Refinance rates are currently between 6.5% and 7.5%, but your personal interest rate will depend on your credit history, financial profile and application.
Average refinance rates reported by lenders across the US as of March 1, 2024. We track refinance rate trends using information from Bankrate.
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.
How to select the right refinance type and term
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
The average rate for a 30-year fixed refinance loan is currently 7.10%, an increase of 1 basis point over this time last week. (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
For 15-year fixed refinances, the average rate is currently at 6.60%, a decrease of 2 basis points compared to one week ago. 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
For 10-year fixed refinances, the average rate is currently at 6.45%, a decrease of 4 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.
What to know about today’s refinance rates
Refinance rates dropped significantly toward the end of 2023, bringing much-needed activity to the housing market. Since early February, however, rates have climbed back into the 7% range. The increase came after recent inflation and labor data made it clear to investors that the Federal Reserve won’t start cutting interest rates until early this summer. Higher mortgage rates make refinancing less attractive to homeowners, making them more likely to hold on to their existing mortgages.
30-year fixed refinance: 7.10%
15-year fixed refinance: 6.60%
10-year fixed refinance: 6.45%
What to know about 2024 refinance rate trends
Experts say slowing inflation and the Fed’s projected interest rate cuts should help push mortgage interest rates down to around 6% by the end of 2024, but that will depend on incoming economic data.
Over 82% of homeowners currently have interest rates below 5% on their property. If home loan rates stabilize over the next several months, more homeowners should be able to save money through refinancing. Yet in order for refinance applications to pick up in a meaningful way, rates would need to fall substantially, according to Mark Zandi, chief economist at Moody’s Analytics.
For homeowners looking to refinance, remember that you can’t time the market: Interest rates fluctuate on an hourly, daily and weekly basis, and are influenced by an array of macroeconomic 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.
Refinancing 101
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.
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,” Mohtashami said.
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.
If you’re in the market for a home, here are today’s mortgage rates compared to last week’s.
Loan type
Interest rate
A week ago
Change
30-year fixed rate
7.18%
7.10%
+0.08
15-year fixed rate
6.64%
6.51%
+0.13
30-year jumbo mortgage rate
7.11%
7.02%
+0.09
30-year mortgage refinance rate
7.19%
7.10%
+0.09
Average rates offered by lenders nationwide as of Feb. 29, 2024. We use rates collected by Bankrate to track daily mortgage rate trends.
Mortgage 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.
How to select a mortgage term and type
When picking a mortgage, consider the loan term, or payment schedule. The most common mortgage terms are 15 and 30 years, although 10-, 20- and 40-year mortgages also exist. You’ll also need to choose between a fixed-rate mortgage, where the interest rate is set for the duration of the loan, and an adjustable-rate mortgage. With an adjustable-rate mortgage, the interest rate is only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the market’s current interest rate. Fixed-rate mortgages offer more stability and are a better option if you plan to live in a home in the long term, but adjustable-rate mortgages may offer lower interest rates upfront.
30-year fixed-rate mortgages
The 30-year fixed-mortgage rate average is 7.18%, which is an increase of 8 basis points from seven days ago. (A basis point is equivalent to 0.01%.) A 30-year fixed mortgage is the most common loan term. It will often have a higher interest rate than a 15-year mortgage, but you’ll have a lower monthly payment.
15-year fixed-rate mortgages
The average rate for a 15-year, fixed mortgage is 6.64%, which is an increase of 13 basis points from seven days ago. Though you’ll have a bigger monthly payment than a 30-year fixed mortgage, a 15-year loan usually comes with a lower interest rate, allowing you to pay less interest in the long run and pay off your mortgage sooner.
5/1 adjustable-rate mortgages
A 5/1 ARM has an average rate of 6.35%, a slide of 1 basis point compared to last week. You’ll typically get a lower introductory interest rate with a 5/1 ARM in the first five years of the mortgage. But you could pay more after that period, depending on how the rate adjusts annually. If you plan to sell or refinance your house within five years, an ARM could be a good option.
What to know about today’s mortgage rates
High inflation and the Federal Reserve’s aggressive interest rate hikes drove up mortgage rates over the last several years. Toward the end of last year, however, the Fed announced that interest rate cuts were on the table for 2024. That projection led to a significant drop in mortgage rates, pushing them into the 6% range. Since early February, however, mortgage rates have climbed back above 7% in response to strong economic data.
30-year fixed mortgage: 7.18%
15-year fixed mortgage: 6.64%
5/1 adjustable-rate mortgage: 6.35%
Where mortgage rates are headed in 2024
Experts say interest rate cuts from the Fed will allow mortgage rates to ease, though the first cut won’t likely come until May or June, depending on how quickly inflation decelerates.
“We are expecting mortgage rates to fall to around 6.5% by the end of this year, but there’s still a lot of volatility I think we might see,” said Daryl Fairweather, chief economist at Redfin. “It’s possible that rates might go up before they go down again, so that’s why we’re still being conservative with rates being around 6.5%.”
Each month brings a new set of inflation and labor data that can change how investors and the market respond and what direction mortgage rates go, said Odeta Kushi, deputy chief economist at First American Financial Corporation. “Ongoing inflation deceleration, a slowing economy and even geopolitical uncertainty can contribute to lower mortgage rates. On the other hand, data that signals upside risk to inflation may result in higher rates,” Kushi said.
While mortgage forecasters base their projections on different data, most experts and market watchers predict rates will move toward 6% or lower by the end of 2024. Here’s a look at where some major housing authorities expect average mortgage rates to land.
What factors affect mortgage rates?
While it’s important to monitor mortgage rates if you’re shopping for a home, remember that no one has a crystal ball. It’s impossible to time the mortgage market, and rates will always have some level of volatility because so many factors are at play.
“Mortgage rates tend to follow long-date Treasury yields, a function of current inflation and economic growth as well as expectations about future economic conditions,” says Orphe Divounguy, senior macroeconomist at Zillow Home Loans.
Here are the factors that influence the average rates on home loans.
Federal Reserve monetary policy: The nation’s central bank doesn’t set interest rates, but when it adjusts the federal funds rate, mortgages tend to go in the same direction.
Inflation: Mortgage rates tend to increase during high inflation. Lenders usually set higher interest rates on loans to compensate for the loss of purchasing power.
The bond market: Mortgage lenders often use long-term bond yields, like the 10-Year Treasury, as a benchmark to set interest rates on home loans. When yields rise, mortgage rates typically increase.
Geopolitical events: World events, such as elections, pandemics or economic crises, can also affect home loan rates, particularly when global financial markets face uncertainty.
Other economic factors: The bond market, employment data, investor confidence and housing market trends, such as supply and demand, can also affect the direction of mortgage rates.
Calculate your monthly mortgage payment
Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to make a budget and try to stay within your means. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.
How to find the best mortgage rates
Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right.
Save for a bigger down payment: Though a 20% down payment isn’t required, a larger upfront payment means taking out a smaller mortgage, which will help you save in interest.
Boost your credit score: You can qualify for a conventional mortgage with a 620 credit score, but a higher score of at least 740 will get you better rates.
Pay off debt: Experts recommend a debt-to-income ratio of 36% or less to help you qualify for the best rates. Not carrying other debt will put you in a better position to handle your monthly payments.
Research loans and assistance: Government-sponsored loans have more flexible borrowing requirements than conventional loans. Some government-sponsored or private programs can also help with your down payment and closing costs.
Shop around for lenders: Researching and comparing multiple loan offers from different lenders can help you secure the lowest mortgage rate for your situation.
Home improvement loans are offered by banks, online lenders and credit unions.
Unlike home equity loans, home improvement loans are generally not tax deductible.
If used for projects that substantially improve your home, you may be able to deduct the interest on a home equity loan from your taxes.
Home improvement loans generally aren’t eligible for federal tax deductions, even when used for eligible renovations or property improvements. Unlike home equity loans, which can be tax deductible, home improvement loans are unsecured debt, rendering them ineligible for tax credits.
