Cash-Out Refinance

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Here’s some Q&A with regard to the home loan approval process: “What do underwriters do?”

Once you actually apply for a home loan, your mortgage application will be organized by a loan processor and then sent along to a loan underwriter, who will determine if you qualify for a mortgage.

The underwriter can be your best friend or your worst enemy, so it’s important to put your best foot forward.

The expression, “you’ve only got one chance to make a first impression” comes to mind here.

Trust me, you’ll want to get it right the first time to avoid going down the bureaucratic rabbit hole.

Underwriter Will Approve, Suspend, or Decline Your Mortgage Application

  • After you formally apply for a home loan your file will be submitted to the underwriting department
  • A human underwriter will then review your loan application and decision it
  • Their job is to approve, suspend, or decline your application based on its contents
  • It’s paramount to submit a clean file to boost your chances of loan approval

Simply put, the loan underwriter’s job is to approve, suspend, or decline your mortgage application.

If the loan is approved, you’ll receive a list of “conditions” which must be met before you receive your loan documents.  So in essence, it’s really a conditional loan approval.

If the loan is suspended, you’ll need to supply additional information or loan documentation to move it to approved conditional status.

If the loan is declined, you’ll more than likely need to apply elsewhere with another bank or mortgage lender, or take steps to fix whatever went wrong.

The Three C’s of Mortgage Underwriting

  • Credit – payment behavior over time (your credit report)
  • Capacity – ability to repay the home loan (your income and assets)
  • Collateral – value of the underlying asset (the property)

Now you may be wondering how underwriters determine the outcome of your mortgage application?

Well, there are the “three C’s of underwriting,” otherwise known as credit reputation, capacity, and collateral.

Credit reputation has to do with your credit history, including past foreclosures, bankruptcies, judgments, and basically measures your willingness to pay your debts.

[What credit score do I need to get a mortgage?]

If you’ve had previous mortgage delinquencies or even non-housing related delinquencies, these will need to be taken into account.

Typically these items will be reflected in your three-digit credit score, which can actually eliminate you without any further underwriting necessary if you fall below a certain threshold.

Your history supporting significant amounts of debt is also important; if the most you’ve ever financed has been a plasma TV, the underwriter may think twice about approving your six-figure loan application.

Capacity deals with a borrower’s actual ability to repay a loan, using things like debt-to-income ratio, salary, cash reserves, loan program and more.

This covers whether the loan is interest-only, an adjustable-rate mortgage or a fixed-rate mortgage, cash-out refinance or simply rate and term.

The underwriter wants to know that you can repay the mortgage you’re applying for before granting approval.

[How much house can I afford?]

Finally, collateral deals with the borrower’s down payment, loan-to-value ratio, property type, and property use, as the lender will be stuck with the home if the borrower fails to make timely mortgage payments.

Mortgage Underwriters Consider Layered Risk

  • They don’t look at one aspect of your borrower profile in a vacuum
  • They consider all factors together to make a sound decision
  • Those with risk in one area who are able to compensate for it may be approved
  • While those with risk in all areas might be denied due to layered risk

Now it’s important to understand that the three C’s are not independent of one another.

All three must be considered simultaneously to understand the level of layered risk that could be present in said loan application.

For example, if the borrower has a less-than-stellar credit score, limited asset reserves, and a minimal down payment, the risk layering could be deemed excessive, leading to denial.

This is the underwriter’s discretion, and can certainly be subjective based on other factors such as occupation, how long the borrower has been in the line of work, why the credit score is less than perfect, and so on.

The underwriter must decide, based on all the criteria, if the borrower is an acceptable risk for the mortgage lender, and if the end product can be resold without difficulty to investors.

Layered risk is a major reason why the mortgage crisis got so out of hand. Scores of borrowers applied for mortgages with stated income and zero down financing, which is certainly very high risk, and were easily approved.

Rising home prices covered up the mess for a while, but it didn’t take long for everything to unravel. This is why sound mortgage underwriting is so critical to a healthy housing market.

