Tuesday marked the highest mortgage rates since November, capping a mini surge that began after last week’s inflation data. After a moderate improvement yesterday, rates moved back up toward (but thankfully not above) the recent highs today.
Financial markets reacted to stronger economic data and comments from Federal Reserve officials regarding the possibility of no Fed rate cuts in 2024 and even a small chance of rate hikes. Importantly, Fed members don’t see hikes as being likely and the economic data would have to accelerate enough to justify a change in strategy.
We’re definitely not there yet, but we’re just as certainly not there when it comes to lower inflation readings required to validate the first rate cut. At the March Fed meeting, officials still saw 3 cuts by the end of the year, albeit just barely. Based on data that’s come out since then, markets are betting on only one cut.
Other news sources are running headlines regarding a big jump in mortgage rates to 7.10% based on Freddie Mac’s weekly survey results released today. Keep in mind that’s a weekly number based on average of last Thursday through yesterday and that it doesn’t account for the impact of discount points. In other words, rates are definitely not 7.1 today, and especially not without points.
As thousands of Chicago-area families go house-hunting this spring, the dream of homeownership continues to drift further and further away.
By Don DeBat
21-Apr-24 – Average long-term mortgage rates inched above 7 percent nationwide for the first time this year, reported Freddie Mac’s Primary Mortgage Market Survey on April 18.
Benchmark 30-year fixed-rate home loan rates hit 7.10 percent, up from 6.88 percent a week earlier. That’s its highest level since October 26, 2023, when 30-year fixed loans hit 7.79 percent. A year ago, 30-year fixed mortgage rates averaged a more affordable 6.39 percent.
“The 30-year fixed-rate mortgage surpassed 7 percent for the first time this year,” said Sam Khater (left), Freddie Mac’s Chief Economist. “As rates trend higher, potential home buyers are deciding whether to buy before rates rise even more or hold off in hopes of decreases later in the year.”
Interest charges on 15-year fixed loans on April 18 averaged 6.39 percent, up from 6.16 percent a week earlier. A year ago, 15-year fixed mortgages averaged 5.76 percent.
Khater noted that home purchase applications rose modestly the week before, but “it remains unclear how many home buyers can withstand increasing rates in the future.”
The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who place a down payment of 20 percent and have an excellent credit score of 740 or higher.
The truth is home buyers in Chicago and across the nation really are starting to get rate-shy. Sales of existing homes in the United States fell 4.3 percent in March to a seasonally adjusted 4.19 million, reported the National Association of Realtors (NAR). That’s the first monthly decline in sales since December 2023, and follows a nearly 10 percent monthly sales jump nationwide in February.
“Home sales essentially remain stuck because mortgage rates have been stable and inventory is not really rising,” said Laurence Yun (right), NAR’s Chief Economist.
Unfortunately, Yun predicted that mortgage rates are likely to rise above 7 percent in the coming weeks. Early in 2024, Yun had predicted that 30-year fixed loan rates would average 6.3 percent by the fourth quarter of this year.
The interest rate rise is a direct result of the Federal Reserve’s aggressive interest rate hikes intended to tame soaring inflation numbers not seen in 40 years.
The Fed has raised its key benchmark lending rate to a range of 5.25 to 5.50 percent, the highest level since 2007. Based on moves by the Fed, mortgage analysts say 30-year fixed home loans could reach – or surpass – the 8 percent level in the near future. Home loan rates have not hit the lofty 8 percent level since August 11, 2000, more than 23 years ago.
Searching for a better deal, some borrowers are beginning to flock to riskier adjustable-rate mortgages (ARM), lenders say.
“This week we have issued 30-year loan commitments with rates as high as 7.5 percent, depending on down payments and borrower credit scores,” said Jeremy Rose (left), Chicago-based loan consultant for Loan Depot, one of the largest lenders in the nation. “Mortgage interest rates may have gradually declined over the past two decades, but home prices have tripled.”
Today, the buyer of a $400,000 home with a credit score of 740, who places a 25 percent down payment and takes out a $300,000 mortgage for 30 years at Loan Depot, would pay a rate of 7.5 percent. If the buyer is willing to pay a 1 percent discount point, or a loan fee of $3,000, the interest rate would drop to 7.125 percent.
“The most motivated buyers will accept the current level of mortgage rates and make offers when they find a place that’s suitable,” said Holden Lewis (right), a home and mortgage expert at Nerd Wallet. “High mortgage rates aren’t holding buyers back as much as lack of inventory and high prices.”
“If you’re always waiting for the perfect market conditions to arise, you could end up missing out on a lot of great opportunities,” warned Jacob Channel, Senior Economist at Lending Tree.
Mortgage rate history
Thirty-year fixed-mortgage interest rates ended 2020 at a rock-bottom 2.65 percent – the lowest level in the Freddie Mac survey history, which began in 1971.
Home loan rates set new record lows an amazing 16 times in 2020, and tens of thousands of homeowners refinanced.
Archives of the now-defunct Federal Housing Finance Board show long-term mortgage rates in the 1960s were not much higher than the Great Depression, when lenders were charging 5 percent on five-year balloon loans.
Nearly six decades ago, between 1963 and 1965, you could get a mortgage at 5.81 to 5.94 percent. Between 1971 and 1977, the now-defunct Illinois Usury Law held rates in the 7.6-to-9 percent range.
In the early 1980s, runaway inflation caused home loan rates to skyrocket into the stratosphere. According to Freddie Mac, benchmark 30-year mortgage rates peaked at a jaw-dropping 18.45 percent in October 1981 during that Great Recession.
Rates finally fell below 10 percent in April 1986, and then bounced in the 9-to-10 percent range during the balance of the 1980s. Twenty-three years ago, in August 2000, when some of today’s Millennial borrowers were still in diapers, lenders were quoting 8.04 percent.
(Left) October 1981 issue of Inc. magazine
Between 2002 and 2011, rates bounced in the 4-to-6 percent range. They inched into the 3-to-4 percent range until 2020, when they fell into the rock-bottom 2 percent bracket.
