fed Chairman Jerome Powell needs to lower interest rates today, and if not Chairman Powell needs to resign, immediately. Fannie Mae and Freddie Mac can help so many more Americans if Chair Powell will just do his job and lower rates. — Pulte (@pulte) June 18, 2025 After the decision to hold rates steady, Pulte shared a series of posts on X further bashing Powell, calling him "a main reason for the Housing Supply Crisis in this country" and criticizing him for hurting the mortgage market. Jerome Powell is a main reason for the Housing Supply Crisis in this Country. By improperly keeping interest rates high, Jerome Powell is trapping homeowners in low-rate mortgages and choking off existing home sales—directly fueling the housing supply crisis. He must lower rates. — Pulte (@pulte) June 20, 2025 As he's done in the past, President Donald Trump also ripped into the Fed's decision on Truth Social, referencing Pulte's statements and calling for Powell to lower rates to 2.5%. The president has repeatedly clashed with Powell, blaming him for holding the stock market back, and even threatening to fire him. Powell's reasoning behind staying in wait-and-see mode is that the Fed is monitoring the impacts of tariffs on inflation and wants to see more evidence that inflation has cooled for good. Pulte's argument is referring to the "lock-in" effect in the housing market, which some housing experts argue has exacerbated supply issues by keeping current owners from selling their homes to avoid having to refinance a new purchase as a higher rate than their existing mortgage. The 30-year mortgage rate rose from historically low levels under 3% during the pandemic to around 7% today. Some housing experts may agree with Pulte's assessment that high rates are hurting the market. Lawrence Yun, chief economist at the National Association of Realtors, sees mortgage rates as the "magic bullet" that'll alleviate the housing crisis. "Part of the delay in recovery is because the Federal Reserve has changed its outlook and appears to be on pause for a longer period," Yun said during a NAR economic forum earlier this month. Others are optimistic that the housing market will improve this year. The Fed is still on track for two cuts in 2025, and Nadia Evangelou, senior economist at NAR, sees a path for mortgage rates to decline to 6.4% to 6.5% by year-end. In some markets across the country, buyers are gaining the upper hand as home price appreciation slows and increases affordability. "We are at a bit of a turning point with mortgage rates," Evangelou told Business Insider. "We expect affordability to be better and for rates to ease, but we don't know to what extent. When mortgage rates are at 6.7% or lower, we typically see more activity."
Yahoo
8 hours ago
- Business
- Yahoo
Mortgage and refinance interest rates today, June 20, 2025: Rates trending lower
Mortgage rates sank slightly lower this week. According to Freddie Mac, the one-week average for the 30-year fixed interest rate slipped three basis points from last week to 6.81%. It's the fourth week of a falling trend. The 15-year fixed rate stepped down one basis point over the past week to an average of 5.96%. With the Federal Reserve leaving short-term interest rates unchanged Wednesday, the market is focusing on the Middle East. With markets closed for Juneteenth on Thursday, today's Wall Street trading will provide a clue to the momentum for the upcoming week. Dig deeper: 2025 housing market — Is it a good time to buy a house? Here are the current mortgage rates, according to the latest Zillow data: 30-year fixed: 6.75% 20-year fixed: 6.43% 15-year fixed: 5.97% 5/1 ARM: 7.00% 7/1 ARM: 7.24% 30-year VA: 6.25% 15-year VA: 5.84% 5/1 VA: 6.37% Remember, these are the national averages and rounded to the nearest hundredth. Learn more: Should you lock in a mortgage rate? These are today's mortgage refinance rates, according to the latest Zillow data: 30-year fixed: 6.79% 20-year fixed: 6.51% 15-year fixed: 6.02% 5/1 ARM: 7.08% 7/1 ARM: 7.15% 30-year VA: 6.30% 15-year VA: 6.00% 5/1 VA: 6.23% Again, the numbers provided are national averages