Mortgage Underwriter FAQ

Do underwriters work for the bank/lender?

Yes, underwriters are employees of banks, lenders, and mortgage bankers. They work on the operational side of things, making loan decisions after the sales team brings the loan in the door.

How long does underwriting take?

It might only take an underwriter a few hours to comb through a loan file and approve, suspend, or deny it. However, mortgage lenders only have so many underwriters available, and surely the number of loans in the pipeline will exceed the number of staff. As such, much of the time might be waiting in the queue until a pair of eyeballs actually look over your loan.

Why do underwriters take so long?

Hmm…I don’t know, because they’re approving a six-figure loan amount, or seven, to a complete stranger. As noted, the actual underwriting might not take that long, but the amount of available underwriters (humans) might be low. So you could just be in the queue. A clean loan file will get approved faster and with fewer conditions so get it right before the underwriter even sees it.

Do underwriters verify employment?

While employment is generally verified nowadays when you take out a mortgage, it might not be the underwriter verifying it. Instead, the loan processor may obtain the verification of employment (VOE). Many use the “The Work Number,” an independent third-party employment verification company now owned by credit bureau Equifax.

How much do loan underwriters make?

They can make pretty good money. Salaries may be in the high five figures to low six figures if they’re seasoned and skilled in underwriting all types of loans, including FHA, VA, and so on. If you start as a junior underwriter the salary could be less than $50,000. But once you become a senior loan underwriter, the pay can jump up tremendously. It may also be possible to earn overtime.

Do underwriters make commission?

They shouldn’t because that would be a conflict of interest. They should approve/deny loans based on the characteristics of the loan file, not because they need to hit a certain number. Compensating them for loan quality might be a different story, but again could lead to discrimination if they cherrypick only the best loans.

Do underwriters work weekends?

I’ve heard of some that have. I don’t know if they do on a regular basis, but if loan volume picks up in a short period of time it’s possible to come in on a Saturday or Sunday. The mortgage world is all about highs and lows, so sometimes it might be slow and other times it’s impossible to keep up.

Are underwriters warm and friendly?

They can be if you don’t rub them the wrong way. I look at mortgages kind of like the DMV. Show up with the right paperwork and a good attitude and you’ll get in and out before you know it. Do the opposite at your peril!

(photo: Joelk75)

Source: thetruthaboutmortgage.com

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VA loans are available to active-duty military members, veterans, reservists, National Guard members, and certain surviving spouses. They require no down payment or mortgage insurance and typically come with lower interest rates than other types of mortgages. If you think you might qualify for a VA loan, it’s worth comparing the costs to those of a conventional loan.

What Is a VA Home Loan?

VA loans were created in 1944 as part of the G.I. Bill, and they have grown in popularity since. They are one way to buy a house with no money down.

Most VA loans are VA-backed loans. Approved private lenders issue the loans, part of which the U.S. Department of Veterans Affairs agrees to repay if the borrower stops making the payments. That guarantee incentivizes lenders to offer VA loans with attractive terms.

The VA issues direct loans to Native American veterans or non-Native American veterans married to Native Americans. The agency also refinances VA and other mortgages.

How Does a VA Home Loan Work?

To receive a VA loan, a veteran, service member, reservist, National Guard member, or surviving spouse first has to apply for a Certificate of Eligibility. Once you have your COE and have decided what you wish to spend on a home, you’ll seek out a lender. Most lenders charge a flat 1% fee for VA loans but there may be other fees as well.

Once you have a lender and find a home to purchase, you’ll need to have the home appraised by a VA-approved appraiser to ensure it meets the minimum qualifications for a VA loan. If it does, you’re on your way to moving day.

Types of VA Home Loans

VA loans are available to help eligible borrowers buy, build, renovate, or refinance. Here are the main programs.

VA-Backed Loans

VA-backed home loans are full of advantages. They require no down payment or mortgage insurance, and have fairly loose rules about qualifying.