Florida-based First Federal Bank announced on Thursday that it struck a deal to acquire Watson Mortgage Corp., expanding its mortgage retail lending footprint in the communities in which it operates. The financial details of the deal were not disclosed.
First Federal Bank has 25 branches in the Southeast and operations in the Midwest, including mortgage centers in Jacksonville, Florida; Alpharetta, Georgia; Madison, Wisconsin; and Overland Park, Kansas.
Last year, the community bank originated about $435 million in mortgage volume, per mortgage data platform Modex. Nearly 58% of this total was conventional loans and 55% was purchase loans. As of Thursday, the bank had 155 sponsored loan officers, according to the Nationwide Multistate Licensing System (NMLS).
President and CEO John Medina said in a prepared statement that the First Federal Bank has a mission to provide solutions from a “financially stable institution,” and the acquisition “underscores our commitment“ to the residential mortgage sector.
Under the agreement, First Federal Bank will serve Watson’s customers throughout the Watson Realty footprint and the Watson platform will transition to the First Federal brand“within a few months of closing,“the parties said in a statement.
First Federal Bank has plans to retain the “vast majority“of employees at the acquired lender. Per NMLS, Watson Mortgage had 17 sponsored LOs as of Thursday, and Modex shows that the lender originated about $78 million in mortgage volume last year.
Watson Mortgage Corp. was established in 1994 and is part of Florida-based Watson Realty Corp., a family-owned company since 1965. The lender is being acquired by a bank that has about $3.9 billion in total assets.
Bill Watson, chairman of Watson Realty Corp., said the agreement permits the team to “continue providing mortgage solutions to our customers and serve our teams with valuable mortgage expertise.“
“Watson’s strategic plan for 2024 includes a strong focus on helping customers secure homes in a challenging rate environment,“Watson added.
First Federal Bank has engaged in previous M&A deals. In 2023, it acquired the mortgage division of BNC National Bank. The deal included the bank’s consumer-direct technology platform.
Buying your first home can be tedious and overwhelming.
While it’s exciting to visit properties and daydream about your dream home, getting over the financing hurdles is another story. But don’t fret.
This comprehensive guide for first-time homebuyers will walk you through the entire process from start to finish.
Benefits of Being a First-Time Homebuyer
As a first-time homebuyer, you may feel a mix of excitement and apprehension. While the home buying process can seem overwhelming, it’s important to recognize the numerous benefits that come with this milestone.
Financial Assistance
First-time homebuyers have access to several financial assistance programs that can make homeownership more affordable. These include down payment assistance programs, low-interest mortgage loans, and grants specifically designed for first-time buyers. Some of these programs are offered by state and local governments, while others are provided by non-profit organizations or private lenders.
Lower Down Payments
Several loan programs offer lower down payment requirements for first-time homebuyers. The FHA loan, for example, requires as little as 3.5% down if your credit score is 580 or higher. The USDA and VA loans even offer zero down payment options in some cases.
Access to Educational Resources
There’s a lot to learn when you’re buying a home for the first time, but fortunately, there are plenty of resources available. Many organizations offer homebuyer education courses that can help you understand the process and make informed decisions. Some lenders and assistance programs require you to take one of these courses, but even if it’s not mandatory, it can still be a valuable resource.
Before Starting Your Home Search
Check Your Credit
Not only will your credit score play a considerable factor in whether you’re approved for a mortgage, but it will also determine your interest rate.
A small increase or decrease in interest rates may not seem like a big deal. However, mortgage loans are for a hefty sum and for an extended period of time. So, a slight increase or decrease equates to thousands of dollars more spent or saved over the life of the loan.
To have the best chance of being approved for a home loan, you should aim for a credit score of at least 620. It’s possible to get approved for select home loan programs with a score as low as 580, but you may have fewer lenders to choose from.
Run the Numbers
It’s tempting for first-time homebuyers to start searching for homes when they know their credit score is up to par. But that’s probably not a good move until you determine how much home you can afford. Yes, the loan officer will give you a figure when you obtain a preapproval, but that amount isn’t always indicative of what you can afford.
Why so? Well, they focus on the debt-to-income (DTI) ratio to get an idea of a loan amount you qualify for. According to the Consumer Financial Protection Bureau, lenders prefer a DTI ratio of 43% or lower with your new mortgage payment. To illustrate:
CURRENT MONTHLY DEBT
GROSS INCOME
DEBT-TO-INCOME RATIO
MAXIMUM MORTGAGE PAYMENT (USING 43% RECOMMENDATION)
$1,000
$4,000
25%
$720
$2,000
$6,000
33%
$580
$3,000
$10,000
30%
$1,300
Note: Debt-to-Income Ratio = Aggregate Amount of Monthly Debt / Gross Income
The problem is that it fails to consider any expenses unrelated to debt. And if you have hefty insurance, childcare, or even grocery bills, that could be a major concern.
So, your best bet is to look at your current budget and come up with a realistic figure for your new mortgage payment. But don’t forget to keep the recommended DTI ratio in mind.
Explore Mortgage Options
There are several mortgage options on the market for first-time homebuyers, but the most prevalent are:
Conventional Loans
A conventional mortgage is a type of home loan that is not insured or guaranteed by the government. It’s typically offered by a private lender, such as a bank or credit union, and is the most common type of mortgage used to purchase a home.
Conventional mortgages typically require a down payment of at least 3% of the purchase price of the home. Borrowers typically must have a credit score of 620 or higher and a DTI ratio of 36% or lower to qualify. If you have bad credit or are unable to make a large down payment may have a harder time qualifying for a conventional mortgage.
If the loan amount is over $726,200, it becomes a jumbo loan and requires a higher down payment.
FHA Loans
An FHA loan is a type of home loan insured by the Federal Housing Administration (FHA), a government agency within the U.S. Department of Housing and Urban Development (HUD).
FHA loans are designed to make it easier for people to buy homes, especially for first-time homebuyers. They offer lower down payment requirements and more flexible credit guidelines than conventional mortgages.
The minimum credit score required for an FHA loan is 500. If your credit score is between 500 -579, the down payment is 10%. However, if you have a credit score of 580 or above, the down payment is 3.5% of the purchase price.
