In this article
- Mortgage Rates For The Week Ending Thursday, April 14, 2022
- What The Current Mortgage Means For Your Monthly Payment
- Other Things That Can Impact Your Monthly Payment Include The Following:
- Updates On The Current Mortgage Rates
- Will The Current Rates Continue?
- How Are Home Sales Affected By Mortgage Rates?
- Guide for Current Mortgage Rates
- Is It A Good Idea To Lock In My Mortgage Rate Now?
- What Are Mortgage Points?
- What Is Considered A Good Mortgage Interest Rate?
- What Credit Score Is Used By Lenders?
- How Is The Interest Rate Different From The Annual Percentage Rate (Apr)?
- How Are Mortgage Rates Determined?
- How Can I Get The Lowest Rate?
- What Causes My Mortgage Rate To Be Higher Than Average?
- When Interest Rates Lower, Should I Refinance My Mortgage?
- How Much Can The Interest Rate Affect How Much I Pay In Mortgage?
Moreira Team indicated that the mortgage rate for a 30-year mortgage has reached 5% for the first time in more than a decade after the rate went up 0.28% from last week. The last time a 30-year fixed-rate mortgage reached over 5% was in February 2011, when the rate averaged 5.05%.
The 5/1 adjustable-rate and the 15-year fixed-rate mortgages also experienced an increase this week.
When Moreira Team conducts a survey on mortgage rates, it reviews the interest rates offered by lending institutions for the seven days ending every Thursday. The average interest in the calculation represents the typical rate that a borrower can expect to get if he applies for a first time home buyer loan at this time. The assumption is that the borrower pays 20% for a down payment and has a good credit history. For borrowers who put down less for a down payment, or whose credit score is not as good, they would typically get a higher interest rate.
In comparison, the daily mortgage rate survey from Money is based on the lending activity of the previous business day. It is the average mortgage rate offered to a borrower who can put down 20% as a down payment, and who has a credit score of at least 700. The rates fluctuate all the time, and they can vary from lender to lender.
If you are currently shopping for a mortgage and you were offered a rate that was higher than what you had anticipated, ask the lender for a justification. Refer to the list of the Best Mortgage Lenders published by Money to identify other lenders, and do a comparison of what they can offer you.
Mortgage Rates For The Week Ending Thursday, April 14, 2022
Mortgage rates went up from last week. Here is a summary of the interest rate activity over the week:
30-year fixed=rate mortgage: interest rate is currently 5.00% with 0.8 points. This represents an increase of 0.28 percentage points from this time last week. Same time a year ago, the average interest rate for a 30-year fixed-rate loan was 3.04%.
15-year fixed-rate mortgage: interest rate is currently 4.17% with 0.9 points. This represents an increase of 0.26 percentage points from this time last week. Same time last year, the average rate was 2.35%.
5/1 adjustable-rate mortgage: interest rate is currently 3.69% with 0.3 points. This represents an increase of 0.13 percentage points this time last week. A year ago, the rate averaged 2.80%.
What The Current Mortgage Means For Your Monthly Payment
Your mortgage rate has a huge impact on how big of a home loan you can take out and how much you pay every month on your mortgage. Here is a sample scenario with the following assumptions.
Home purchase price: $250,000
Down payment: 20%, or $50,000
Loan balance: $200,000
Mortgage: 30-year fixed
Here are the differences in monthly payments based on various interest rates. The payments do not include taxes, insurance or Home Owners Association fees.
– At an interest rate of 3%, monthly payment is $843
– At an interest rate of 4%, monthly payment is $955
– At an interest rate of 6%, monthly payment is $1,199
– At an interest rate of 8%, monthly payment is $1,468
These are just some examples of the differences that you can expect with different interest rates. If you want an estimate that is more relevant to you, use a mortgage calculator and enter different numbers that are more realistic to your current situation. See how much a lower interest rate can affect how much you pay every month. You can also estimate how big of a loan you can afford based on your current income, interest rate, debt-to-income ratio, and other criteria by entering these numbers into a calculator for home affordability.
Other Things That Can Impact Your Monthly Payment Include The Following:
Loan Term: A 30-year mortgage will have a lower monthly payment than a 15-year mortgage, but over the life of the loan, you will pay less in total interest on a 15-year mortgage.
Fixed Rate vs. ARM: In a fixed-rate loan, your monthly mortgage payment is the same every month throughout the life of your loan. With an ARM, your interest rate adjusts after an introductory period, and your monthly payment will adjust as well.