rounded to the nearest hundredth. Mortgage refinance rates are often higher than rates when you buy a house, although that's not always the case. Learn more: Want to refinance your mortgage? Here are 7 home refinance options. Your mortgage rate plays a large role in how much your monthly payment will be. Use this mortgage calculator to see how your mortgage amount, rate, and term length will impact your monthly payments: To get an even more detailed look at your potential monthly payment, use our Yahoo Finance mortgage calculator. It also factors in your homeowners insurance, property taxes, mortgage insurance, and HOA fees. A mortgage interest rate is a fee for borrowing money from your lender, expressed as a percentage. You can choose from two types of rates: fixed or adjustable. A fixed-rate mortgage locks in your rate for the entire life of your loan. For example, if you get a 30-year mortgage with a 6% interest rate, your rate will stay at 6% for the entire 30 years unless you refinance or sell. An adjustable-rate mortgage locks in your rate for a predetermined amount of time and then changes it periodically. Let's say you get a 7/1 ARM with an introductory rate of 6%. Your rate would be 6% for the first seven years, then the rate would increase or decrease once per year for the last 23 years of your term. Whether your rate goes up or down depends on several factors, such as the economy and housing market. At the beginning of your mortgage term, most of your monthly payment goes toward interest. Your monthly payment toward mortgage principal and interest stays the same throughout the years — however, less and less of your payment goes toward interest, and more goes toward the mortgage principal or the amount you originally borrowed. Learn more: Adjustable-rate vs. fixed-rate mortgages A 30-year fixed-rate mortgage is a good choice if you want a lower mortgage payment and the predictability that comes with having a fixed rate. Just know that your rate will be higher than if you choose a shorter term, and will result in paying significantly more in interest over the years. You might like a 15-year fixed-rate mortgage if you want to pay off your home loan quickly and save money on interest. These shorter terms come with lower interest rates, and since you're cutting your repayment time in half, you'll save a lot in interest in the long run. But you'll need to be sure you can comfortably afford the higher monthly payments that come with 15-year terms. Read more: How to decide between a 15-year and 30-year fixed-rate mortgage Typically, an adjustable-rate mortgage could be good if you plan to sell before the introductory rate period ends. Adjustable rates usually start lower than fixed rates, then your rate will change after a predetermined amount of time. However, 5/1 and 7/1 ARM rates have similar to (or even higher than) 30-year fixed rates recently. Before getting an ARM just for a lower rate, compare your rate options from term to term and lender to lender. Mortgage rates have been moving in a tight range for the past few weeks. Still, they are slightly lower than this week in 2024. Even though mortgage rates have fallen over the last year, they probably won't plummet in the short term. So, when will mortgage rates go down enough to lower your monthly payment significantly? It could be months, if not well over a year. If you are ready to buy a house but holding out for lower rates, it might not be worth the wait. According to Freddie Mac, the national average 30-year mortgage rate is down three basis points to 6.81%, and the average 15-year mortgage rate has fallen by one basis point to 5.96%. According to its May forecast, the Mortgage Bankers Association (MBA) expects the 30-year mortgage rate to be 6.7% in Q3 2025 and 6.6% by the end of the year. Fannie Mae's May forecast is a little more optimistic, predicting the 30-year loan rate to be 6.1% by the end of the year — and 5.8% by the end of 2026. Mortgage rates are likely to remain mostly unchanged through the third quarter of 2025, with a chance that they may slip slightly lower by the end of the year.