VA Loans
VA Loans are insured by the Department of Veterans Affairs. They don’t require a down payment and are easier to qualify for than conventional loan products. However, you must be an active-duty member of the armed forces. Surviving spouses also qualify.
USDA Loans
A USDA loan is a type of mortgage offered by the U.S. Department of Agriculture (USDA) to low- and moderate-income borrowers who are looking to buy a home in a rural or suburban area.
See also: 14 First-Time Home Buyer Grants and Programs
Check Out Our Top Picks for 2024:
Best Mortgage Lenders
Most mortgages have a 30 or 15-year term. The latter will cost you more per month, but you’ll save a load of cash on interest.
You can also choose from a fixed or adjustable-rate mortgage (ARM). Fixed-rate mortgages have the same interest rate for the duration of the loan. But ARMs typically start with a lower interest rate for a set amount of time. In fact, they usually span from five to ten years and then adjust depending on the housing market.
Some first-time homebuyers choose ARMs over fixed-rate mortgages because it gives them the option to make a smaller monthly payment in the first few years. It could also mean that you can qualify for a more expensive home. But, be careful not to get too overextended, as erratic market behavior could cause the rate to skyrocket.
Get Preapproved
This is one of the more time-consuming parts of the entire mortgage process for a first-time home buyer. The good news is you don’t have to settle for the first offer that comes your way out of fear that your credit score will take a hit.
“FICO Scores ignore [mortgage] inquiries made in the 30 days prior to scoring,” according to myFICO. So, you won’t be penalized for multiple inquiries.
So, start by researching mortgage lenders that you may be interested in working with. You could also solicit the help of a mortgage broker if you’re strapped for time or want someone to do the legwork for you.
Once you’ve settled on a few lenders, be prepared to provide the following to get preapproved:
Financial statements to confirm your assets, including retirement accounts and real estate
Recent bank statements
Last two pay stubs
W-2s from the last two years
They will also pull your credit report and credit scores. If you qualify, the mortgage lender will then provide you with a preapproval letter, valid for a certain time period, that specifies how much you’re eligible for.
Save Up for a Down Payment and Closing Costs
During the preapproval process, the lender should have discussed loan options that could be a good fit for you. They should also have communicated how much you will need for a down payment and closing costs.
While some sellers may be willing to cover closing costs, be prepared to provide earnest money to secure your offer. And you may need a large down payment if you’re taking out a jumbo loan, or don’t qualify for the FHA or VA loan program. If that’s the case, now’s the time to figure out a plan for it.
If the seller is not paying closing costs, expect to pay between 2% and 5% of the sales price. And if a hefty down payment isn’t required, it’s not a bad idea to bring money to the table. Doing so allows you to reduce the Loan-to-Value, which positions you as less risky to the lender.
You may also be able to avoid private mortgage insurance (PMI), which is required until you reach 20% in equity, and possibly qualify for a reduced interest rate.
How to Find the Perfect Home
Go Home Shopping
All squared away with a preapproval and planned to save up the cash you need? Now, it’s time to go home shopping. But before you go, you have to decide if you want to enlist the assistance of a real estate agent.
It’s possible to find a slew of listings within your price range on the web with minimal effort. However, real estate agents have access to a system that could expand your reach. Even better, they could be integral in helping you choose a home that’s a good buy and negotiating the final purchase price.
And the seller’s agent pays their commission, so no need to worry about forking over extra cash. Just be sure to hire a real estate professional that is seasoned and reputable.
Now for the fun part: home shopping. Be careful not to judge a home solely by its appearance. Some other important factors to keep in mind:
Taxes: are the property taxes affordable or beyond what you can comfortably afford? (You can roll property taxes and homeowners insurance into an escrow account, but they can easily make or break your budget if the figures are steep).
Location: is the home in an area that has historically held its value? Is the location optimal for your commute to and from work?
Crime: is it a high crime area or is it relatively safe?
Condition: how old is the property? Does it need tons of repairs, or is it close to being move in ready?
Floor plan: is the floor plan feasible or ideal for your situation? Would it be appealing to other buyers if you had to sell?
School district: how are the schools? Have they received a good rating, or do they struggle to stay afloat?
All of these factors can have an effect on the value of the property over time.
Submit an Offer
You’ve found the perfect home, and you’re ready to sign on the dotted. Before you can finalize the paperwork and move in, there’s one more important step. And that’s making the offer. Even if the sales price seems fair, you may need to make an offer that’s higher or lower to snag the home.
Why so? Well, there could be a slight or drastic bidding war going on, and the only way for you to win is to beat out the competition. Or maybe your real estate agent did some research and determined the asking price was a bit high based on similar properties in the area or the home’s current condition.
Either way, you want to submit an offer that stands out and gets accepted. Your real estate agent will be able to do so on your behalf. But if you don’t have a real estate agent, check out these letters from Trulia to get you started.
The Mortgage Process
Even after your offer is accepted, there’s still more work to do. You’re not done just yet! It’s time to move on to the mortgage process.
Remember that preapproval letter? The lender will make sure all the information you initially provided is accurate through a process called underwriting.
Depending on how long it’s been since you were preapproved, you may be asked to provide updated bank statements or pay stubs.
The faster you submit the requested information, the quicker you’ll get a response. So, don’t drag your feet if you want a closing date that’s sooner than later.
Home Inspections and Appraisals
Before you close on the home, you will need to have a home inspection and appraisal complete.
The home inspection shouldn’t cost you more than $500. It will give you an overall assessment of the property and identify any potential issues.
The appraisal also plays an integral role as it will give you a solid idea of the home’s fair market value. The lender will mandate it, but it’s not a bad idea to get an independent appraisal done to serve as a second opinion.
An inspection and appraisal may help you decide if you should lower your offer or walk away from the property.
Purchase Homeowners Insurance
Your mortgage lender will require that you take out homeowners insurance. So, you want to start shopping around for quotes and select a policy prior to closing.