Home improvement loans vs. home equity loans
Although home improvement and home equity loans may sound similar on paper and can be used for the same purpose, it’s important to understand the differences between the two categories.
If you turn to a home improvement loan to finance your next project rather than an equity loan, you could leave thousands of dollars in tax deductions on the table.
Home improvement loans
A home improvement loan is offered by online lenders, banks or credit unions and functions as a personal loan. Borrowers must meet the lender’s requirements to get approved and receive the funds in a lump sum. While lenders typically require good credit, some provide bad credit home improvement loans.
Most lenders offer repayment timelines between two and five years and can come with fixed or variable interest rates based on your creditworthiness. In short, home improvement loans are unsecured personal loans specifically marketed toward borrowers looking to finance renovations.
Unsecured loans or debts (like personal loans for home improvements) aren’t secured by a house or property. Therefore, they’re not eligible for the tax credits, even if the funds are used for eligible projects or improvements.
Home equity loans
Home improvement loans and home equity loans are in two different categories for a number of reasons. For one, home equity loans are secured — backed by the home — and allow you to tap into the equity you’ve built up in your home over time.
Also called a ‘second mortgage,’ these loans and lines of credit tend to have stricter usage restrictions and are higher risk. If you fail to make the payments, you run the risk of losing your home. Home equity loans and lines of credit (HELOCs) are a few of the most popular secured debts and qualify for tax deductions.
Home loans that are tax deductible
As a rule of thumb, if your home or property doesn’t back the loan, it doesn’t qualify for the tax interest deduction. However, if you’re looking to finance a specific renovation, consider a home equity loan or line of credit.
Home equity loans
A home equity loan allows you to borrow against the equity — the portion of the home you’ve already paid off — built up in your home. They typically have fixed interest rates and repayment terms of up to 30 years, but most lenders allow the borrower to choose a repayment plan.
How much you can borrow will depend on the lender and how much equity you’ve built up over time. However, many lenders cap the amount you can borrow between 80 to 85 percent of your home’s equity.
If used for projects to substantially improve your home, you may be able to deduct the interest from your loan on your taxes, even if only a portion of the balance went toward the home.
Home Equity Lines of Credit (HELOCs)
HELOCs also allow you to borrow against the equity you’ve built up over time, but rather than dispersing the amount in a lump sum, a HELOC allows you to withdraw funds over time.
Borrowers can take out how much they need when they need it. The interest is eligible for a tax credit when used for eligible projects. Because of this, HELOCs can be a great way to finance an ongoing home improvement project.
Deduction-eligible home equity loan uses
Not all home improvement projects qualify for a tax deduction, even if you use a home equity loan for financing. It’s not likely that you’ll see any interest deducted for smaller projects, like updating your kitchen cabinets or installing a patio.
The IRS has specific parameters around what qualifies as eligible. Check the specific home improvement details and deadlines before banking on a significant return this tax season.
Home office deductions
If your residence is your primary workspace, you may be able to deduct certain home office improvements or purchases. This applies to homeowners and renters residing in any home or utilizing a free-standing structure for their business. Employees will not qualify, even if they meet the other requirements.
The term “home office” is more of an umbrella term as personal property also may qualify. Among others, Boats, RVs, mobile homes and unattached garages, studios or barns fall under this category if used strictly for business.
In order to qualify, the IRS states that:
You must use a specific part of your home strictly for business purposes.
Your home (or structure) is your principal place of business, or if administrative tasks can only be performed on your property.
If you work on a hybrid schedule and only work from home a few times a week, it likely won’t qualify. “If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home,” an IRS resource page reads.
Medical-related home renovations
The installation of specialized household equipment for medical care to support you, your spouse or your dependent may qualify for a tax break, but only if the additions fall within certain parameters.
For example, the value of the property must not be increased by the renovation for the entire cost to be considered a taxable medical expense. Such improvements may include:
Widening hallways and doorways.
Adding ramps or lifts to accommodate for a wheelchair.
Modifying stairwells.
Lowering (or modifying) kitchen appliances, cabinets or household electrical outlets.
Any amount paid (or borrowed) for medical upkeep and operation also qualifies as long as the funds are used strictly for medical purposes and the installation of a specialized plumbing system for a person with a disability.
If you’re unsure whether your renovations qualify, consider the primary function of the addition and the potential value-add it gives your home. “Only reasonable costs to accommodate a home to your disabled condition are considered medical care,” the IRS tax resource reads. “Additional costs for personal motives, such as for architectural or aesthetic reasons, aren’t medical expenses.”
Energy efficient installations
If you’ve installed energy efficient equipment — think solar panels, energy efficient windows, skylights and doors, biomass equipment or small wind turbines — then you may qualify for a tax break on your next return.
Also called the residential clean energy property credit, qualifying eco-friendly renovations made after Dec. 31, 2021, and before Jan. 1, 2033, are eligible for a tax credit totaling up to 30 percent of the equipment costs. Any expenditure made in 2033 can result in a 26 percent maximum tax credit and a 22 percent maximum credit for property placed in 2034. There will be no credit available for renovations made Dec. 31, 2034.
What constitutes a qualifying cost when calculating the deduction percentage will vary based on the type of eco-friendly equipment you’ve had installed. There’s also a $1,200 aggregate yearly tax credit maximum for home components, energy audits and energy property, while qualifying heaters, stoves and boilers have a separate $2,000 limit.
Which is better: home equity or home improvement loans?
While there isn’t a ‘right’ answer as to which product is better, there are projects that are better suited for certain projects. For example, home improvement loans are best for smaller projects that don’t qualify for tax deductions, especially if you don’t have significant home equity built up.
For larger and longer renovations, HELOCs may be the better option for qualifying borrowers. Home equity loans are well suited for long-term homeowners with less strenuous projects that qualify for tax credits.
Roughly 72% of potential homebuyers say homeownership would be financially feasible if mortgage rates fell below 5%, according to a recent survey from Realtor.com. That means mortgage rates would need to drop by at least 2% to unlock today’s unaffordable housing market.
But there’s a problem. Major forecasts don’t call for mortgage rates to slip under 6% until 2025.
Between last November and early January, the average rate for a 30-year fixed mortgage, the most popular home loan type, fell from a high of 8.01% to the mid-6% range, according to Bankrate, CNET’s sister site. However, throughout February, rates have gone up and kept steady at around 7.25%.
Though mortgage rates aren’t expected to fall dramatically this year, any dip is good news for homebuyers. If home loan rates manage to reach the low-6% range by the end of the year, it would increase housing affordability for a large number of families who have been stuck on the sidelines.
Will 6% be the magic mortgage rate to kick-start the housing market? Or will we need to wait for 5% rates a year from now? Here’s what experts are saying.
Mortgage rates: Rise like a rocket, fall like a feather?
The recent surge in mortgage rates was fueled by hotter-than-expected inflation and labor data, which sent the 10-year Treasury yield (a key benchmark for the 30-year fixed mortgage rate) higher. But in some ways, rates were just recalibrating to an appropriate level.
“Investors got a little ahead of themselves in terms of expectations for lower rates this year,” said Keith Gumbinger, vice president of mortgage site HSH.com. Given the state of the economy — like sticky inflation and the Federal Reserve’s reactive monetary policy — financial markets may have been overly optimistic in projecting when interest rate cuts would start.
After nearly two years of aggressive interest rate hikes to tame inflationary pressures, the Fed signaled in December it would likely cut rates three times in 2024. Though the Fed doesn’t directly set mortgage rates, a lower federal funds rate, combined with cooler inflation, would help mortgage rates go down.
Overall forecasts still project mortgage rates to decline, but exactly when and by how much is murkier. Before adjusting the federal funds rate, the central bank wants to see inflation steady at its 2% year-over-year target.
Even if economic data points to a slowdown, mortgage rate movement will likely be slow and gradual, so 5% rates aren’t in the cards this year.
Read more: Mortgage Predictions: How Labor Data Could Impact Mortgage Rates in 2024
Will mortgage rates go below 6% this year?