The Hill
a day ago
- Business
- The Hill
Fannie, Freddie oversight chief to Powell: Cut rates or resign
The head of the federal agency responsible for overseeing Fannie Mae and Freddie Mac called Wednesday for Federal Reserve Chair Jerome Powell to resign if the central bank did not cut rates that day. In a Wednesday post on social media, Federal Housing Finance Agency (FHFA) Director William Pulte accused Powell of refusing to do his job by not cutting interest rates at President Trump's request. Both the Fed and FHFA are independent federal agencies charged with overseeing critically important parts of the U.S. financial system. Congress designed those agencies to be immune from the political pressures exhibited by both Trump and Pulte. 'Because President Trump has crushed inflation, Fed Chairman Jerome Powell needs to lower interest rates today, and if not Chairman Powell needs to resign, immediately. Fannie Mae and Freddie Mac can help so many more Americans if Chair Powell will just do his job and lower rates,' Pulte wrote on social platform X, just half an hour before the Fed was expected to announce it would keep rates unchanged. The Fed, as anticipated, did not cut or raise rates. As FHFA director, Pulte is responsible for overseeing Fannie Mae and Freddie Mac — two companies under federal conservatorship that package U.S. mortgages into investment products. Both companies have been under control of the federal government since the collapse of the housing market during the 2007-08 financial crisis. By attacking Powell, Pulte has plunged himself and his agency into a political battle with severe financial implications. Trump has threatened to fire Powell frequently throughout his two presidential terms, even though federal law prohibits him from doing so in all but extreme circumstances. Attempting to fire the Fed chief could also cause a panic in financial markets, a risk the president has acknowledged when discussing his plans for the Fed. Even so, Trump suggested making a run at Powell as recently as last week, and mused Wednesday about nominating himself to the Fed. Powell reiterated Wednesday that the Fed prefers to keep rates steady given the high level of uncertainty created by Trump's trade policy and the relative strength of the economy despite those risks. The Fed is obligated under federal law to set interest rates in a way that preserves the proper balance in between unemployment and inflation. But Pulte claimed Wednesday that Powell and the Fed should be setting interest rates with the health of the housing market in mind. 'Funny thing is Jay Powell is talking right now about the housing market – he has no clue what he can do for the housing market. And he's not listening to the people who help lead the housing market. Too Late needs to RESIGN,' Pulte posted, referring to Powell with Trump's nickname for the Fed chair. Powell has dismissed the president's previous attacks and said he would not leave his position before the end of his term. With less than a year left into Powell's stint as Fed chair, Trump and his advisors are expected to nominate his replacement before the end of 2025.
Yahoo
a day ago
- Business
- Yahoo
How to finance a mobile or manufactured home
Mobile homes, also known as manufactured homes, can be a cost-effective alternative to buying a traditional home. Due to their lower cost and rapid depreciation, most traditional mortgage lenders don't offer mobile home financing. FHA Title I and Title II loans, Freddie Mac loans, Fannie Mae loans and personal loans are some ways you can finance a mobile or manufactured home. With the median price of traditional homes exceeding $416,900 in the U.S., mobile homes, also called manufactured homes, can be more cost-effective while offering more flexibility. The average manufactured double-wide home costs approximately $145,200. That said, it may take more legwork to find a lender to help you finance the purchase of a mobile or manufactured home than a traditional home. That's because most mortgage lenders don't offer financing for these types of properties due to the lower sales price and high rate of depreciation. Still, there are some options available. Since traditional mortgages may not be a viable option for financing mobile homes, consider alternative types of loans. Carefully weigh the pros and cons of each to find the solution that best meets your needs. The Department of Housing and Urban Development (HUD) offers mobile home loans through the Federal Housing Administration (FHA) loan program. This includes Title I and Title II loans. A Title I manufactured home loan can be used in several ways, including to finance the purchase of a new or used manufactured home, refinance a manufactured home purchase, to buy the developed lot where you will locate this type of home and for a combination purchase of both the lot and the home itself. These funds can also be used to alter, repair or improve a manufactured home. Lenders can offer Title I mobile home loans even if the buyer doesn't own or isn't planning to purchase the land on which the manufactured home will stand. These homes will typically be placed in a manufactured home