Close on Your Loan
At last! You’ve reached the finish line, and it’s time to close on your loan. During the closing, expect to:
Sign a load of paperwork.
Provide any amounts owed for the down payment.
Pay closing costs, which could include property tax obligations, premiums for homeowner’s insurance and association dues, title insurance, and any other costs associated with finalizing the loan.
Pay discount points or prepaid interest that can reduce the interest rate.
But before you show up at closing, it’s a good idea to speak with the lender, so you’ll know what to expect. You can also request a copy of the final closing document, or Closing Disclosure, to see a detailed breakdown of expenses.
A Few More Tips
Here are a few more suggestions for first time home buyers to help you get approved for your first loan:
Refrain from applying for new credit before you close. This could throw off your DTI ratio, lower your credit score, and ultimately prevent you from closing on the loan.
State and local programs may be available to assist with down payments. If you’re low on funds, be sure to explore options that may be available to you.
Several builders offer buyer incentives, like allowances for upgrades and closing costs. So if you haven’t considered new construction, it may not be such a bad idea to take a look if the price points are within your budget.
Should You Rent, Instead?
Perhaps you’ve done a little legwork, ran the numbers, and are on the fence about home buying. You will typically find that it’s cheaper to make monthly mortgage payments than to pay rent.
You can also take advantage of tax deductions and build up equity as you’re making monthly payments. The equity can be borrowed against for a loan or put some extra money in your pocket should you decide to sell before the repayment period ends.
However, renting a home gives you the flexibility to move to a new location if the home isn’t quite what you expected, don’t like the neighborhood, or want something more affordable.
Furthermore, renting allows you to pass the costs of maintaining the home on to the owner. But as a homeowner, you’ll be responsible for costs associated with maintenance and repairs.
Another reason why some choose to rent over buying is the upfront costs. Most landlords require a security deposit. However, it could be substantially lower than the money you may have to bring to the table for the down payment and closing costs.
Ultimately, you have to decide which is the better fit: investing in an asset that could build wealth or continuing to pay rent until you feel the time is right. There is no right or wrong answer; it just depends on your personal preference and financial situation.
Bottom Line
By taking the time to learn about the home buying process, you’ll be well-prepared and save yourself time and headaches. Best of all, you’ll increase your chances of landing your dream home with the most competitive mortgage product on the market.
Frequently Asked Questions
What is the process for buying a home?
The process for buying a home typically involves the following steps:
Determine your budget and get preapproved for a mortgage.
Find a real estate agent and start looking for homes.
Make an offer on a home and negotiate the terms.
Get a home inspection and address any issues that are found.
Get a mortgage and close on the home.
How much house can I afford?
When determining how much house you can afford, there are several factors to take into account. You should consider your income, expenses, down payment, credit score, and mortgage type before making a decision.
A larger down payment can help you get a lower mortgage rate, and a higher credit score can qualify you for better rates and loan terms. Shopping around for mortgage rates and considering different types of mortgages, such as fixed-rate or adjustable-rate, can also help you find the best deal.
Keep in mind that owning a home involves more than just the monthly payments. You will also need to factor in property taxes, insurance, and maintenance costs. You should create a budget that includes all of these costs and leaves room for unexpected expenses.
How much money do I need for a down payment?
The amount of money you need for a down payment will depend on the type of mortgage you get and the price of the home you are buying.
Some mortgage programs, such as FHA loans, allow for down payments as low as 3.5%, while others may require a higher down payment. It’s a good idea to speak with a mortgage lender to determine how much you will need.
Can I buy a house if I have a low credit score?
It’s possible to buy a house with a low credit score. However, it may be more difficult to get approved for a mortgage, and you may have to pay a higher interest rate. Before applying for a mortgage, work on improving your credit scores, as this will help you qualify for a better loan and save you money over time.
How much will closing costs be?
Closing costs are fees that are paid at the closing of a real estate transaction. These costs can vary widely and may include things like mortgage origination fees, title insurance, and appraisal fees. On average, closing costs can range from 2% to 5% of the purchase price of the home.
What is a mortgage preapproval?
A mortgage preapproval is a letter from a lender that indicates how much you are qualified to borrow for a mortgage. The preapproval letter is based on a review of your financial information, including your credit score, monthly income, and debts. A mortgage preapproval can help you understand how much you can afford to borrow and can make you a more competitive buyer in the real estate market.
What is a mortgage rate?
A mortgage rate is the interest rate that you will pay on your mortgage. The mortgage rate will determine the amount of your monthly payments and the overall cost of your loan. Interest rates can vary depending on the type of mortgage you get and your credit scores.
What is PMI?
PMI, or private mortgage insurance, is insurance that is required by lenders for certain types of mortgages when the borrower has less than a 20% down payment. PMI protects the lender in the event that the borrower defaults on the mortgage. The cost of PMI is typically added to the borrower’s monthly mortgage payment.
It’s ironic that the home furnishing retailer Crate & Barrel, known for its modern aesthetic, would be associated with a credit card that’s hardly cutting-edge. The few perks that come with the Crate & Barrel credit card may be found in dozens of other store cards, plus it lacks benefits that come standard in other cards, such as a sign-up bonus.
The products on our list of best credit cards for home improvement have great rewards rates, generous welcome offers, and lengthy 0% APR periods — and some of the cards offer all three. You’ll also get much better redemption flexibility.
Here are five things to know about the Crate & Barrel credit card, issued by Synchrony Bank.
1. There are two versions of the card
The Crate & Barrel credit card. This is a “closed-loop” card, meaning it can only be used to make purchases at Crate & Barrel and affiliated stores such as Crate & Kids and CB2.
The Crate & Barrel Mastercard. This card is “open-loop,” so it can be used at any retailer that accepts Mastercard.
Whether you get the open- or closed-loop version of the Crate & Barrel card will depend on your creditworthiness.
Both cards earn rewards when shopping with Crate & Barrel (see below), but the Crate & Barrel Mastercard also offers 2% back on grocery store purchases (warehouse clubs like Costco are excluded) and 1% back on other purchases.