Mortgage rates tend to be volatile and preemptive. Rate movement depends not on what’s happening now, but on what investors and lenders believe will happen in the future, according to Orphe Divounguy, senior economist at Zillow Home Loans.
“Today’s mortgage rates, to some extent, already reflect expectations of slowing economic growth and future Fed rate cuts,” Divounguy said.
While next month’s economic data could change the equation, expectations for mortgage rates haven’t changed much. Rates in the low-6% range are still possible in 2024, just not in time for the spring homebuying season.
What the experts are saying
“If we’ve learned anything over the past few years, it is that mortgage rates and other financial conditions can shift rapidly as conditions change. My base expectation is that mortgage rates will decline more gradually and not break below 6% in 2024.”
“As the Federal Reserve holds interest rates steady before beginning to slowly cut rates in May, the spread on the 30-year fixed-rate loan and the 10-year Treasury bond will normalize, and mortgage rates gradually will fall. That said, forecasting mortgage rates is challenging, and near-term volatility is likely. While the rate will trend lower, there is uncertainty in the month-to-month movement in rates.”
“A 6-8% range can be a possible outcome if inflation remains stickier and higher than expectations, and the Fed does not cut until much later than the second half of this year. If the soft landing scenario occurs, then we could see a range closer to 5-7% once the Fed starts to cut rates later in 2024.”
“I don’t think present conditions change the overall forecast for mortgage or other interest rates all that much, but sustained higher economic growth or more persistent inflation would.”
Is 6% an affordable mortgage rate?
Today’s mortgage rates feel high, even if they’re not in a broad historical sense.
Most prospective first-time homebuyers have witnessed low rates over the past decade, especially when they hit rock bottom in the 2% to 3% range during the pandemic. Current buyers likely weren’t on the market for a home in the 1980s, when rates peaked above 18%.
What’s considered an affordable mortgage rate depends on your financial situation. Broadly speaking, a good mortgage rate is generally at or below the national average. The median 30-year mortgage rate since 1971 is 7.4%, according to Freddie Mac.
For many homeowners, the mortgage rate they start with is only temporary: They refinance to a lower rate when mortgage rates drop.
Mortgage rates feel so high nowadays because of the housing market’s overall affordability crisis. Home prices keep rising, inflation is cutting into wages, and debt from credit cards and student loans continue to chip away at savings. All those factors combined have put homeownership out of reach for middle-income and low-income Americans.
Comparing 6% vs. 7% vs. 8% mortgage rate
If you’ve been waiting for rates to plummet before buying a home, doing some basic calculations might change your perspective. Yes, a 6% mortgage is higher than just four years ago. But it’s still a better deal than an 8% or even 7% mortgage rate.
What difference does 1% or 2% make?
Does a 1% drop in mortgage rates make a difference in your monthly payment? The answer is yes. What about a 2% drop? Even more.
Using CNET’s mortgage calculator, we did the math to demonstrate what a 1% or 2% difference can make on your home loan payment. In the chart above, we assumed a 20% down payment on a $500,000 home, making a total loan amount of $400,000 with a 30-year fixed term comparing a 6%, 7% and 8% rate.
Getting a home loan at a 6% interest rate versus a 7% rate gives you savings of $263 a month. That’s $3,156 a year and $94,683 in total interest over the life of your loan.
The savings are even bigger when comparing a 6% interest rate with an 8% rate: The lower rate saves you $537 per month, $6,444 per year and $193,267 in total interest paid.
Pro Tip: Even if you’re getting a lower interest rate, pay attention to lender fees and other costs. Excessive fees or mortgage “discount” points are often hidden and can offset the savings.
For example, a lender might advertise a below-average rate, let’s say 6%. But that’s often based on the borrower having an excellent credit score and paying discount points in exchange for that low rate, which can cost thousands of dollars upfront. Each mortgage discount point results in a 0.25% decrease in your rate but will typically cost 1% of the loan amount.
How to get a lower mortgage rate
While it’s important to keep track of current mortgage rate trends, the best thing to do is focus on doing things like improving your credit score, paying off debt and saving for a bigger down payment.
Many mortgage lenders advertise lower-than-average interest rates. But to qualify for those low rates, you’ll need to have excellent credit, a low debt-to-income ratio and (typically) a down payment of at least 20%.
Experts also recommend comparing loan offers from at least two different mortgage lenders to help you secure the best deal.
Images by GettyImages; Illustration by Hunter Newton/Bankrate
More than half of aspiring homeowners say living costs are too high or their incomes are too low to squeeze a down payment and closing costs into their budgets, according to Bankrate’s new Down Payment Survey.
Reflecting the bout of inflation that swept through the economy in 2022 and 2023, fully 51 percent of would-be homeowners say the cost of living poses an obstacle to their home-buying plans. Meanwhile, 54 percent of Americans say their incomes haven’t kept pace with home prices that are flirting with record levels.
“With so many aspiring homeowners saying they’re not making enough money to afford a down payment, the job market has been more resilient, the economy more robust than many experts expected,” says Mark Hamrick, Bankrate’s chief economic analyst. “That strength can still be leveraged.”
Bankrate’s key takeaways
Myriad financial challenges vex would-be buyers. In addition to the high cost of living and low income, aspiring homeowners cited these barriers to homeownership: credit card debt (18 percent); friends or family not being able to provide financial assistance (15 percent); and student loan debt (10 percent).
Saving up could take a long time. Fully 20 percent of aspiring homeowners think they will never be able to save enough to purchase a home. Just 7 percent say they’ll be ready in less than a year.
Successful buyers were intentional about achieving their goal. More than four in 10 current homeowners (41 percent) saved specifically for the down payment and closing costs on their first homes, and 14 percent got down payment assistance or a first-time buyer grant.
Americans’ housing outlook is growing less gloomy. Overall, 42 percent believe now is a bad time to buy a home, a decrease from 49 percent in September 2023.
Many say high living costs, constrained incomes pose challenges
More than half of aspiring homeowners say the current cost of living is too high or their income is not high enough for them to afford a down payment and closing costs for a home (51 percent and 54 percent, respectively).
In addition to the high cost of living and low income, aspiring homeowners cited credit card debt (18 percent), friends or family not being able to provide financial assistance (15 percent) and student loan debt (10 percent) as barriers to homeownership, while 8 percent cited some other reason. Just 13 percent of aspiring homeowners said nothing is holding them back.
Younger aspiring homeowners are more likely to point to a lack of financial assistance from friends or family as obstacles to homeownership compared to older generations, while millennials are most likely to point to both credit card and student loan debt.
Aspiring homeowners not hopeful they’ll be able to afford to buy in near future
Fully 20 percent of aspiring homeowners think they will never be able to save enough to purchase a home. Older generations (36 percent of baby boomers and 28 percent of Gen Xers) are more likely to believe they will never be able to save enough to buy a home, compared to 18 percent of millennials and 10 percent of Gen Zers.
Nearly one-third of aspiring homeowners (30 percent) say it will take at least five years or longer to save enough money for a home, while 10 percent say it will take a decade or more.
Americans more optimistic about housing market
Overall, 42 percent believe now is a bad time to buy a home, a decrease from 49 percent in a September 2023 Bankrate survey.
Among other housing market headwinds, nearly two in five (39 percent) say they think mortgage rates will remain elevated for the foreseeable future, while 38 percent say a buyer needs excellent credit to get a mortgage and 17 percent say that renting is cheaper than buying a home.
Current homeowners got there through intentional savings
When asked how they came up with the cash for their first homes, 41 percent of current homeowners saved specifically for that purpose, 14 percent received a gift from family or friends and another 14 percent used a first-time homebuyers grant or loan assistance program. Nine percent received a loan from family or friends, while another 9 percent took money out of retirement savings. Fewer homeowners found additional income streams (8 percent) or sold some personal items such as jewelry, electronics or cars (7 percent).
3 ways to save for a down payment
Leverage a savings account. Although mortgage rates have increased, the rates on savings accounts have gone up, too. Look into high-yield or money market accounts, or even a certificate of deposit, to take advantage of these returns.