The home must be a primary residence, but up to a four-unit multifamily property may be purchased if one unit will be owner-occupied.

Approved condos and manufactured homes classified as real property are eligible.

VA Direct Home Loans

If either a veteran or their spouse is Native American, they may qualify for a Native American Direct Loan (NADL) to purchase, construct, or improve a home on federal trust land.

The VA issues these loans directly to borrowers who meet credit standards and whose tribal government has an agreement with the VA.

VA Refinancing

The VA offers an interest rate reduction refinance loan (IRRRL) and a cash-out refinance.

An IRRRL, or VA Streamline Refinance, refinances an existing VA-backed home loan. No verification of credit, income, or employment is required, and you might not need a home appraisal.

The VA-backed cash-out refinance can be used to convert any type of home loan to a VA mortgage with cash back at closing. (Cash back is optional: You can also use a VA cash-out refi to switch to a VA loan, shed mortgage insurance, and possibly lower your mortgage rate.)

VA Renovation and Construction Loans

The VA renovation loan is Veterans Affairs’ answer to the FHA 203(k) loan. It allows eligible borrowers to purchase and repair a property using a single VA loan with no down payment.

VA construction loans can help borrowers finance land and the construction of a home without a down payment. The hitch is, few lenders offer these loans.

Some states also administer their own loan programs for qualified veterans. California, for example, may have a high cost of living but it does offer its own home loan program to veterans.

Who Should Apply for a VA Home Loan

Eligible applicants for a VA loan are:

•   Current service members who have served for 90 consecutive days.

•   Veterans who served after 1990 for 24 continuous months or for the full period (at least 90 days) when called or ordered to active duty. (Those who served prior to 1990 may also be eligible; check VA.gov for detailed requirements.)

•   Service members who served at least 90 days of active duty in the Reserves or the National Guard after 1990. (Those who served prior to 1990 may also be eligible; visit VA.gov for details.)

•   Spouses of service members who died in the line of duty or from a service-connected disability, or who are missing or are prisoners of war.

VA Home Loan Requirements for Buying a House

If you apply and meet the requirements for a VA loan, you’ll receive a certificate of eligibility. Approved lenders can check eligibility quickly, or potential borrowers can contact va.gov.

The document indicates “full entitlement.” For full entitlement, at least one of these must be true:

•   You’ve never used your home loan benefit

•   You’ve paid a previous VA loan in full and sold the property

•   You’ve used your home loan benefit but had a foreclosure or short sale and repaid the VA in full

Credit, Income, Debt

For a VA loan, the lender will determine how much of a mortgage you can afford based on your credit history, income, debts, and assets.

The VA does not have a minimum credit score, but most mortgage lenders will want to see a FICO credit score above 620. Some may go lower.

According to VA residual-income guidelines, borrowers should have a certain amount of discretionary income left over each month after paying major expenses.

The VA does not name a maximum debt-to-income ratio, but it does suggest placing more financial scrutiny on borrowers with a DTI of more than 41%, which includes the projected mortgage payments.

VA Loan Rates

For VA-backed loans, approved private lenders set their own VA loan rates and fees. It’s smart to contact more than one lender when shopping for a mortgage and compare offers.

VA Funding Fee

There will be no mortgage insurance on a VA loan, but most borrowers will pay a one-time funding fee for a VA-backed or VA direct home loan. The fee can be rolled into the loan.

For the first use of a VA-backed purchase or construction loan, the funding fee is 2.3% of the loan amount if the borrower is putting less than 5% down.

The NADL funding fee for a home purchase is 1.25%.

A few borrowers, including those who are receiving VA compensation for a service-connected disability, do not have to pay the funding fee.

Benefits of VA Home Loans

Here are the main selling points of VA loans:

•   No down payment.

•   More attractive interest rates and terms than loans from some mortgage lenders.

•   Possibly lower closing costs. The VA allows lenders to charge up to 1% of the loan amount to cover origination, processing, and underwriting costs. Sellers can pay all of your loan-related closing costs, but yes, that’s a big ask. VA loans have an appraisal fee that is set by area. Buyers may purchase mortgage points to reduce the interest rate.