2. There are two primary perks, but they can’t be combined
Crate & Barrel cardholders may choose to receive one of two benefits:
Earn 10% back (in “Reward Dollars”) for every $200 spent at Crate & Barrel. That’s an excellent earnings rate, but redemption is another matter. More on that later.
Special financing for purchases of $749 or more.
If an order qualifies for 10% back and special financing, you must choose one or the other. The card won’t allow you to receive rewards on a purchase that is also being financed.
3. Reward redemption is severely limited
Reward rates of 10% and above are uncommon, especially on cards with no annual fee. But that rate gets less impressive when you consider the various redemption restrictions you’ll face.
As with most store cards, the rewards you earn are usable only within the retailer’s brand umbrella. But there’s more to keep in mind here:
Your Crate & Barrel card earns Reward Dollars, which are automatically converted into Reward Certificates in $20 increments. On the plus side, there’s nothing for you to “do” to get those certificates — but on the minus side, you’ll have to wait until you’ve hit the $20 minimum threshold, and you won’t be able to save up your Reward Dollars to use them all at once on a large purchase.
You can’t bank Reward Certificates for very long either; they expire 90 days after they’re issued.
Reward Certificates can’t be combined with any other store discount. Moreover, if you don’t use the full amount of your Reward Certificate, the remaining amount is forfeited.
Many general cash-back credits will let you redeem rewards however (and whenever) you like, without worrying about minimum redemption thresholds, expiration dates or the possibility of forfeiting any value.
4. There are three special financing options
The special financing options offered by the Crate & Barrel credit card come in three different term lengths:
6 months of special financing on purchases of $749 or more. This special financing offer never expires.
12 months of special financing on purchases of $1,499–$2,998.99 made before Dec. 31, 2024.
24 months of special financing on purchases of $2,999 or more made before Dec. 31, 2024.
In theory, special financing (also known as deferred interest) seems like a great deal. And it could be — as long as you pay off the entire balance before the term ends. Do that and you’ll owe no interest.
If, however, there’s any balance at all left by the end of the financing period, you’ll owe interest on the entire purchase amount, retroactive to the purchase date.
Credit cards with true 0% intro APRs are much more forgiving because they won’t charge back interest if any part of the balance remains when the APR period expires. For example, the Bank of America® Customized Cash Rewards credit card offers a 0% Intro APR for 15 billing cycles for purchases, and for any balance transfers made in the first 60 days. After the Intro APR offer ends, a Variable APR that’s currently 18.24% – 28.24% will apply. The card also can earn 3% back on home improvement and furnishings on up to $2,500 of combined quarterly spending between that category and grocery stores and wholesale clubs. (Cardholders must select home improvement and furnishings as their 3% bonus category, although there are other category options.)
5. The interest rate is high
As of February 2024, the interest rate, or purchase APR, for both Crate & Barrel cards was 32.24%. While high interest rates are typical of store cards, that’s not necessarily the norm for all credit cards. According to the Federal Reserve, the average interest rate for interest-accruing credit cards in February 2024 was 22.63%.
“NAMB is thrilled to announce its newly formed partnership with marketing-solution leader Roomvu,” NAMB president Valerie Saunders said in a Press release emailed to MPA. “Their innovative marketing technology is easy to use and is proven to move the needle in our industry. NAMB members and the entire industry will benefit from using their solutions. … [Read more…]
Today’s average mortgage rates on Apr. 22, 2024, compared with one week ago. We use rate data collected by Bankrate as reported by lenders across the US.
Mortgage refinance rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
Refinance rate news
A vast majority of US homeowners already have mortgages with a rate below 6%. Because mortgage refinance rates have been averaging above 6.5% over the past several months, households are choosing to hold on to their existing mortgages instead of swapping them out with a new home loan.
If rates fell to 6%, at least a third of borrowers who took out mortgages in 2023 could reduce their rate by a full percentage point through a refinance, according to BlackKnight.
Refinancing in today’s market could make sense if you have a rate above 8%, said Logan Mohtashami, lead analyst at HousingWire. “However, with all refinancing options, it’s a personal financial choice because of the cost that goes with the loan process,” he said.
What to expect from refinance rates this year
Mortgage rates have been sky-high over the last two years, largely as a result of the Federal Reserve’s aggressive attempt to tame inflation by spiking interest rates. Experts say that decelerating inflation and the Fed’s projected interest rate cuts should help stabilize mortgage interest rates by the end of 2024. But the timing of Fed cuts will depend on incoming economic data and the response of the market.
For homeowners looking to refinance, remember that you can’t time the economy: Interest rates fluctuate on an hourly, daily and weekly basis, and are influenced by an array of factors. Your best move is to keep an eye on day-to-day rate changes and have a game plan on how to capitalize on a big enough percentage drop, said Matt Graham of Mortgage News Daily.
What to know about refinancing
When you refinance your mortgage, you take out another home loan that pays off your initial mortgage. With a traditional refinance, your new home loan will have a different term and/or interest rate. With a cash-out refinance, you’ll tap into your equity with a new loan that’s bigger than your existing mortgage balance, allowing you to pocket the difference in cash.
Refinancing can be a great financial move if you score a low rate or can pay off your home loan in less time, but consider whether it’s the right choice for you. Reducing your interest rate by 1% or more is an incentive to refinance, allowing you to cut your monthly payment significantly.
How to find the best refinance rates
The rates advertised online often require specific conditions for eligibility. Your personal interest rate will be influenced by market conditions as well as your specific credit history, financial profile and application. Having a high credit score, a low credit utilization ratio and a history of consistent and on-time payments will generally help you get the best interest rates.
30-year fixed-rate refinance
For 30-year fixed refinances, the average rate is currently at 7.25%, an increase of 19 basis points compared to one week ago. (A basis point is equivalent to 0.01%.) A 30-year fixed refinance will typically have lower monthly payments than a 15-year or 10-year refinance, but it will take you longer to pay off and typically cost you more in interest over the long term.
15-year fixed-rate refinance
The current average interest rate for 15-year refinances is 6.76%, an increase of 15 basis points over last week. Though a 15-year fixed refinance will most likely raise your monthly payment compared to a 30-year loan, you’ll save more money over time because you’re paying off your loan quicker. Also, 15-year refinance rates are typically lower than 30-year refinance rates, which will help you save more in the long run.