Don’t sweat 20 percent. While 20 percent is an ideal amount to put down, the reality is that the typical home price nationally is close to $400,000, and most first-time buyers don’t have $80,000 to devote to the down payment. The good news is that there are plenty of loans available for borrowers with as little as 3 percent to 3.5 percent for the down payment.
Tap into first-time buyer programs. Nearly every state in the country has a program to help first-time buyers become homeowners. These programs typically feature some sort of down payment assistance.
FAQ
Because of the combination of high home prices and still-high mortgage rates, fewer Americans than usual are buying homes. Don’t wait too long, though: If mortgage rates decline significantly in 2024, that shift would lure more buyers into the market, creating more competition and upward pressure on home prices.
No. While the best mortgage offers are available to borrowers with credit scores of 740 or higher, that’s not a requirement. Mortgages are available to borrowers with credit scores as low as 580, although those loans typically carry higher costs.
The current consensus is that mortgage rates will fall to 6 percent or below by the end of 2024. A lot can happen between now and then, however — much depends on the direction of the economy and when the Federal Reserve decides to cut interest rates.
Bankrate commissioned YouGov Plc to conduct the survey. All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,267 U.S. adults, of which 864 are aspiring/prospective homeowners. Fieldwork was undertaken between Jan. 24-26, 2024. The survey was carried out online and meets rigorous quality standards. It employed a non-probability-based sample using both quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results. For this survey, Bankrate defined aspiring/prospective homeowners as those who have owned a home in the past but currently do not, and those who have never owned a home in the past but hope to someday.
National mortgage rates rose for all types of loans compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans jumped.
While it’s expected that rates will gradually come down this year, the path might be bumpy.
“Mortgage rates will be bouncy week-to-week but will most likely settle towards 6 percent by the year end,” said Lawrence Yun, chief economist for the National Association of Realtors.
At its Jan. 31 meeting, the Federal Reserve announced it would hold off changing rates and affirmed its plan to slash rates this year. Rate changes affect many areas of the economy, including the 10-year Treasury, a key benchmark for fixed-rate mortgages.
“The 10-year Treasury yield that serves as a baseline for fixed mortgage rates will have a bouncy journey lower, moving back above 4 percent early in 2024 but trending lower as inflation cools and the Fed gets closer to cutting rates,” says Greg McBride, CFA, Bankrate chief financial analyst. “For mortgage rates, that portends a general downtrend — albeit with fits and starts — in 2024.”
Rates last updated February 27, 2024.
The rates listed above are Bankrate’s overnight average rates and are based on the assumptions indicated here. Actual rates listed across the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Tuesday, February 27th, 2024 at 7:30 a.m.
30-year mortgage rate trends higher, +0.05%
Today’s average rate for the benchmark 30-year fixed mortgage is 7.34 percent, up 5 basis points since the same time last week. A month ago, the average rate on a 30-year fixed mortgage was lower, at 6.96 percent.
At the current average rate, you’ll pay a combined $688.29 per month in principal and interest for every $100,000 you borrow. That’s $3.40 higher compared with last week.
15-year fixed mortgage rate moves upward, +0.14%
The average 15-year fixed-mortgage rate is 6.76 percent, up 14 basis points from a week ago.
Monthly payments on a 15-year fixed mortgage at that rate will cost $885 per $100,000 borrowed. The bigger payment may be a little more difficult to find room for in your monthly budget than a 30-year mortgage payment, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much faster.
5/1 ARM rate climbs, +0.04%
The average rate on a 5/1 ARM is 6.19 percent, adding 4 basis points over the last 7 days.
Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. In other words, the interest rate will change at regular intervals, unlike fixed-rate mortgages. These loan types are best for people who expect to refinance or sell before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 6.19 percent would cost about $612 for each $100,000 borrowed over the initial five years, but could climb hundreds of dollars higher afterward, depending on the loan’s terms.
Jumbo mortgage rate moves higher, +0.03%
The average rate you’ll pay for a jumbo mortgage is 7.38 percent, up 3 basis points over the last seven days. Last month on the 27th, the average rate was lesser at 7.00 percent.
At the current average rate, you’ll pay $691.02 per month in principal and interest for every $100,000 you borrow. That’s up $2.05 from what it would have been last week.
The average 30-year fixed-refinance rate is 7.24 percent, down 7 basis points from a week ago. A month ago, the average rate on a 30-year fixed refinance was lower at 7.16 percent.
At the current average rate, you’ll pay $681.50 per month in principal and interest for every $100,000 you borrow. That represents a decline of $4.75 over what it would have been last week.
Where are mortgage rates heading?
With inflation still above the Fed’s 2 percent goal and the job market holding strong, the Fed isn’t likely to cut rates at its March meeting.
“The Federal Reserve will not cut interest rates in the first half of this year, in my view,” says Yun, “but rate cuts of three, four or even five rounds will be possible in the second half of the year as rent measures will be much more well-behaved.”
The rates on 30-year mortgages mostly follow the 10-year Treasury, which shifts continuously as economic conditions dictate, while the cost of variable-rate home loans mirror the Fed’s moves.
These broader factors influence overall rate movement. As a borrower, you could be quoted a higher or lower rate compared to the trend.
What current rates mean for you and your mortgage
While mortgage rates change daily, it’s unlikely we’ll see rates back at 3 percent anytime soon. If you’re shopping for a mortgage now, it might be wise to lock your rate when you find an affordable loan. If your house-hunt is taking longer than anticipated, revisit your budget so you’ll know exactly how much house you can afford at prevailing market rates.
Keep in mind: You could save thousands over the life of your mortgage by getting at least three loan offers, according to Freddie Mac research. You don’t have to stick with your bank or credit union, either. There are many types of mortgage lenders, including online-only and local, smaller shops.
“All too often, some [homebuyers] take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
More on current mortgage rates
Methodology
Bankrate displays two sets of rate averages that are produced from two surveys we conduct: one daily (“overnight averages”) and the other weekly (“Bankrate Monitor averages”).
The rates on this page represent our overnight averages. For these averages, APRs and rates are based on no existing relationship or automatic payments.
Learn more about Bankrate’s rate averages, editorial guidelines and how we make money.
Construction loans are short-term loans that you can use to build a new home.
Some construction loans can be converted to mortgages after your home is finished.
Construction loans typically have tougher criteria than conventional mortgages for existing homes.
If you can’t find the right home to buy, you might be thinking about building a house instead. Financing this type of project is somewhat different than getting a mortgage to move into an existing property. Instead of a mortgage, you take on a construction loan (also known as a construction mortgage). Here’s what to know about construction loans.
What are construction loans?
Construction loans are loans that fund the building of a residential home (aka a stick-built house), from the land purchase to the finished structure. Common types are a standalone construction loan — a short-term loan (generally with a year-long term) — which only finances the building phase, and a construction-to-permanent loan, which converts into a mortgage once the construction is done. Borrowers who take out a standalone construction loan often get a separate mortgage to pay it off when the principal falls due.
You can use a construction loan to cover such costs as:
The land
Contractor labor
Building materials
Permits
How do construction loans work?
The initial term on a construction loan generally lasts a year or less, during which time you must finish the project. Because construction loans work on such a short timetable and are dependent on the project’s progress, you (or your general contractor) must provide the lender with a construction timeline, detailed plans and a realistic budget. Based on that, the lender will release funds at various phases of the project, usually directly to the contractor.
Construction loan statistics
Construction loans typically require 20 percent down, at minimum.
As of the second quarter of 2023, commercial and non-commercial construction loan volume totaled $488.54 billion, according to S&P Global Market Intelligence.
Currently, the top five construction loan lenders, in terms of number of loans, are (in order): Wells Fargo, JP Morgan Chase, Bank of America, U.S. Bank and Bank OZK, reports S&P.
Construction loans vs. traditional mortgages
Beyond the cost and repayment timeline, construction loans and mortgages have a few main differences:
The funds distribution: Unlike mortgages and personal loans that provide funds in a lump-sum payment, the lender pays out the money for a construction loan in stages as work on the new home progresses. These draws tend to happen when major milestones are completed — for example, when the foundation is laid, or the framing of the house begins.