community or mobile home park. If the borrower doesn't own — or isn't buying — the land, they must provide a signed lease for a mobile home plot with an initial term of at least three years to qualify for a Title I loan. The amount you can borrow with a Title I loan depends on the width of the home and whether you plan to purchase a lot as well: Purchase type Maximum loan amount Single-wide home $105,532 Single-wide home with lot $148,909 Multi-width home $193,719 Multi-width home with lot $237,096 This loan program insures loans that borrowers can use to finance a qualifying manufactured home and lot. For example, you can only use a Title II loan if you plan to live in the manufactured home as your primary residence. Other requirements for the home include: Have a minimum floor area of 400 square feet Be constructed after June 15, 1976 Be classified as real estate, but not necessarily for state tax purposes Be built and remain on a permanent chassis The loan must cover the home and the land on which it stands Title II loans cannot be used for manufactured homes on leased land in manufactured home communities or mobile home parks. Down payments on a Title II loan can be as low as 3.5 percent, and terms can last up to 30 years. Some lenders offer mortgages backed by Fannie Mae through the Manufactured Housing (MH) Advantage program. The loans come with 30-year financing and down payments as low as 3 percent. As an added benefit, interest rates on MH Advantage mortgages tend to be lower than those of most traditional loans for manufactured homes. To qualify, you must satisfy several eligibility criteria, including installing a home with a driveway and a sidewalk that connects the driveway, carport or detached garage. The home must also meet certain construction, architectural design and energy efficiency standards similar to those of site-built homes. You may be able to obtain conventional financing for a manufactured home through the Freddie Mac Home Possible mortgage program. Down payments begin at just 3 percent, and in some cases, you can use gifted or grant money to help cover the upfront costs. Freddie Mac also offers manufactured home financing through their CHOICEHome Mortgage program. To qualify, homes must meet the same requirements as site-built homes and meet certain eligibility factors. Service members with eligible service histories may qualify for a loan backed by the U.S. Department of Veterans Affairs (VA). VA loans are intended to help military members become homeowners, and can be used to buy a manufactured or modular home and put it on land you already own, buy both the home and land simultaneously or refinance a home you plan to transport to land you own. Lenders can offer up to 100 percent financing on manufactured home loans, though you'll have to pay a one-time funding fee, which can be between 1.25 and 3.3 percent of the purchase price, depending on the size of your down payment and whether you've borrowed a VA loan before. You'll need an affidavit of affixture, which proves the property is attached to land you own and meets certain local and VA requirements. A chattel loan is a specialized type of personal property loan that can be used to purchase a mobile home. These loans are designed for financing expensive vehicles, such as planes, boats, mobile homes or farm equipment, where the property serves as collateral for the loan. Some lenders offer chattel loans for manufactured home purchases that are insured by the FHA, the VA or the Rural Housing Service (RHS) through the U.S. Department of Agriculture. Additionally, the closing process for chattel loans is usually faster and less restrictive than what you would experience with a traditional mortgage. But chattel loans have disadvantages to be aware of. They typically have higher interest rates than traditional mortgages. Chattel loans also have shorter terms, which means their monthly payments will likely be higher than a conventional mortgage. Mobile homes are significantly cheaper than traditional homes, so you may be able to finance your purchase with a personal loan. Because personal loans are flexible, you can use them for almost any purpose — including buying a mobile home. However, personal loan interest rates tend to be higher than secured loans, such as mortgages or auto loans. The trade-off is that you don't have to provide any collateral — which means you won't lose your home if you default on a personal loan — and the application process tends to be shorter and involves less paperwork. Another important advantage of personal loans over mobile home mortgages is that they're typically inexpensive or free to originate, says Steve Sexton, CEO of Sexton Advisory Group. 