10-year fixed-rate refinance
The current average interest rate for a 10-year refinance is 6.62%, an increase of 25 basis points compared to one week ago. A 10-year refinance typically has the lowest interest rate but the highest monthly payment of all refinance terms. A 10-year refinance can help you pay off your house much quicker and save on interest, but make sure you can afford the steeper monthly payment.
To get the best refinance rates, make your application as strong as possible by getting your finances in order, using credit responsibly and monitoring your credit regularly. And don’t forget to speak with multiple lenders and shop around.
Reasons to refinance
Homeowners usually refinance to save money, but there are other reasons to do so. Here are the most common reasons homeowners refinance:
To get a lower interest rate: If you can secure a rate that’s at least 1% lower than the one on your current mortgage, it could make sense to refinance.
To switch the type of mortgage: If you have an adjustable-rate mortgage and want greater security, you could refinance to a fixed-rate mortgage.
To eliminate mortgage insurance: If you have an FHA loan that requires mortgage insurance, you can refinance to a conventional loan once you have 20% equity.
To change the length of a loan term: Refinancing to a longer loan term could lower your monthly payment. Refinancing to a shorter term will save you interest in the long run.
To tap into your equity through a cash-out refinance: If you replace your mortgage with a larger loan, you can receive the difference in cash to cover a large expense.
To take someone off the mortgage: In case of divorce, you can apply for a new home loan in just your name and use the funds to pay off your existing mortgage.
The Fed expected to be able to cut rates 3 times in 2024 as recently as March. Financial markets agreed. But the data that’s come out since then has everyone singing a different tune. This week’s data was more of an afterthought compared to last week’s.
The chart above pertains to Fed rate expectations, and that’s not exactly the same as longer term rates like mortgages and 10yr Treasury yields. The latter saw a bit more volatility this week.
Monday’s Retail Sales data was much stronger than expected and markets reacted immediately. Tuesday’s data was consequential, but it was followed by a speech in which Fed Chair Powell had an opportunity to provide some updated thoughts on the rate outlook. After all, the Fed hadn’t seen the most recent CPI data (and several other strong reports) at the time the last round of rate projections came out in March.
As the market expected, the tone is evolving. While Powell and the Fed repeat that the rate path depends on economic data, it’s no surprise to see recent comments acknowledging a surprising amount of strength in the recent data. Stronger data means fewer rate cuts. Powell went as far as saying there was new uncertainty as to whether the Fed will even be able to cut in 2024.
Two days later, NY Fed President John Williams struck similar tone. Just last week, he had pushed back on the CPI data, saying the Fed wasn’t surprised by setbacks in the inflation data. This week’s comments did more to acknowledge the other side of data dependency. Specifically, Williams said the Fed could hike again if the data called for it.
To be sure, these are not earth-shattering “ifs” and “thens.” But the market hones in on the subtle differences with which the data dependency is communicated. It didn’t help that Thursday morning’s Philly Fed Manufacturing Index moved up to the highest levels in 2 years or that the “prices paid” component of the same report moved up much more than economists expected.
Here’s how the entire week looked in terms of 10yr Treasury yields.
Friday’s reaction to the attacks in Iran is important because it shows us that some geopolitical news is indeed worth a reaction. That was less clear earlier in the week as multiple batches of somewhat similar headlines failed to cause as much movement. The difference on Friday was the uncertainty over the status of Iran’s nuclear sites as well as concern that it would be the catalyst for the outbreak of much more significant fighting. The market calmed down quite quickly once it was clear the nuclear sites were not damaged and that Iran was not retaliating. The correlation between stock prices and bond yields further confirms the “flight to safety” trading pattern commonly seen after such news.
In the bigger picture, the past 2 weeks have gone a long way toward making the end of 2023 look like yet another “false start” toward lower rates. Up until then, we had sort of a sideways fighting chance. While we have labeled late 2023 as the 3rd false start of this cycle, it wouldn’t meet the purest definition until rates rise back above last October’s highs. We’re definitely not there yet and we won’t know if we’ll get there until we see the next round of big ticket economic data in May.
In the meantime, home sales remain constrained.
Next week’s economic data is fairly muted apart from Friday’s PCE price index. This isn’t as much of a market mover as the Consumer Price Index (CPI), but it could certainly cause some volatility if it happens to send a different message.
Our goal here at Credible Operations, Inc., NMLS Number 1681276, referred to as “Credible” below, is to give you the tools and confidence you need to improve your finances. Although we do promote products from our partner lenders who compensate us for our services, all opinions are our own.
Home equity loan
Home equity line of credit (HELOC)
Interest rate
Fixed
Variable
Monthly payment amount
Fixed
Variable
Closing costs and fees
Yes
Yes, might be lower than other loan types
Repayment period
Typically 5-30 years
Typically 10-20 years
FAQ
What is a rate lock?
Interest rates on mortgages fluctuate all the time, but a rate lock allows you to lock in your current rate for a set amount of time. This ensures you get the rate you want as you complete the homebuying process.
What are mortgage points?
Mortgage points are a type of prepaid interest that you can pay upfront — often as part of your closing costs — for a lower overall interest rate. This can lower your APR and monthly payments.
What are closing costs?
Closing costs are the fees you, as the buyer, need to pay before getting a loan. Common fees include attorney fees, home appraisal fees, origination fees, and application fees.
If you’re trying to find the right mortgage rate, consider using Credible. You can use Credible’s free online tool to easily compare multiple lenders and see prequalified rates in just a few minutes.
Ready to make your money work for you? Before you jump in and start investing, take the time to learn about brokerage accounts first. After all, in most cases, a brokerage account is the best way to actively manage your investments.
To help you make an informed decision and open a brokerage account, we’ve compiled a comprehensive guide covering everything from fees to plan for your investments. So, take a few moments to equip yourself with all the answers to your burning investment questions, and you’ll be on your way to financial freedom!
How does a brokerage account work?