The repayments: With a mortgage, you start paying back the principal and interest right away. With construction loans, your lender will typically expect you to make interest payments only during the construction stage. Additionally, borrowers are typically only obligated to repay interest on any funds drawn to date until construction is completed.
Inspection/appraiser involvement: While the home is being built, the lender has an appraiser or inspector check the house during the various construction stages. As the work is approved, the lender makes additional payments to the contractor, known as draws. Expect to have between four and six inspections to monitor the progress.
Requirements: Construction loan requirements include being financially stable and having the ability to make a down payment. Lenders also want to see a construction plan, which you can read more about below.
Interest rates: Construction loan interest rates are typically higher than traditional mortgage rates. This is often because you’re not providing collateral to back the loan, which means the lender is taking on more risk.
Types of construction loans
There are different types of construction loans available to borrowers, which are designed to suit various financial needs.
Construction-to-permanent loan
With a construction-to-permanent loan, you borrow money to pay for the cost of building your home. Once the house is complete and you move in, the loan is converted to a permanent mortgage.
In essence, the loan becomes a traditional mortgage, typically with a loan term of 15 to 30 years. You can opt for a fixed-rate or an adjustable-rate mortgage.
Then, you start making payments that cover interest and the principal. (During the construction loan phase, your lender disburses the funds based upon the percentage of the project completed, and you’re only responsible for interest payments on the money drawn). While many construction loans are conventional loans — entirely privately originated and financed — there are government versions as well. Your other options include an FHA construction-to-permanent loan — with less-stringent approval standards that can be especially helpful for some borrowers — or a VA construction loan if you’re an eligible veteran.
Whatever the type, the big benefit of the construction-to-permanent approach is that you have only one set of closing costs to pay, reducing your overall expenses. “There’s a one-time closing so you don’t pay duplicate settlement fees,” says Janet Bossi, senior vice president at OceanFirst Bank in New Jersey.
Construction-only loan
A construction-only loan provides the funds necessary to build the home, but the borrower is responsible for repaying the loan in full at maturity (typically one year or less). You can settle the debt either in cash or by obtaining a mortgage to pay it off.
Construction-only loans can ultimately be costlier than their construction-to-permanent cousins, especially if you have to finance the repayment. That’s because you complete two separate loan transactions and pay two sets of fees. Closing costs tend to equal thousands of dollars, so it helps to avoid another set. And, of course, you have to invest time and energy shopping for a mortgage.
Another consideration: Your financial situation might worsen during the construction process. If you lose your job or face some other hardship, you might not be able to qualify for a mortgage later on — and might not be able to move into your new house.
Renovation loan
If you want to upgrade an existing home rather than build one, you can compare home renovation loan options. These come in a variety of forms depending on the amount of money you’re spending on the project.
“If a homeowner is looking to spend less than $20,000, they could consider getting a personal loan or using a credit card to finance the renovation,” says Steve Kaminski, head of U.S. Residential Lending at TD Bank. “For renovations starting at $25,000 or so, a home equity loan or line of credit may be appropriate, if the homeowner has built up equity in their home.”
Another viable option in a low mortgage rate environment is a cash-out refinance, whereby a homeowner would take out a new mortgage in a higher amount than their current loan and receive the extra as a lump sum. As rates tick up, though, cash-out refis become less appealing.
With any of these options, the lender generally does not require disclosure of how the homeowner will use the funds. The homeowner manages the budget, the plan and the payments. With other forms of financing, the lender will evaluate the builder, review the budget and oversee the draw schedule.
Owner-builder construction loan
Owner-builder loans are construction-to-permanent or construction-only loans in which the borrower also acts in the capacity of the home builder.
Most lenders won’t allow the borrower to act as their own builder because of the complexity of constructing a home and the experience required to comply with building codes. Lenders typically only allow it if the borrower is a licensed builder by trade.
End loan
An end loan simply refers to the homeowner’s mortgage once the property is built, says Kaminski. You use a construction loan during the building phase and repay it once the construction is completed. You’ll then have a regular mortgage to pay off, also known as the end loan.
“Not all lenders offer a construction-to-permanent loan, which involves a single loan closing,” says Kaminski. “Some require a second closing to move into the permanent mortgage, or an end loan.”
Construction loan rates
Unlike traditional mortgages, which carry fixed rates, construction loans usually have variable rates that fluctuate with the prime rate. That means your monthly payment can also change, moving upward or downward based on rate changes.
Construction loan rates are also typically higher than traditional mortgage rates. That’s partially because they’re unsecured (backed by an asset). With a traditional mortgage, your home acts as collateral — if you default on your payments, the lender can seize your home. With a home construction loan, the lender doesn’t have that option, so they tend to view these loans as bigger risks.
On average, you can expect interest rates for construction loans to be about 1 percentage point higher than those of traditional mortgage rates.
Construction loan requirements
The companies that offer construction loans usually require borrowers to:
Be financially stable. To get a construction loan, you’ll need a low debt-to-income ratio and proof of sufficient income to repay the loan. You also generally need a credit score of at least 680.
Make a down payment. You need to make a down payment when you apply for the loan, just as you do with most mortgages. The amount will depend on the lender you choose and the amount you’re trying to borrow to pay for construction, but construction loans usually require at least 20 percent down.
Have a construction plan. Lenders will want you to work with a reputable construction company and architect to come up with a detailed plan and schedule.
Get a home appraisal. Whether you’re getting a construction-only loan or a construction-to-permanent loan, lenders want to be certain that the home is (or will be) worth the money they’re lending you. The appraiser will assess the blueprints, the value of the lot and other details to arrive at an accurate figure. For construction-to-permanent loans, the home will serve as collateral for the mortgage once construction is complete.
How to get a construction loan
Getting approval for a construction loan might seem similar to the process of obtaining a mortgage, but getting approved to break ground on a brand-new home is a bit more complicated. Generally, you should follow these four steps:
Find a licensed builder: Lenders will want to know that your chosen builder has the expertise to complete the home. If you have friends who have built their own homes, ask for recommendations. You can also turn to the NAHB’s directory of local home builders’ associations to find contractors in your area. Just as you would compare multiple existing homes before buying one, it’s wise to compare different builders to find the combination of price and expertise that fits your needs.
Find a construction loan lender: Check with several experienced construction loan lenders to obtain details about their specific programs and procedures. If you have trouble finding a lender willing to work with you, check out smaller regional banks or credit unions. Compare construction loan rates, terms and down payment requirements to ensure you’re getting the best possible deal for your situation.
Get your documents together: A lender will likely ask for a contract with your builder that includes detailed pricing and plans for the project. Be sure to have references for your builder and any necessary proof of their business credentials. You will also likely need to provide many of the same financial documents as you would for a traditional mortgage, like pay stubs and tax statements, that offer proof of income, assets and employment.
Get preapproved: Getting preapproved for a construction loan can provide a helpful understanding of how much you will be able to borrow for the project. This can be an important step to avoid paying for plans from an architect or drawing up blueprints for a home that you will not be able to afford.
Get homeowners insurance: Even though you may not live in the home yet, your lender will likely require a prepaid homeowners insurance policy that includes builder’s risk coverage. This way, if something happens during the construction process — the halfway-built property catches on fire, or someone vandalizes it, for example — you are protected.
Construction loan FAQ
Construction loans cover the costs of building a home. Typically, that means the expenses associated with construction, such as contractor fees, labor and permits. But you can also use the funds to purchase land. However, construction loans do not cover design costs. If you want to hire a professional to design your home, you’ll need to cover that cost on your own.
Ask your lender how money gets disbursed from your loan amount. Some lenders allow for monthly draws, while others will only authorize a draw after a passed inspection. Inquire about any processes or documentation required to pull money from your construction loan so that you can pay the bills in a timely fashion as they come in.
Understanding this process — and ensuring your contractor does, too — can help to avoid delays because of insufficient funds.
