Mortgage Interest Rates Today: The Party Is Over? Top 3% rate


SGoodbye mortgage rates below 3%, at least for now. The average rate for a 30-year fixed-rate mortgage is 3.02%, the first time in nearly eight months it has crossed the 3% mark.

This is not a surprising development. Many connoisseurs forecast rates would increase in 2021, supported by more stimulus measures and the deployment of the Covid-19 vaccine. This is exactly what is happening.

This week is also the first time in nearly a year that the 5/1 Variable Rate Mortgage (ARM) rate has fallen significantly below the 30-year fixed rate, reaching 2.73%. The 5/1 ARM rate has historically tended to fall relative to the 30-year fixed rate, but in recent months the 5/1 ARM has increased slightly. ARM activity has grown steadily in recent weeks, up 8.7% from the previous week and 12.9% more than last month.

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Expensive homes are more abundant than affordable homes

Higher mortgage rates can only exacerbate the problems some potential buyers face in finding affordable housing. Budget-conscious buyers have fewer home choices than their peers looking for a home in more toned zip codes. According to a recent report by the American Enterprise Institute, the most affordable homes in the United States are also the hardest to find.

Supply is measured by the number of months it would take to exhaust the building stock. For example, six months of supply is usually the boundary between a seller’s market and a buyer’s market. Anything longer than six months is a buyer’s market, nothing less a seller’s market. Total stock was two months of supply in December, which is incredibly tight.

The supply is even more constrained for the cheapest homes, with 1.4 months of supply compared to the most expensive homes, which have 4.7 months of supply.

There is no doubt that the real estate market today, in many parts of the country, but not necessarily all, can be difficult for first-time buyers. But Jess Kennedy, co-founder of Beeline, an online lender, warns against giving in to scarcity fears and emptying your bank account to buy a home now.

“Leave room in your budget for emergency savings. Also, keep in mind that insurance won’t always cover everything that is wrong with your home. Remember, you don’t want to be rich in house and poor in money, ”Kennedy says.

30 year fixed rate mortgages

The average 30-year benchmark fixed rate jumped 5 basis points to 3.02%, according to Freddie Mac’s Prime Mortgage Market Survey. At the same time last year, the 30-year fixed rate was 3.29%.

Borrowers with a fixed rate mortgage of $ 300,000 over 30 years with a current interest rate of 3.02% will pay $ 1,268.05 per month in principal and interest (taxes and fees not included), depending on the advise Forbes. mortgage calculator shows. The total interest paid over the term of the loan will be $ 156,498.12. That same mortgage taken out a year ago would cost an additional $ 15,898.94 in interest over the life of the loan.

15 year fixed rate mortgages

The average interest rate on the 15-year fixed mortgage remained unchanged at 2.34%. At the same time last year, the 15-year fixed rate mortgage was at 2.79%.

Borrowers with a 15-year fixed rate mortgage of $ 300,000 with a current interest rate of 2.34% will pay $ 1,977.85 per month in principal and interest (plus taxes and fees). The total interest paid over the term of the loan will be $ 56,013.14.

5/1 arm

The average rate on a 5/1 adjustable rate mortgage slipped 26 basis points to 2.73%, a significant drop from 2.99% the week before. Last year, the 5/1 ARM was 3.18%.

ARMs are home loans whose interest rate fluctuates according to the market. In the case of ARM 5/1, the first five years have a fixed rate and then change to a variable rate. This means that when the average rate goes up or down, your rate will also go up.

Traditionally, ARMs have lower interest rates than fixed rate options, making them an attractive choice for borrowers who plan to sell before the fixed period expires.

What low rates mean for borrowers

Mortgage rates are at record highs, so this could be a good time for many people who want to save money on a new home loan or refinance their existing mortgage.

Borrowers who wish to obtain the lowest rate should make sure they have a credit score of at least 760. Lenders reserve their ultra-low rates for those with a strong credit profile, as this is a major indicator that borrowers run a low risk of late payment or default. In fact, borrowers with lower credit scores may be charged a percentage point or more than borrowers with very good or excellent scores.

Before applying for a mortgage, check your credit score. Many banks and credit cards allow you to do this for free. One way to improve your score relatively quickly is to pay off your debt. You can also apply for credit to pay your monthly bills on time, such as your internet or utility bills.

In addition to your credit score, lenders will look at your debt to income ratio, or DTI. This is your total monthly debt divided by your gross monthly income. It is basically an overview of how much you owe versus how much you earn. The lower your DTI, the better your chances of getting a lower interest rate. Most lenders require a minimum DTI of 43% just to qualify for a mortgage or refinance.

Finally, studies have shown that people who shop tend to get lower rates than those who get a mortgage from the first lender they talk to. Know what the current average interest rate is as well as your credit rating, income, debt, and expenses before you start applying. If the lenders are offering you a higher rate than you expected, be sure to ask them why so you can start improving those areas for a lower rate.

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