A brokerage account allows you to purchase and sell stocks and funds through a digital platform. You can generally deposit funds with cash or check and pay a pre-defined commission to your broker.
The fee you pay fluctuates according to the service you get and the level of automation provided by your chosen platform. Unlike a savings account where you gain a consistent interest rate on your deposits, a brokerage account earns (or sustains losses) depending on the performance of your chosen investments.
Although there is more risk involved, you are likely to reap higher profits than a low-interest savings account. However, if you have a strong appetite for risk, particularly if you are aiming for long-term investment, then considering a brokerage account as part of your savings portfolio might be viable.
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Types of Brokerage Accounts
When it comes to investing, there are a variety of brokerage accounts available to select from, each tailored to suit your individual investment objectives and risk appetite. Some common types of brokerage accounts include:
Individual brokerage account: An individual brokerage account is a standard taxable account that is held in the name of a single investor, allowing them to purchase and sell securities such as stocks, bonds, mutual funds, and ETFs.
Joint brokerage account: For those who wish to invest together, a joint brokerage account is an option, held in the names of two or more individuals, such as married couples or business partners.
Retirement account: Retirement accounts are specifically tailored to helping investors save for retirement, offering certain tax advantages that can help their savings grow in the long term, including traditional IRAs, Roth IRAs, SEP IRAs, and 401(k)s.
Trust account: Trust accounts are also available, set up to hold assets for a third party, like a minor or estate beneficiary. These can be revocable or irrevocable trusts.
Business brokerage account: Business brokerage accounts are set up to buy and sell securities on behalf of a business, such as a small business or startup looking to invest their cash reserves or raise capital.
Custodial account: Custodial accounts are designed for minors, often set up by a parent or guardian to save for a child’s education or other expenses, such as a 529 savings plan.
What can you invest in with a brokerage account?
There are actually a wide variety of options available. You may want to pick one type to start with, or you could choose several to diversify your portfolio. Perhaps the most familiar type of investment is a common stock, in which you essentially purchase shares of a specific company.
If you work for a large public company, you might receive shares as part of your compensation package. Or you can choose from any of the companies listed in the stock market, ranging from behemoths like Facebook to successful small niche companies. On top of common stocks, you can also add the following to your brokerage account:
Preferred stocks
Corporate or sovereign bonds
Real estate investment trusts (REITs)
Stock options
Certificates of deposit (CDs)
Money market accounts (MMAs)
Exchange-traded funds (ETFs)
Mutual funds
Master limited partnerships (MLPs)
What should you consider when picking an online broker?
When opening an online brokerage account, the first thing to consider is whether you want a full-service or discount broker. Full-service brokerage accounts invariably comes with higher fees. But the upside is that you get a financial advisor who is dedicated to your investment account. You can discuss your financial situation and future monetary goals with your financial advisor and build an ongoing relationship.
With a managed brokerage account, financial advisors perform trades for you based on your financial goals and risk appetite. If you have questions or concerns, you can directly communicate with your broker by phone, email, or even an in-person meeting. You’re likely to pay commissions that are higher than those of a discount broker, but you have access to a seasoned professional at all times.
Discount Brokerage Firms
Discount brokerage firms, on the other hand, typically operate solely online. You execute all of your own trades in a truly do-it-yourself fashion. The advantage is that you can save lots of money. The disadvantage is that you have to rely solely on your own market research to develop your portfolio, and can cost yourself money by making mistakes out of sheer inexperience.
Still, if you want to be hands-on with your investments, online discount brokers make the stock market accessible — and affordable — in a way it has never been before. Here are a few other things to think about when choosing your brokerage firm.
Costs
There are typically two types of costs associated with an online brokerage account. The first is a commission fee, which can range anywhere between $5 and $10 for each trade you make. These fees usually apply to stocks and options, and sometimes ETFs, plus transaction fees for mutual funds.
Trading Fees
However, some online brokerage accounts offer fee-free trades for ETFs and mutual funds. If either of those is a large part of your investment strategy, you may benefit from choosing a brokerage that doesn’t charge any fees for those.
Brokerage Account Fees
The second cost you’ll come across is various potential account fees. These can include an annual fee for maintaining your brokerage account, inactivity fees, and research and data fees for information provided by your broker.
Withdrawal & Transfer Fees
You may also incur fees for withdrawing or transferring your funds. Think about how often you plan to trade and what resources you want access to when assessing the value of these fees at different companies. If your annual fee is high, but you’ll save money on lower trading fees, it might be worth it.
Similarly, if you don’t intend to trade very frequently, you might want to find a brokerage firm with low or no inactivity fees. Be sure to do a full review of all costs involved to make sure you get the best value across the board for your specific needs. Otherwise, your trades could end up costing you money over time, rather than earning you money.
Account Balance
Another factor to consider when choosing a brokerage account is how much money you initially plan to invest. Some online brokerages have a minimum amount just to get started, often requiring at least a few thousand dollars. Others don’t have any minimum requirements. In either case, you may notice varying fees depending on how much you invest.
For example, you may receive a discount by meeting a certain deposit threshold. In those cases, it also means you’ll end up paying more if you have a lower account balance. Carefully consider how much you intend to invest and where you receive the best perks for that amount.
Customer Service
In addition to research and data made available online (and often resulting in fees), consider what type of personal service you receive. Would you like an annual check-in with a real financial advisor? Do you prefer 24/7 email or chat support? Or do you need something more hands-on?
Just as the level of service varies between full-service brokers and discount brokers, you’ll see a difference even among different online brokers. Pay attention to your needs, and don’t be afraid to change your brokerage account further down the road if you feel you need more or less attention.
Cash Account vs. Margin Account
Yet another breakdown in types of brokerage accounts is a cash account versus a margin account. So, what’s the difference? A cash account is extremely straightforward: you simply trade with the exact amount of funds currently available in your account. This can be relatively restrictive for a couple of different reasons.
First, cash used to purchase new stocks must be settled in your brokerage account, so if a previous transaction is still pending, you can’t use that money for a new trade. Second, you can’t make any withdrawals from a cash account until the money is fully settled.