There are benefits and drawbacks to construction loans. These types of loans tend to have higher interest rates than those associated with a mortgage, for instance. In addition, the funds provided by a construction loan are only released in stages as work on your home progresses rather than in a lump sum upfront. However, construction loans often only require interest payments while your home is being built, which can be easier on your budget. The loan terms may also be more flexible than those that come with a traditional loan.
Talk to your contractor and discuss the timeline of building the home and what sort of factors could slow down the job. Delays could result in changes to your loan’s interest rate, which can lead to higher payments. Delays can also lead to delays in fund disbursement for construction-only loans.
If your project takes longer than expected, work with your contractor to try to resolve any bottlenecks. You should also keep in touch with your lender to let them know what’s going on. Clear and consistent communication can help avoid major issues with the loan.
In general, it is harder to qualify for a construction loan than for a traditional mortgage. Most lenders require a credit score of at least 680 — which is higher than what you’d need for most conventional, VA and FHA loans. It’s also typical for lenders to ask for a minimum down payment of 20 percent on construction loans, so you may have trouble qualifying if you can’t get that much money together upfront.
A plan by the Department of Veterans Affairs to introduce a low-interest refinancing option for veterans with VA-backed loans facing foreclosure drew ire from a House lawmaker who complained some homeowners might choose to default for lower monthly payments. (Stars and Stripes)
WASHINGTON — A plan by the Department of Veterans Affairs to introduce a low-interest refinancing option for veterans with VA-backed loans facing foreclosure drew ire of a House lawmaker who complained some homeowners might choose to default for lower monthly payments.
Rep. Merrick Van Orden, R-Wis., chairman of the House Committee on Veterans’ Affairs subpanel on economic opportunity, on Thursday questioned whether the new VA Servicing Purchase program — also known as VASP — will cause some homeowners to forgo paying back home loans to qualify for VA refinancing at the lower rate of 2.5% offered by the program.
The average interest rate now for a 30-year fixed mortgage is 7.24%, according to Bankrate, a consumer financial services company that surveys major lenders weekly.
“It is essential that we support the dream of home ownership for veterans who served our country,” said Van Orden, a Navy veteran who used a traditional VA home loan to buy his house. “I have used this program myself, and it is awesome.”
But he also said he has “grave reservations” that the new VASP program would result in unintended consequences that could destroy the VA home loan program.
The refinancing option is expected to be rolled out in spring, according to the VA.
Under the program, the VA would purchase the loan from the servicer to hold it in its own portfolio. Qualifying veterans would be allowed to refinance their mortgages under the VASP rate of 2.5% after falling behind on at least two mortgage payments.
“I am concerned that this program poses a moral hazard and will encourage veterans to become delinquent on their loans to let VA take over the servicing of their payments,” Van Orden said at a House hearing about the home loan program.
He said if the VA then experienced high delinquency rates under the VASP program, it could end up being responsible for thousands of home loans it serviced.
Van Orden questioned whether the VA should be in the business of servicing loans and expressed concern that the VA would force veterans out of their homes if they failed to pay down their mortgages.
Given that veterans are 50% more likely to be homeless than others, Van Orden said he could not imagine “the VA would go so far as to be kicking people out of their homes — default or no default.”
Under those circumstances, Van Orden speculated the federal government would end up owning mortgage-delinquent properties and letting the veterans stay in their homes.
“It is no longer private property. It is public property with private citizens living in public property. That was tried in the Soviet Union. I am not signing up for that,” he said.
Van Orden said the House subcommittee has received little information on how the VASP program will operate, its costs and its overall effect on the mortgage markets.
“All of this is a cause for concern,” he said. “We need answers on VASP.”
The VA announced the VASP program in November 2023 in the Federal Register that stated “VA is initiating an expanded program using existing refund provisions. Under this program, VA will exercise its statutory option to purchase the loan from the servicer and VA will hold the loan in VA’s own loan portfolio.”
VA-guaranteed loans comprise more than 10% of the mortgage market, according to the VA.
The VA worked to assist thousands of veterans during the coronavirus pandemic who fell behind on mortgage payments, said Rep. Mike Levin of California, the top Democrat on the subcommittee. He said many financial relief measures implemented during the pandemic have ended.
Levin said the VA in December 2023 paused foreclosures on VA home loans through May 31. The measure allows veterans who have defaulted on their loans to stay in their homes.
Under the foreclosure pause, the VA extended its coronavirus refund modification program that allowed the VA to purchase past due payments — along with additional principal amounts as necessary — and give veterans a second mortgage with no interest.
Lenders meanwhile are encouraged by the VA to work with delinquent homeowners to modify payments with plans that are more affordable. Last year, the VA helped more than 145,000 veterans and their families stay in their homes through various programs, the agency said.
“I understand that the VA cannot prevent every foreclosure. But I expect it to exhaust every option,” Levin said, in reference to VASP and other VA assistance programs.
VASP would provide refinancing at an interest rate lower than the current market rate, which would continue over the life span of the loan, said John Bell, executive director of the VA Home Loan Guaranty Program.
The VA estimates under a VASP Program loan — with a 2.5% fixed interest rate for 30 or 40 years — there would be an average payment reduction of 20%, in principal and interest, for homeowners.
“It is so important that we get this right,” said Levin, who urged the VA to let Congress know what additional tools it might need to assist borrowers in default and ensure that foreclosures occur only “in the most extreme circumstances.”
Bell said job loss, divorce and catastrophic illness can impact financial stability for homeowners.
The VA home loan program — established in 1944 during World War II for soldiers returning home — helps veterans, active-duty personnel, members of the reserves and National Guard, as well as their family members, buy homes, refinance loans and pay for home improvements.
VA has guaranteed more than 28 million loans, valued at nearly $4 trillion, since the program’s inception, Bell said.
One of the attractions of the VA home loan program is the offer of 100% financing without requiring a down payment. A veteran purchasing a home at $386,000 — the median rate now — could avoid a traditional 20% down payment of $77,000, he said.
In fiscal 2023, the VA received 860,000 calls from veterans seeking information and assistance with their home loans. He said 65,000 borrowers are at least 90 days late on their VA home loans.
Bell doubted homeowners would default on home loan payments, damage their credit and face foreclosure to secure a 2.5% interest rate through the VASP program.
“The VASP program is simply a more sustainable option for veterans who cannot afford other available loss mitigation options, such as repayment plans, special forbearances and traditional loan modifications,” he said.
But Van Orden disagreed.
“My focus is to ensure that veterans remain in their homes whenever possible,” he said. “But I am concerned that this program could evolve into a financial burden of billions of dollars in bailouts that fall on the shoulders of taxpayers.
Mortgage rates rose for all types of loans compared to a week ago, according to data compiled by Bankrate. Rates for 30-year fixed, 15-year fixed, 5/1 ARMs and jumbo loans moved higher.
Mortgage rates could gradually come down this year, according to Greg McBride, CFA, Bankrate chief financial analyst. As the Federal Reserve stopped raising rates in 2023, mortgages rates started to drop at the end of Q4. At its Jan. 31 meeting, the central bank announced it would hold off changing rates and pointed to three rate cuts this year. Rate hikes and cuts affect many areas of the economy, including the 10-year Treasury, a key benchmark for fixed-rate mortgages.
“The 10-year Treasury yield that serves as a baseline for fixed mortgage rates will have a bouncy journey lower, moving back above 4 percent early in 2024 but trending lower as inflation cools and the Fed gets closer to cutting rates,” says McBride. “For mortgage rates, that portends a general downtrend — albeit with fits and starts — in 2024.”
Rates as of February 14, 2024.
The rates listed above are averages based on the assumptions here. Actual rates available within the site may vary. This story has been reviewed by Suzanne De Vita. All rate data accurate as of Wednesday, February 14th, 2024 at 7:30 a.m.
30-year fixed-rate mortgage moves up, +0.15%
The average rate for a 30-year fixed mortgage for today is 7.25 percent, up 15 basis points over the last week. Last month on the 14th, the average rate on a 30-year fixed mortgage was lower, at 7.01 percent.