'There's no costly title, escrow or appraisal fees. And the lender has zero interest in or control over your home, because the loan is not secured.' Personal loan lenders usually offer maximum loans of $25,000 to $50,000, though some lenders will let you borrow $100,000 or more. Your credit will need to be in good shape to qualify, and excellent credit personal loan rates can start around 6.6 percent. If you're wondering how to finance a mobile home, there are a few steps you should follow first. When you apply for any type of financing, a lender will consider your credit as part of your loan application. Clean credit histories and solid credit scores make it easier to secure loans with lower rates and better terms. Your bank or credit card issuer may offer free access to your credit score, or you can buy it via a third party. If you find mistakes when you check your credit reports, you can dispute them with the appropriate credit bureau — Experian, TransUnion or Equifax. The bureau will have up to 30 days to respond to you. You can request free copies of your credit reports at Why it's important The better your credit score and history, the lower your interest rate will be. This can save you thousands of dollars over the life of the loan. When you're financing a mobile home, the stability of the asset being financed is important, Sexton says. If you own the land and your mobile home has had the axle and wheels removed, it's less likely that you'll pick up and move. This may make more lending institutions open to financing a mobile home. Why it's important If you plan to rent a plot for your home, you'll be eligible for fewer loans than if you plan to purchase the land the home will be placed on. The type of home you're considering will affect the loans you may be eligible to receive. For example, if you want to buy a double-wide manufactured home that costs $200,000 or more, you won't be eligible for an FHA loan. Older mobile homes may not qualify for certain types of financing at all. Why it's important All lenders have specific lending criteria based on the type and value of your home. Choose the type of loan you'll use and compare different lenders' offerings. Mobile home interest rates and fees can vary widely by lender, so take the time to shop around. Try to find a loan that has few fees and low rates so you can minimize your borrowing costs. Why it's important Doing your research and shopping around can save you thousands of dollars over the life of the loan and help you secure more favorable loan terms. In addition, searching for financing options early will help ensure a loan is available when you're ready to buy. You'll want to ensure that your application is as complete and transparent as possible. In addition, many lenders require a down payment, so be prepared to make one when you complete your application. Why it's important Being able to submit a complete application will improve your odds of qualifying and keep the process running smoothly. If you're planning to get a personal loan, you'll need documents that verify your identity, residency, employment and income. As with any loan, mobile home interest rates and manufactured home loan rates will vary based on several factors. Your credit score, down payment amount, type of home and whether you're buying the land will affect the amount you pay. With this information, you can use a loan calculator to estimate your loan costs. To qualify for low mobile home interest rates, make sure your credit score is at least 700. You'll need a score of 750 or higher and a low percentage of debt relative to your income to qualify for the best rates available. The average rates presented are accurate as of June 17, 2025. Type of loan Average rates Typical minimum credit score Typical terms FHA 6.92% 500 Up to 30 years Fannie Mae Varies 620 Up to 30 years Freddie Mac Varies 680 Up to 30 years Chattel Starting at 5.99% 575 Up to 20 years Personal 12.65% 600 Up to 7 years You'll often hear the terms mobile, manufactured and modular used interchangeably when discussing these similar types of homes. While they are related, there are some important differences between these homes. A mobile home is built at a factory before it's brought to a property for setup. It may or may not use metal tie-downs in place of a traditional foundation. However, this explanation can also apply to manufactured homes. Like mobile homes, manufactured homes are built in a factory. They can be set up at their permanent location on blocks, metal piers or a permanent foundation. Unlike mobile homes, manufactured homes are not intended to be moved once they're set up. They are usually more expensive than mobile homes, with an average sale price of $120,900 in January 2025, according to the U.S. Census Bureau. Similar to mobile and manufactured homes, modular homes are built in a factory and shipped to the land where they will be set up. However, modular homes are more similar to traditional homes. They often include crawlspaces and basements and use a traditional foundation. They can cost between $160,000 and $320,000, according to Angi. Bankrate's take Before you shop, understand the differences between mobile, modular and manufactured homes, so you can choose the option that makes the most sense for you. Now that you know how to buy a mobile home or manufactured home, you'll want to consider a few factors to make sure you select the best option, including location, size and age. Before you think about anything else, figure out where you will install your mobile home. The location you choose will have a big impact on the rest of the process. 