•   There’s no limit to the amount that can be borrowed with a VA home loan. However, there is a limit to the amount of the loan that the VA will guarantee.

•   No minimum credit score requirement (although some lenders may still not lend to those with lower credit scores).

•   A VA home loan can be for first-time homebuyers or repeat buyers.

•   VA loans are assumable, meaning the loan could be taken over by the home’s next purchaser.

Downsides of VA Home Loans

Although there are many benefits to VA loans, there are a few potential pitfalls to keep in mind.

The main one is the funding fee. If rolled into the loan, this increases monthly payments as well as total interest paid over the life of a loan.

Others:

•   VA loans can’t be used to purchase investment properties or vacation homes.

•   Some approved condos are eligible, but co-op properties are not.

•   Zero down payment is a nice option, but if the housing market falters, borrowers may be paying more on their home than it’s worth.

What Is the VA Loan Limit?

As of 2020, if you have full entitlement, you don’t have a VA loan limit.

If you have a remaining entitlement (e.g., you have a VA loan you’re still paying back), you can use your remaining entitlement — on its own or with a down payment — to take out another VA loan.

In that case, the VA loan limit is based on the county conforming loan limit where you live. (In most of the country, the 2023 conforming loan limit for one-unit properties is $726,200.)

VA Loan vs Traditional Mortgage

After comparing the pros and cons of VA loans, some borrowers may find that a conventional loan with a low down payment is a better fit for their long-term financial goals. Even if they save money upfront, in the long term, VA loan borrowers often end up paying more.

Conventional loans can be used for vacation homes or investment properties. They don’t include the VA funding fee.

And some borrowers who put less than 20% down may be able to avoid PMI.

The Takeaway

VA loan requirements are more flexible than some others, and VA loan rates may be slightly lower. VA loans have benefits, but it might pay to get loan estimates for conventional loans, too, and compare. For one thing, nothing down means starting out with no equity.

Applying for a home mortgage loan with SoFi requires as little as 3% down for qualifying first-time homebuyers. The fixed rates are competitive. SoFi finances primary homes, second homes, and investment properties.

Check out SoFi Mortgages and get your rate with no obligation.

FAQ

What are the disadvantages of a VA loan?

The main downside of a VA loan is its funding fee. VA loans also can’t be used to purchase investment or vacation properties, or co-ops (although some condos are eligible).

What is the difference between a VA loan and a regular loan?

The main difference between a VA loan and a conventional loan is that VA loans do not require a down payment or mortgage insurance. And, of course, VA loans are only available to qualified service members, veterans, and certain spouses.

Do you pay a VA loan back?

Yes. A VA loan is a loan, not a gift, and It must be repaid. A homeowner who doesn’t make payments could lose their home and any equity they had built up in it.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOHL0523018

Source: sofi.com

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Our experts answer readers’ home-buying questions and write unbiased product reviews (here’s how we assess mortgages). In some cases, we receive a commission from our partners; however, our opinions are our own.

After falling moderately in June, mortgage rates have been climbing this month. Average 30-year mortgage rates hit 6.81% this week, the highest they’ve been in eight months, according to Freddie Mac.

“Mortgage rates continued their upward trajectory again this week, rising to the highest rate this year so far,” Sam Khater, Freddie Mac’s chief economist, said in a press release. “This upward trend is being driven by a resilient economy, persistent inflation, and a more hawkish tone from the Federal Reserve. These high rates combined with low inventory continue to price many potential homebuyers out of the market.”

The Federal Reserve has been raising the federal funds rate to get inflation under control. Though the central bank opted not to raise rates at its June meeting, Fed officials have indicated that future hikes are likely, as the economy is still running hot. This has helped keep mortgage rates elevated.

Markets largely expect a 25-basis-point hike at the Fed’s next meeting later this month, according to the CME FedWatch Tool.