At the current average rate, you’ll pay principal and interest of $682.18 for every $100,000 you borrow. That’s an additional $10.15 per $100,000 compared to last week.
The 30-year mortgage is the most popular option for borrowers. It has a number of advantages. Among them:
Lower monthly payment: Compared to a shorter term, such as 15 years, the 30-year mortgage offers lower, more affordable payments spread over time.
Stability: With a 30-year fixed mortgage, you lock in a set principal and interest payment, making it easier to plan your housing expenses for the long term. Remember: Your monthly housing payment can change if your homeowners insurance premiums and property taxes go up or, less likely, down.
Buying power: With lower payments, you might qualify for a larger loan amount or a more expensive home.
Flexibility. Lower monthly payments can free up some of your monthly budget for other goals, like building an emergency fund, contributing to retirement or college tuition, or saving for home repairs and maintenance.
15-year fixed mortgage rate advances, +0.13%
The average rate for the benchmark 15-year fixed mortgage is 6.61 percent, up 13 basis points from a week ago.
Monthly payments on a 15-year fixed mortgage at that rate will cost around $877 per $100,000 borrowed. The bigger payment may be a little tougher to find room for in your monthly budget than a 30-year mortgage payment, but it comes with some big advantages: You’ll come out several thousand dollars ahead over the life of the loan in total interest paid and build equity much faster.
5/1 adjustable rate mortgage moves higher, +0.03%
The average rate on a 5/1 ARM is 6.14 percent, rising 3 basis points over the last week.
Adjustable-rate mortgages, or ARMs, are mortgage terms that come with a floating interest rate. To put it another way, the interest rate will change at regular intervals, unlike fixed-rate mortgages. These types of loans are best for those who expect to refinance or sell before the first or second adjustment. Rates could be considerably higher when the loan first adjusts, and thereafter.
While borrowers shunned ARMs during the pandemic days of super-low rates, this type of loan has made a comeback as mortgage rates have risen.
Monthly payments on a 5/1 ARM at 6.14 percent would cost about $609 for each $100,000 borrowed over the initial five years, but could ratchet higher by hundreds of dollars afterward, depending on the loan’s terms.
Jumbo loan interest rate advances, +0.16%
The average rate you’ll pay for a jumbo mortgage is 7.32 percent, up 16 basis points over the last week. This time a month ago, the average rate for jumbo mortgages was lesser at 7.06 percent.
At the current average rate, you’ll pay a combined $686.93 per month in principal and interest for every $100,000 you borrow. That’s up $10.85 from what it would have been last week.
Mortgage refinance rates
30-year mortgage refinance advances, +0.09%
The average 30-year fixed-refinance rate is 7.28 percent, up 9 basis points from a week ago. A month ago, the average rate on a 30-year fixed refinance was lower at 7.22 percent.
At the current average rate, you’ll pay $684.21 per month in principal and interest for every $100,000 you borrow. Compared with last week, that’s $6.10 higher.
Where are mortgage rates heading?
At its meeting concluding Jan. 31, the Federal Reserve announced it was maintaining its current rate due to a resilient economy and strong jobs numbers. Policymakers also signaled the potential for three rate cuts in 2024.
“Inflation is coming down faster than has been expected but that will need to be sustained before the Fed feels comfortable cutting short-term interest rates,” says McBride. “Easing inflation pressures will help mortgage rates now, no waiting.”
Still, don’t expect rates to change drastically anytime soon.
“The budget deficit remains high, and the various inflation metrics remain above the comfort level,” says Lawrence Yun, Chief Economist with the National Association of Realtors. “That means the mortgage rates will likely be in the 6 percent to 7 percent range for most of the year.”At its meeting concluding Jan. 31, the Federal Reserve announced it was maintaining its current rate due to a resilient economy and strong jobs numbers. Policymakers also signaled the potential for three rate cuts in 2024.
“Inflation is coming down faster than has been expected but that will need to be sustained before the Fed feels comfortable cutting short-term interest rates,” says McBride. “Easing inflation pressures will help mortgage rates now, no waiting.”
Still, don’t count on mortgage rates plummeting in the near future.
“The budget deficit remains high, and the various inflation metrics remain above the comfort level,” says Lawrence Yun, Chief Economist with the National Association of Realtors. “That means the mortgage rates will likely be in the 6 percent to 7 percent range for most of the year.”
The rates on 30-year mortgages mostly follow the 10-year Treasury, which shifts continuously as economic conditions dictate, while the cost of variable-rate home loans mirror the Fed’s moves. These broader factors influence overall rate movement. The specific rate you’d qualify for is tied to your credit score, loan type and other variables.
What current rates mean for you and your mortgage
While mortgage rates change daily, it’s unlikely we’ll see rates back at 3 percent anytime soon. If you’re shopping for a mortgage now, it might be wise to lock your rate when you find an affordable loan. If your house-hunt is taking longer than anticipated, revisit your budget so you’ll know exactly how much house you can afford at prevailing market rates.
To help you uncover the best deal, get at least three loan offers, according to Freddie Mac research. You don’t have to stick with your bank or credit union, either. There are many types of mortgage lenders, including online-only and local, smaller shops.
“All too often, some [homebuyers] take the path of least resistance when seeking a mortgage, in part because the process of buying a home can be stressful, complicated and time-consuming,” says Mark Hamrick, senior economic analyst for Bankrate. “But when we’re talking about the potential of saving a lot of money, seeking the best deal on a mortgage has an excellent return on investment. Why leave that money on the table when all it takes is a bit more effort to shop around for the best rate, or lowest cost, on a mortgage?”
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It’s possible to get approved for a home loan as a self-employed borrower, but you often have to take a few extra steps to prove your creditworthiness.
To boost your chances, consider non-conforming loans and/or non-qualifying mortgage lenders or mortgage brokers who specialize in the self-employed.
Other strategies include making a larger down payment, raising your credit score and lowering your debts.
If you run your own business — or are a gig worker, freelancer or independent contractor — financing a home could prove challenging. The reason? One of the first things lenders look for is a steady, verifiable income stream. Without a regular paycheck or W-2 statement, it can be harder to prove how much you make, and how reliably you make it. That’s why most lenders have stricter rules for self-employed borrowers.
Just because you work for yourself doesn’t mean you’re guaranteed to have a hard time getting a mortgage, however. If you supply the right documentation to verify your income, do your homework and know what to expect, you can get approved for a loan.
Can you qualify for a mortgage while self-employed?
Yes, it is possible to qualify for a mortgage while self-employed. However, in some cases, you may need to put in a little extra work.
It’s a common misconception that it’s always more difficult for self-employed applicants to get a loan than regular salaried or hourly workers with a W-2 from their employer, says Paul Buege, president and CEO of Inlanta Mortgage in Pewaukee, Wisconsin.
“In all cases,” says Buege, “the basic criteria to get approved are the same: You need to have a good credit history, sufficient liquid available assets and a history of stable employment.”
Challenges can crop up, however, if you’ve only been working for yourself for a short time or make less money than lenders prefer — even if it’s just on paper. “Self-employed individuals often take full advantage of the legal tax deductions and write-offs that are allowed by the IRS; unfortunately, this means that they often show a low net income — or even a loss — on their tax returns,” says Eric Jeanette, president of Dream Home Financing and FHA Lenders, based in Adelphia, New Jersey. “That can make it tougher to qualify for a mortgage.”
Complicating matters is that the rules for self-employed applicants can vary depending on the lender or loan type.
“This makes the process confusing, especially if you are shopping around and applying with multiple lenders,” says Anna DeSimone, a New York City-based personal finance expert and author of “Housing Finance 2020.” Often, “it lengthens the time you may have to spend trying to get approved for a loan.”
How to get a mortgage when you’re self-employed in 5 steps
If you’re self-employed, the loan approval process will be somewhat similar to that of a W-2 salaried applicant: You’ll need to provide certain documentation to verify your employment income and prove to the lender that you’re a creditworthy fit for a mortgage in general and a certain sum.