Trading on Margin
A margin account essentially allows you to borrow money from your brokerage firm to cover short-term capital needs. The advantage is that it gives you a bit more flexibility in making time-sensitive trades.
One of the disadvantages is that you’ll have to pay a margin rate, which serves as interest on the short-term loan. Additionally, you may need to place a higher account minimum to compensate for the risk of the broker potentially losing money.
You can potentially qualify for a lower margin rate by permitting rehypothecation, which allows brokerage firms to reuse your collateral for their own purposes. Clearly, this brings additional risk to your portfolio.
If you’re a beginning investor, it’s probably wise to stick to straightforward cash trading. As you become more comfortable and active with the trading process, you can begin exploring the intricacies of margin trading with your broker.
How to Open a Brokerage Account
Opening a brokerage account isn’t terribly difficult and just requires a few pieces of personal information and, of course, money. When you’re ready to get started, gather basic materials such as your Social Security number or tax ID number, driver’s license, date of birth, and contact information.
You’ll also need employment and income information, including your employer, annual income (usually submitted using a W9 form), and your net worth. Assuming this information is easy for you to pull together, the process is both quick and easy, especially if you opt to open a brokerage account online.
You’ll also need cash to open a brokerage account. You cannot use a credit card to deposit funds. Instead, you’ll likely need to perform an electronic funds transfer from your bank account.
Keep a paper check on hand to facilitate the transfer. This process can take anywhere between a few days and a week so that the money can be verified. Once the funds hit your brokerage account, you can get started trading!
Should you use a brokerage account for retirement funds?
This is a very personal question which depends upon your retirement savings goals. First, it’s critical to take advantage of any employer-sponsored retirement accounts like a 401(k), especially if you receive a company match for your contributions. Then, consider contributing to a tax-advantaged retirement account like a Roth IRA.
There are limits on how much you can contribute each year, but you do both to enjoy different tax advantages. For example, a traditional IRA is not taxed until you begin withdrawing, making your annual contributions tax-deductible. Roth IRA contributions, on the other hand, are taxed when you make them.
The upside is that you don’t pay taxes when you start to withdraw, potentially saving you money during your retirement. If you’ve maxed out an appropriate amount of these account types, you might consider supplementing your retirement savings with a brokerage account.
Before you do, consider a few things. First, the earnings you make on selling investments are taxable, usually as capital gains tax. You’ll also want to review the amount of risk in your portfolio as you approach retirement age. Remember to review your holdings regularly, especially if you’re not a frequent trader.
Getting Started
With so many options available for brokerage accounts today, investing is more accessible — and affordable — than ever before. If you’re just beginning to get your feet wet, start by investing just a small amount of money to help you learn through rookie mistakes. Then you can grow into more sophisticated trading methods as you learn the full potential of your brokerage account.
Alternatively, you can switch to a more service-oriented account to take the day-to-day trading out of your hands. The options are quite limitless when it comes to managing a brokerage account.
Frequently Asked Questions
Are brokerage accounts insured?
The Securities Investor Protection Corporation (SIPC) offers insurance for cash and securities held in a brokerage account should the brokerage fail, though this coverage only extends to the custodial function of the brokerage. Unfortunately, it does not extend to losses resulting from inadequate investment decisions or drops in the value of investments.
In addition, SIPC guarantees up to $500,000 per customer, with a $250,000 cap on cash. However, keep in mind that SIPC insurance does not shield against market losses or other dangers associated with investing.
Which brokerage account is the most suitable for beginners?
When selecting a brokerage account as a novice investor, there are a host of factors to consider, including the kind of investment products you have your eye on, fees and commissions, user-friendliness, and customer service. Here are some of the options you may want to think about:
Robinhood: For those wishing to begin investing without incurring too many costs, Robinhood may be a good choice; it offers commission-free trading for numerous popular stocks and ETFs. However, it should be noted that Robinhood does not provide the same features as more traditional brokerage firms, such as access to research and investment advice.
E*TRADE: E*TRADE is a much-revered brokerage firm that provides a vast selection of investment products, including stocks, ETFs, mutual funds, and options. The platform also provides access to educational materials and investment guidance, as well as a navigable platform with a wide range of tools and resources for rookies. That being said, E*TRADE does impose commissions on some trades and, as such, may not be suitable for those looking to make numerous trades.
Charles Schwab: Charles Schwab is yet another highly regarded brokerage firm that offers various investment products and a user-friendly platform, and it boasts a plethora of resources and tools for novice investors, such as educational materials and investment guidance. Although it does charge commissions for certain trades, Charles Schwab does offer commission-free trading for certain ETFs.
At the end of the day, the best brokerage account for a beginner depends on their individual needs and objectives. Hence, it is advisable to shop around and compare the fees, commissions, and features of different brokerage firms before choosing.
How old do you have to be to open a brokerage account?
In the United States, you must be at least 18 to open a brokerage account in your own name. However, some brokerage firms may require a Social Security number or tax identification number to proceed.
If this applies to you, and you are under 18, it may still be possible to open an account with the help of a parent or guardian. A few brokerage firms offer custodial accounts, which are held in the name of minors, but managed by adults.
How much do you need to open a brokerage account?
The amount of capital required to start a brokerage account differs depending on the broker and type of account. Some brokers may require a minimum of $500 or $1,000 to open a regular account, while others may not have any minimum balance requirement. It all depends on the institution and the account you select.
What is a taxable brokerage account?
A taxable brokerage account is a type of investment account funded with after-tax dollars, meaning the money you put in has already been taxed at your marginal tax rate. Capital gains tax is typically assessed on the profits you make when you sell an asset for more than you paid for it, and is based on how long you hold the asset.
If held for a year or less, short-term capital gains are taxed at your ordinary income tax rate; if held for more than a year, the profits are considered long-term capital gains and are taxed at a lower rate.
Additionally, any dividends or interest earned from your investments in the account are considered taxable income, and must be reported and taxed accordingly. To ensure you make the most informed decisions and minimize your tax liability, consult a financial professional or tax advisor before investing.