Mortgage Rates Today

Mortgage type Average rate today
This information has been provided by
Zillow. See more
mortgage rates on Zillow

Real Estate on Zillow

Mortgage Refinance Rates Today

Mortgage type Average rate today
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Zillow. See more
mortgage rates on Zillow

Real Estate on Zillow

Mortgage Calculator

Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.

Mortgage Calculator

$1,161
Your estimated monthly payment

Total paid$418,177
Principal paid$275,520
Interest paid$42,657
  • Paying a 25% higher down payment would save you $8,916.08 on interest charges
  • Lowering the interest rate by 1% would save you $51,562.03
  • Paying an additional $500 each month would reduce the loan length by 146 months

By plugging in different term lengths and interest rates, you’ll see how your monthly payment could change.

30-Year Fixed Mortgage Rates

The average 30-year fixed mortgage rate is currently 6.81%, according to Freddie Mac. This is a 10-basis-point increase from the week before.

The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.

The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates. 

15-Year Fixed Mortgage Rates

The average 15-year fixed mortgage rate is 6.24% right now, according to Freddie Mac data. This is an 18-basis-point increase from the previous week.

If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.

Are Mortgage Rates Going Up?

Mortgage rates started ticking up from historic lows in the second half of 2021 and increased significantly in 2022. But mortgage rates are expected to trend down this year.

In the last 12 months, the Consumer Price Index rose by 4%. Inflation remains elevated, but has started to slow, which is a good sign for mortgage rates and the broader economy. 

For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.

Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans. 

How Do Fed Rate Hikes Affect Mortgages?

The Fed has been increasing the federal funds rate to try to slow economic growth and get inflation under control.

Mortgage rates aren’t directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy. 

As inflation starts to come down, mortgage rates should, too. But the Fed has indicated that it’s watching for sustained signs of slowing inflation, and it’s not going to lower rates again any time soon — it may even increase rates again in its July meeting.

Molly Grace

Mortgage Reporter

Source: businessinsider.com

Apache is functioning normally

Our experts answer readers’ home-buying questions and write unbiased product reviews (here’s how we assess mortgages). In some cases, we receive a commission from our partners; however, our opinions are our own.

After moderating somewhat in June, mortgage rates have spiked back up this month. Average 30-year mortgage rates are now the highest they’ve been since November 2022, when they topped 7% for the first time since 2002, according to Freddie Mac data. Currently, this rate is hovering in the 6.9% to 7% range.

Rates are up across the board, with some ARM rates and 30-year refinance rates spiking above 7%. However, FHA rates are currently still well below 6%, offering a bit more affordability for FHA borrowers.

“Surprisingly resilient” has been the phrase most commonly used to describe both the labor market and the larger economy, and this resilience is what’s keeping mortgage rates up. On Friday, the US Bureau of Labor Statistics released June’s jobs report. The report showed that while the labor market is cooling, it’s still running relatively hot, adding 209,000 jobs in June. 

While a strong labor market is generally a good thing, there’s currently more jobs available than there are workers to fill them. This mismatch can be good for wage growth but bad for inflation, which is why the Federal Reserve has been watching this area of the economy so closely. Until the labor market becomes more balanced, the Fed is likely to keep hiking the federal funds rate. This will keep mortgage rates elevated.

The good news is that the economy is cooling, albeit slowly. Most major forecasts expect rates to recede at some point in the second half of 2023, which means we should start to see rates fall very soon.

Current Mortgage Rates

Mortgage type Average rate today
This information has been provided by
Zillow. See more
mortgage rates on Zillow

Real Estate on Zillow

Current Refinance Rates

Mortgage type Average rate today
This information has been provided by
Zillow. See more
mortgage rates on Zillow

Real Estate on Zillow

Mortgage Calculator

Use our free mortgage calculator to see how today’s mortgage rates would impact your monthly payments. By plugging in different rates and term lengths, you’ll also understand how much you’ll pay over the entire length of your mortgage.