1. Determine if you’re classified as self-employed
If you own a business or have one partner, you will be considered self-employed. “A loan qualification is based on your taxable income shown on your personal 1040 federal tax returns,” says DeSimone. If earned income is verified by 1099 forms, rather than W2s, you’re likely to be considered a freelancer rather than a salaried worker bee.
The same goes if your return includes Schedule C, which is used “to report income or loss from a business you operated or a profession you practiced as a sole proprietor, to quote the IRS. “Mortgage applicants with a 25 percent or greater share in a business or partnership are considered self-employed,” says DeSimone.
Here are other factors that qualify you as self-employed:
You run a business as a sole proprietor or independent contractor
You are part of a partnership that runs a trade or a business
You are a gig worker or run a part-time business that accounts for most of your income
Even when you have a second, part-time job with a W2, a lender will likely place more weight on your own gig — if it’s your primary income source.
2. Prepare a pitch that explains your business
Depending on the nature of your work, your problem may not be so much the amount of your income as the reliability of it. While you’re not required to submit a full business plan, it may behoove you to prepare some documents that show the health of your industry and explain why your services are (and are likely to stay) in demand. Supply reports or tax returns that prove revenue growth and provide links to a professional website that helps an underwriter understand you’re serious and successful in your field.
If you have any contracts or written agreements indicating that you’re on retainer or guaranteed compensation for a period, include those. These details may convince a lender that you can make those monthly mortgage payments.
Providing the lender with any of the below items can help show your job is secure:
Data showing the health of the industry and demand for your services
A description of your experience in the business, including any certifications
Tax returns from previous years, especially if they show growth in revenue over time
Explanations of any revenue gaps
Your professional website
A business plan, if you have one
Description of the services you provide
Ongoing contracts you have with clients
Anything else that shows your income is likely to continue
3. Gather necessary documents to show lenders
Your lender will need to see proof of income, just like they would for a salaried employee. It’s just that you may have to jump through more hoops to provide that proof. “Since self-employed people have non-traditional income structures, they may be required to show additional income documents when applying for the mortgage,” says Alan Rosenbaum, founder and CEO of GuardHill Financial Corp. in New York City.
The sort of documents you might need include:
Employment verification
A copy of your business license
Proof of business insurance (if applicable)
Articles of incorporation, LLC or partnership (if applicable)
State or federal permits
Any other documents that prove when you began operating
Income documentation
Two years of federal income tax returns (personal and business)
Recent business bank statements and profit-and-loss reports (aka income statements)
An itemized list of unpaid accounts receivable
4. Shop multiple lenders
You may want to seek a loan officer who has experience underwriting a self-employment mortgage. These officers may fight harder for your approval and be able to explain your qualifications to the underwriting department. Lenders who offer FHA loans may also be a better fit than traditional loans because they are guaranteed by the government and lessen the risk to the lender.
A mortgage broker might be able to steer you toward lenders who specialize in self-employment mortgages.
5. Consider a non-qualified-mortgage lender
A non-qualified mortgage (non-QM mortgage or loan, for short) is a type of non-conforming loan, one in which there are looser income verification criteria. Instead of using standard federal qualifications to ascertain your creditworthiness, the lender bases approval on alternatives — like your average bank statement balance over the last 12 to 24 months, for example. The lender would be willing to consider this balance as an earned-income equivalent, in place of pay stubs.
This sort of mortgage is often tailor-made for the self-employed or those lacking the proverbial bi-weekly paycheck. If you choose this type of mortgage, just be prepared to pay a higher interest rate and some additional closing costs. There may also be some features, like balloon payments or 30-plus-year terms, that often aren’t allowed on traditional, “qualified” mortgages.
How to improve your chances of getting a mortgage when you’re self-employed
There are several ways to boost your odds of getting approved for a mortgage as a self-employed borrower.
Boost your credit score
Focus on improving your credit score and credit history. This requires making bill payments on time, paying down debt, correcting any errors or red flags on your credit reports and sticking to the limits on your revolving credit accounts.
Lower your debt-to-income ratio
Another way to increase your likelihood of funding is to lower your debt-to-income (DTI) ratio to 43 percent or less. This can be done by avoiding taking on any new debt, lowering your existing debt and paying it off faster than scheduled and earning extra money.
Make a larger down payment
Forking over a higher down payment than the minimum needed can help, too. “Down payment requirements for a bank statement loan were as low as 10 percent before COVID-19 hit,” says Jeanette. “But now, many lenders require 20 percent or more.”
Shop around for the right lender for you
Shopping around among different lenders and programs can yield the best opportunities. Focus on those that do business with independent contractors or sole proprietors.
“Work with an experienced loan officer who understands self-employed business records and documentation,” says Buege. “This person can help you present your business earnings and liabilities in a clear and understandable way that facilitates the approval process.”
Enlisting a skilled mortgage broker (again, one familiar with self-employed applicants) can also up your chances.
Loan types to consider when you are self-employed
Fortunately, self-employed borrowers are eligible for virtually all of the same mortgage types available to others. That means you can qualify for a conventional loan from a variety of private lenders or a government-backed loan.
“You should be eligible for all available options, including both conforming mortgage programs by Fannie Mae, Freddie Mac, FHA and others, as well as non-conforming loans if necessary,” says DeSimone.
Here’s a closer look at each:
Fannie Mae and Freddie Mac mortgages: These are traditional conforming loans that require a 20 percent down payment and may have fairly strict approval requirements. It’s not impossible for a self-employed person to get approved, but you may have more success after at least five years in business.
FHA: FHA loans are guaranteed by the Federal Housing Administration and only require a 3.5 percent down payment for most homebuyers. The fact that the government is backing the loan may make some lenders more likely to approve this loan for someone who is self-employed.
VA: VA loans are available to current service members and people who were previously active-duty. Requirements depend on the time of your service. These loans can guarantee up to 100 percent of the loan, which would mean you’re not responsible for any down payment. If you have a VA home loan COE, your lender may find your application more appealing.
What if I don’t qualify for a mortgage?
If you don’t get approved for a traditional mortgage, you can try applying for a non-conforming loan. “But these often come at a higher cost to the consumer, and not everyone can qualify,” says Buege, who adds that non-conforming loans can charge a higher interest rate and closing costs and impose less favorable repayment terms.
Alternatively, you could pursue a personal loan, although the maximum amount you can borrow likely won’t cover the cost of the home purchase.
If you’re trying to refinance and get denied, you could try applying for a home equity loan or home equity line of credit (HELOC) if you’ve built up enough equity in your property and meet the qualifications.
Self-employed mortgage FAQ
Lenders for self-employed mortgages will look at a borrower’s net business income to determine loan eligibility. This means they look at your gross income minus business expenses.
You can use tax returns to quickly calculate your gross and net income for previous years. Business owners may also find a recent income statement useful for proving your current income stream. Self-employed people may also be allowed to use rental income or government payments as a part of their overall income.
Also, keep in mind that loan applications for all types of self-employment are underwritten using a process DeSimone calls “add-backs,” whereby certain non-cash business expenses (like depreciation) are added back to your net income.
The short answer is yes, you can get a mortgage loan with less than two years of self-employment history. This situation may require more documentation to get a mortgage. Lenders typically want to see at least two years of self-employment before they will give you a mortgage.
However, your income isn’t the only factor they use to determine eligibility. Having a strong credit score can help boost your application. In addition, if you’ve become self-employed in an industry where you’ve previously worked, you can show continuity of career, even if you’ve been self-employed for less than two years.
If your self-employment income is insufficient to qualify for a mortgage, having a co-signer or a co-borrower can help you qualify for a mortgage or even a larger loan amount. Having either a co-signer or a co-borrower allows you to use their income and credit to qualify for a loan.
It’s important to note that co-signers are slightly different from co-borrowers. Both take on the debt as their own in addition to you. However, a co-borrower becomes a joint owner on the title, while a co-signer does not.
Keeping business expenses separate from personal expenses can help keep your credit utilization score lower because you won’t put any potentially large business expenses on your personal credit accounts. A low credit utilization score is one factor that lenders look at when assessing you for a mortgage.