'Purchasing a mobile home and finding the right location is just like buying a home,' Sexton says. 'A good neighborhood is important.' You can choose to install the home on a piece of land you already own, buy the land where your mobile home will be located or rent a plot of land in a mobile home community. If you choose to buy land, consider zoning regulations and necessary utility hookups. Mobile homes and manufactured homes come in a variety of sizes. Larger homes are more expensive and require larger lots. As a result, you may need to borrow more if you want a larger home. Mobile homes are usually classified by their width. Both classifications are usually about 70 feet long. The classifications you'll typically see are: Single-wide homes or single units: Under 15 feet wide Double-wide homes or double units: About 30 feet wide 'Many towns don't allow single-wide mobile homes in their town or city limits,' Sexton says. 'Make sure you research the rules that might apply to your situation.' Unlike traditional real estate, mobile and manufactured homes tend to lose value over time. That means you can get a discount if you buy a used mobile home. The trade-off is that used mobile homes will often show signs of age, unless they've been well-maintained. Some locations won't allow the placement of homes produced before a specific date, which limits your options. Purchasing an older mobile home may require expert insight to assess its condition. When you purchase a mobile or manufactured home, one of the expenses to consider is the cost of mobile home insurance. Similar to standard homeowners insurance, this type of policy offers you protection if your home is damaged or requires repairs. Often, mobile home policies cover both the dwelling itself and your personal belongings, if they're damaged or stolen. You may also obtain policies that include liability coverage, which protects you if someone is injured on your property and you are held liable. Standard mobile home insurance typically doesn't include coverage for hurricanes, earthquakes and flood events, and may require an add-on for this protection. And, like traditional homes, the cost of mobile home insurance policies varies based on your coverage level. Mobile and manufactured homes can be much more affordable than a traditional site-built home — but they can be trickier to finance. Since you typically can't use a conventional mortgage to buy a mobile home, you should consider options like FHA loans, VA loans and personal loans. You'll also want to ensure the home isn't too old to qualify, and that you have a suitable location. What credit score is needed to finance a mobile home? The higher your credit score, the easier it will be to qualify for a mobile home loan with competitive interest rates. 'FHA will finance with a 500 to 589 credit score and 10 percent down,' Sexton says. 'Credit scores of 580 or above will only be required to have a deposit of 3.5 percent. The minimum credit score with Freddie Mac or Fannie Mae is 620. Various chattel loan providers will require a credit score of as little as 575 or as high as 660.' How long can I finance a mobile home? The length of mobile home financing depends on the lender. However, you can expect to find loans with terms ranging from five to 30 years, depending on the loan type. Is it hard to finance a mobile home? Because mobile homes depreciate over time, it can be more challenging to find a lender that offers financing for manufactured homes. But there are still plenty of options available. Just be sure to do your due diligence to find the right one based on your creditworthiness, financial situation, needs and preferences. Should I use a personal loan to buy a mobile home? A personal loan can be a good way to finance a mobile home that doesn't qualify for other types of financing. They are unsecured, offer fast funding and have fewer restrictions when it comes to choosing your home. However, personal loans generally have lower maximum borrowing amounts, higher interest rates and shorter terms than traditional mobile home financing options, such as FHA loans or loans from Freddie Mac and Fannie Mae. This could make it more difficult to borrow enough to purchase the home you want and repay your loan on time. 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
a day ago
- Business
- Yahoo
Mortgage and refinance interest rates today, June 19, 2025: Rates fall to a 4-week low