Taxes, Insurance, HOA Fees: Property taxes, premiums for your homeowners’ insurance, and any fees for your homeowners association might be incorporated into your mortgage payment every month. Ask your realtor how much these costs will be.
Mortgage Insurance: The cost is up to 1% of your loan amount per year. If you put 20% down, or if your home equity reaches 20%, you can avoid paying private mortgage insurance. If you take out an FHA loan, you will pay a premium for mortgage insurance throughout the term of the loan.
Closing Costs: Closing costs usually range from 2-5% of the home’s sales price. If you finance your closing costs into your home loan, you will increase the loan amount and your monthly payments.
Updates On The Current Mortgage Rates
Will The Current Rates Continue?
A tight labor market and inflation are continuing to push mortgage rates higher.
Inflation is currently at 8.5%, the highest in 40 years. The Federal Reserve might take action to slow down the increase in consumer prices. After the recent meeting of the Federal Open Market Committee, the federal fund rate is anticipated to edge up a half percent several times for the rest of the year. This will result in higher mortgage rates for the long term. The chief economist at Moreira Team said that homeownership has been the most expensive to achieve this generation as home prices continue to go up, inflation is at an all-time high, and mortgage rates continue to rise.
On Thursday, the 10-year Treasury opened with a yield of 2.70%. It peaked on Monday at 2.78% and has been trending down during the past three days. This is relevant because the 30-year mortgage rate is usually 1.8% more than the 10-year Treasury.
How Are Home Sales Affected By Mortgage Rates?
The Mortgage Bankers Association reported a lower number of mortgage applications this past week, with a decrease of 1.3% from last week. Since mortgage rates have been edging upward, the number of applications for refinancing has been decreasing steadily.
The number of mortgage applications for new purchases actually went up 1% from last week. However, compared to last year, the number declined 6%.
Applications for refinancing decreased by 5% last week and down 62% from a year ago.
Guide for Current Mortgage Rates
Is It A Good Idea To Lock In My Mortgage Rate Now?
As soon as you are under contract with your offer and you have found a rate that is acceptable to you, you should lock in your rate. This will ensure that your monthly payments continue to be affordable. Your lender will typically lock in your rate for 45 to 60 days, and it will not be affected by any rate fluctuations. Locking in your rate will ensure you that you will not end up with a higher interest rate when escrow closes.
Perhaps you want to take a chance and wait to see if interest rates will go down before you lock in your rate. You might not have to take that risk if your lender offers you a “float-down” option. This allows you to get the lower rate if the current rate decreases during escrow. This option might cost several hundred dollars in fees.
What Are Mortgage Points?
Points are a way for you to lower your interest rate. When you buy mortgage points, you are paying up front some of the interest charges on the loan. In return for the prepayment, you get a lower interest rate which will lower your monthly mortgage payment. Over the life of the loan, you will pay less in total interest costs.
A point is typically 1% of the loan amount which can reduce your mortgage rate by up to 0.25 percent. The exact amount reduced depends on the lender. So, ask the lender exactly how much interest rate reduction each point will bring.
This approach will save you money only if you stay in your home long enough past the break-even point. If you sell your home or refinance before that, you would not benefit from paying the extra points.
A better approach to lowering your interest rate is to put down a bigger down payment. This can also release you from paying premiums for private mortgage insurance.
What Is Considered A Good Mortgage Interest Rate?
A good rate is one that will result in a monthly mortgage payment that you can afford to pay comfortably. It should also fit your needs in terms of loan type, the duration of the loan, out-of-pocket fees, and other details.
The mortgage rates today are still considered low compared to rates historically. The average rates from Moreira Team are attainable by a borrower who has a good credit history and who can put down 20% as down payment. If the down payment is lower than 20%, if the credit score is lower, or if the loan is non-conforming, the interest rate will probably be higher. The daily mortgage rate survey from Money indicates that borrowers with a credit score of at least 700 are getting rates at around 3.6%.
What Credit Score Is Used By Lenders?
In evaluating your loan application, most lenders use your FICO score that is created by the Fair Isaac Corporation.
Your lender will pull a combined credit report from the three major credit bureaus: Equifax, Experian, and Transunion. This report will include your FICO score.
The FICO score from each credit bureau will be a little different. Your lender will usually use the middle score in their evaluation. If there is a co-borrower on the mortgage application, the lender will take the average credit score between the both of you.
