Virtually anytime you borrow money, there’s a cost for the privilege. That’s no different for mortgage loans, which you rely on during the home buying process. Mortgage rates are generally lower than interest rates from other types of debt.
If you’re a first-time homebuyer or you simply want to better meet your financial goals, here’s what you need to know about mortgage rates.
What are current mortgage rates today?
Mortgage rates are changing constantly based on housing market conditions where you live and by the lender, but it’s possible to get an average rate and payment based on the U.S. market data as a whole.
As of July 2, there have been record-low mortgage rates. The average rate for a 30-year fixed mortgage is 3.07 percent, according to Freddie Mac, and a 15-year fixed mortgage has a 2.56 percent average.
Based on the current mortgage and refinance rates, it’s likely now is a good time for you to refinance. To see how much you could save on monthly payments today, crunch the numbers and compare rates using Credible’s free online tool.
Of course, that doesn’t mean that’s the rate borrowers can expect when applying for a mortgage. Your interest rate will largely depend on your credit history and income.
How to get the lowest mortgage rate possible
Because mortgage loans are much longer than most loan types, you’ll still end up paying tens or even hundreds of thousands of dollars in interest despite low mortgage rates.
Even just a slight decrease can help boost your savings account. For example, in our previous example, an $898.09 monthly payment over 30 years amounts to $323,312.40 in payments, including $123,312.40 in interest.
If you could qualify for a 3.25 percent rate instead, your monthly payment would be $870.41, and you’d pay $113,348.55 in interest—almost $10,000 less.
Here are some tips on how to qualify for low-interest rates:
Improve your credit score: Check your credit score and report to identify areas where you can improve, then take steps to address them.
Pay down debt: Your debt-to-income ratio—how much of your gross monthly income goes toward debt payments—is an important factor mortgage lenders consider. As you pay off debts, you’ll have more room for a mortgage payment.
Shop around: Each lender has different criteria for calculating interest rates, so it’s crucial to take time to shop around and compare rates from multiple lenders before settling on one. Visit Credible to compare…