Today, mortgage interest rates fell to a four-week low. According to Freddie Mac, the average 30-year fixed mortgage rate slipped three basis points to 6.81%. One year ago, it was 6.87%. The 15-year fixed rate ticked down one basis point, to 5.96%. Last year on this day, it was 6.13% 'Mortgage rates moved lower, with the average 30-year fixed rate reaching a four-week low,' Sam Khater, Freddie Mac's chief economist, said in a release. 'More available inventory to choose from, coupled with this week's decline in mortgage rates, could be the spark to get potential homebuyers off the sidelines." Dig deeper: What the latest CPI report means for mortgage rates Here are the current mortgage rates, according to the latest Zillow data: 30-year fixed: 6.72% 20-year fixed: 6.32% 15-year fixed: 5.90% 5/1 ARM: 6.83% 7/1 ARM: 6.90% 30-year VA: 6.27% 15-year VA: 5.66% 5/1 VA: 6.29% Remember, these are the national averages and rounded to the nearest hundredth. Learn more: How to get the lowest mortgage rate possible Here are today's mortgage refinance interest rates, according to the latest Zillow data: 30-year fixed: 6.81% 20-year fixed: 6.37% 15-year fixed: 6.01% 5/1 ARM: 7.14% 7/1 ARM: 7.01% 30-year VA: 6.25% 15-year VA: 5.94% 5/1 VA: 6.15% As with the purchase mortgage rates, these are national averages we've rounded to the nearest hundredth. Refinance rates can be higher than purchase mortgage rates, but that isn't always the case. Use the mortgage calculator below to see how various mortgage rates will impact your monthly payments. The free Yahoo Finance mortgage payment calculator goes even deeper by including factors like homeowners insurance and property taxes in your calculation. You can even add private mortgage insurance costs and HOA dues if they apply to you. These monthly expenses, along with your mortgage principal and interest rate, will give you a realistic idea of what your monthly payment could be. A mortgage interest rate is a fee for borrowing money from your lender, expressed as a percentage. There are two basic types of mortgage rates: fixed and adjustable rates. A fixed-rate mortgage locks in your rate for the entire life of your loan. For example, if you get a 30-year mortgage with a 6% interest rate, your rate will stay at 6% for the entire 30 years. (Unless you refinance or sell the home.) An adjustable-rate mortgage keeps your rate the same for the first few years, then changes it periodically. Let's say you get a 5/1 ARM with an introductory rate of 6%. Your rate would be 6% for the first five years and then the rate would increase or decrease once per year for the last 25 years of your term. Whether your rate goes up or down depends on several factors, such as the economy and U.S. housing market. At the beginning of your mortgage term, most of your monthly payment goes toward interest. As time passes, less of your payment goes toward interest, and more goes toward the mortgage principal or the amount you originally borrowed. Dig deeper: Adjustable-rate vs. fixed-rate mortgage — Which should you choose? Two categories determine mortgage rates: ones you can control and ones you cannot control. What factors can you control? First, you can compare the best mortgage lenders to find the one that gives you the lowest rate and fees. Second, lenders typically extend lower rates to people with higher credit scores, lower debt-to-income (DTI) ratios, and considerable down payments. If you can save more or pay down debt before securing a mortgage, a lender will probably give you a better interest rate. What factors can you not control? In short, the economy. The list of ways the economy impacts mortgage rates is long, but here are the basic details. If the economy — think employment rates, for example — is struggling, mortgage rates go down to encourage borrowing, which helps boost the economy. If the economy is strong, mortgage rates go up to temper spending. With all other things being equal, mortgage refinance rates are usually a little higher than purchase rates. So don't be surprised if your refinance rate is higher than you may have expected. Two of the most common mortgage terms are 30-year and 15-year fixed-rate mortgages. Both lock in your rate for the entire loan term. A 30-year mortgage is popular because it has relatively low monthly payments. But it comes with a higher interest rate than shorter terms, and because you're accumulating interest for three decades, you'll pay a lot of interest in the long run. A 15-year mortgage can be great because it has a lower rate than you'll get with longer terms, so you'll pay less in interest over the years. You'll also pay off your mortgage much faster. But your monthly payments will be higher because you're paying off the same loan amount in half the time. Basically, 30-year mortgages are more affordable from month to month, while 15-year mortgages are cheaper in the long run. According to 2024 Home Mortgage Disclosure Act (HMDA) data, some of the banks with the lowest median mortgage rates are Bank of America and Citibank. However, it's a good idea to shop around for the best rate with not just banks, but also credit unions and companies specializing in mortgage lending. Yes, 2.75% is a fantastic mortgage rate. You're unlikely to get a 2.75% rate in today's market unless you take on an assumable mortgage from a seller who locked in this rate in 2020 or 2021, when rates were at all-time lows. According to Freddie Mac, the lowest-ever 30-year fixed mortgage rate was 2.65%. This was the national average in January 2021. It is extremely unlikely that rates will dip below 3% again anytime soon. Some experts say it's worth refinancing when you can lock in a rate that's 2% less than your current mortgage rate. Others say 1% is the magic number. It all depends on what your financial goals are when refinancing and when your break-even point would be after paying refinance closing costs.