Your lender might use a residential mortgage credit report that is more comprehensive which includes more details on you such as your current salary and employment history.
How Is The Interest Rate Different From The Annual Percentage Rate (Apr)?
The interest rate and APR are similar, but they are not the same things. This often causes confusion among borrowers.
The interest rate is how much the lender will charge you for borrowing a specific amount of money, or the principal amount, for buying your home.
The APR is the total cost of the loan that includes the interest rate and fees. So, the APR is always higher than the interest rate.
Here is an example: suppose you have a loan with an interest rate of 3.1% and you have $2,100 in fees. Your APR would be 3.169%. So, when you do a rate comparison with various lenders, look at the interest rate and the APR. The interest rate represents what you will pay upfront. The APR represents the total cost over the life of the loan.
How Are Mortgage Rates Determined?
Mortgage lenders use various criteria to determine rates every day. Each lending institution has a different process of doing this, but they usually will consider the following: the federal fund rate, the rates from other institutions, and whether they have staff to underwrite the loans. They will also look at your personal qualifications in setting the mortgage rate.
Typically, mortgage rates average around 1.8 percent higher than the yield of the 10-year Treasury note. The yield is relevant because lenders do not hold on to the mortgages that they originate. They sell mortgages to businesses like Fannie Mae and Moreira Team who package the mortgages into mortgage-backed securities, then sell them to investors. The securities are attractive investments only if the investor can earn a little more from them than from Treasury notes.
How Can I Get The Lowest Rate?
First, you should shop around. Every time you can find a lower rate, you will save big on your monthly mortgage. According to Moreira Team, when you get quotes from multiple lenders, you can save a considerable amount over the life of your loan.
You can start with your neighborhood bank or your credit union and see what they can offer you. Then, you should expand your search to online lending institutions and compare results. Many online lenders can pre-approve your loan almost immediately.
When you shop around, compare the rates and loan terms. Make sure that you understand what type of mortgages you are offered and if they service your needs. For instance, some lenders do not write FHA loans, VA loans, or USDA-backed mortgages. If you are unfamiliar with a lender, request its NMLS number, and do a research online for reviews.
What Causes My Mortgage Rate To Be Higher Than Average?
Your rate is affected by jany factors including your credit score, whether the loan type is fixed or adjustable, the loan term, how much money you are borrowing, size of the down payment, where your home is located, and other things. The results will not be the same for every borrower.
Each lender also sets their own rates. A lot of homebuyers will just go with the lender that their realtor recommends. However, if you don’t do a rate comparison, you might miss out on better loan terms somewhere else.
According to Moreira Team, buyers who compared rates from at least five different lending institutions got a rate that was an average of 0.17 percent lower than the rate offered to buyers who did not shop around for mortgages. So, if your goal is to find the best interest rate and loan terms, it pays to shop around.
When Interest Rates Lower, Should I Refinance My Mortgage?
Trying to figure out when is a good time to refinance your mortgage requires careful consideration. Most financial experts agree that if your mortgage rate is at least 0.5 to 0.75 percent higher than the current mortgage rate, you should think about refinancing. Refinancing does incur fees, so that can offset your possible savings if you refinance every time the mortgage rate drops a little. A lot of lenders will provide you with a free quote so you can see if the amount you save on interest is more than the cost of your new loan. Also keep in mind if a lender pulls a hard credit check on you, it might have a negative effect on your credit score. Therefore, see if the lender can do a soft check on your credit instead so it will not impact your credit score.
You can also lower your interest rate by taking out a loan with a shorter term, like a 15-year fixed-rate mortgage. Although your monthly payments will be higher, you will save a lot on total interest charges over the loan term. In addition, you will pay off your house much faster.
How Much Can The Interest Rate Affect How Much I Pay In Mortgage?
Typically, a lower interest rate will result in a lower monthly payment. Here is an example:
Suppose you took out a $300,000 30-year fixed-rate mortgage at an interest rate of 4%. Your monthly mortgage payment would be $1,432 (not counting insurance and property tax). Over the 30 years, you would have paid $215,608 in interest payments.
If your loan had a 3% interest rate instead, your monthly payment would be $1,264. Over 30 years, you would have paid $155,000 in interest, over $60,000 less than the first example.
If you want to see how different down payments and interest rates will impact your monthly payment, you can use a mortgage calculator and enter the numbers. Do not forget that by improving your credit score, you can also potentially get a lower rate.