What is a Good Rate for a Mortgage?
When you’re looking to buy a home, one of the factors to keep in mind that would affect how much you can afford is the interest rate. According to S&P Global, the average interest rate for a 30-year mortgage is 6.59%, but is that the best interest rate you can acquire? In this article, we’ll go over what a good rate for a mortgage is as well as the factors that determine your interest rate.
Rates Change Daily
Many people don’t realize that mortgage interest rates change daily, which means that the best options are drastically different from one day to the next, or even from one month to another. A good mortgage rate for those who seek a 15-year fixed loan starts at about 5%, while a 30-year mortgage typically begins at 6%.
Factors That Determine Your Interest Rate
Many factors determine your interest rate, some of these you can control, while there are other factors that you can’t. Below are some factors that affect your interest rate on a mortgage.
Your Finances
The lender you choose will look at your entire financial situation. This includes your credit score , debts, how much of a down payment you can afford, and income consistency. While you can qualify for a home loan with a lower credit score and a down payment of less than 20%, those with a credit score above 720 and a down payment of 20% often earn the best rates.
Loan Purpose
The purpose of your loan also affects interest rates. For example, you’ll have a different interest rate for a mortgage than you would if you took out a cash-out refinance. Another example is if you were refinancing, a cash-out refinance would have a higher interest rate than a no-cash-out refinance.
Loan Term
The length of your loan also makes a difference. Loans with a shorter term, such as a 15-year mortgage, usually have lower interest rates than a 20 or 30-year loan. Likewise, interest rates for a 5-year ARM (adjustable rate mortgage) are about 7.225%.
Mortgage Lender
The mortgage lender you choose also affects the rates you receive for a mortgage, which is why it’s wise to follow the advice of shopping around and getting rate quotes from several lenders. At Equity Mortgage Lending, we aim to provide home loans to our clients while providing them with the lowest interest rates and closing costs possible.
Mortgage Type
Each mortgage loan type has a different average rate. For example, a 30-year fixed, 30-year fixed FHA, and 30-year fixed jumbo mortgages have different interest rates, with the 30-year fixed jumbo having the highest rate. While it’s easier to pick a 30-year conventional mortgage loan, you have to stop to consider if it’s the best loan for you, or if a 30-year USDA loan or an adjustable-rate mortgage, might be a better choice.
The same type of mortgage doesn’t fit everyone; that’s why it’s best to work with a lender who offers a wide range of mortgage products and flexible lending practices. If it’s time for you to buy a home and you’re looking for a lender, contact us today for a quick quote or if you have any questions.
* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.