Mortgage Calculator

$1,161
Your estimated monthly payment

Total paid$418,177
Principal paid$275,520
Interest paid$42,657
  • Paying a 25% higher down payment would save you $8,916.08 on interest charges
  • Lowering the interest rate by 1% would save you $51,562.03
  • Paying an additional $500 each month would reduce the loan length by 146 months

Click “More details” for tips on how to save money on your mortgage in the long run.

30-year Fixed Mortgage Rates

The current average 30-year fixed mortgage rate is 6.81%, according to Freddie Mac. This is an increase from the previous week.

The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.

The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates. 

15-year Fixed Mortgage Rates

The average 15-year fixed mortgage rate is 6.24%, up from the prior week, according to Freddie Mac data.

If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.

When Will Mortgage Rates Go Down?

Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022. Though rates had initially been trending down this year, they’ve since ticked back up. 

As inflation starts to come down, mortgage rates will recede somewhat as well. If we experience a recession, rates may drop a little faster. But average 30-year fixed rates will likely remain somewhere in the 6% to 7% range throughout 2023.

For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.

Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans. 

How Do Fed Rate Hikes Affect Mortgages?

The Federal Reserve has been increasing the federal funds rate this year to try to slow economic growth and get inflation under control. So far, inflation has slowed, but it’s still above the Fed’s 2% target rate.

Mortgage rates aren’t directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy. 

As inflation starts to come down, mortgage rates should, too. But the Fed has indicated that it’s watching for sustained signs of slowing inflation.

Molly Grace

Mortgage Reporter

Source: businessinsider.com

Apache is functioning normally

Our experts answer readers’ home-buying questions and write unbiased product reviews (here’s how we assess mortgages). In some cases, we receive a commission from our partners; however, our opinions are our own.

After moderating somewhat in June, mortgage rates have spiked back up this month. Average 30-year mortgage rates are now the highest they’ve been since November 2022, when they topped 7% for the first time since 2002, according to Freddie Mac data. Currently, this rate is hovering in the 6.9% to 7% range.

Rates are up across the board, with some ARM rates and 30-year refinance rates spiking above 7%. However, FHA rates are currently still well below 6%, offering a bit more affordability for FHA borrowers.

“Surprisingly resilient” has been the phrase most commonly used to describe both the labor market and the larger economy, and this resilience is what’s keeping mortgage rates up. On Friday, the US Bureau of Labor Statistics released June’s jobs report. The report showed that while the labor market is cooling, it’s still running relatively hot, adding 209,000 jobs in June. 

While a strong labor market is generally a good thing, there’s currently more jobs available than there are workers to fill them. This mismatch can be good for wage growth but bad for inflation, which is why the Federal Reserve has been watching this area of the economy so closely. Until the labor market becomes more balanced, the Fed is likely to keep hiking the federal funds rate. This will keep mortgage rates elevated.

The good news is that the economy is cooling, albeit slowly. Most major forecasts expect rates to recede at some point in the second half of 2023, which means we should start to see rates fall very soon.

Current Mortgage Rates

Mortgage type Average rate today
This information has been provided by
Zillow. See more
mortgage rates on Zillow

Real Estate on Zillow

Current Refinance Rates

Mortgage type Average rate today
This information has been provided by
Zillow. See more
mortgage rates on Zillow

Real Estate on Zillow

Mortgage Calculator

Use our free mortgage calculator to see how today’s mortgage rates would impact your monthly payments. By plugging in different rates and term lengths, you’ll also understand how much you’ll pay over the entire length of your mortgage.

Mortgage Calculator

$1,161
Your estimated monthly payment

Total paid$418,177
Principal paid$275,520
Interest paid$42,657
  • Paying a 25% higher down payment would save you $8,916.08 on interest charges
  • Lowering the interest rate by 1% would save you $51,562.03
  • Paying an additional $500 each month would reduce the loan length by 146 months

Click “More details” for tips on how to save money on your mortgage in the long run.

30-year Fixed Mortgage Rates

The current average 30-year fixed mortgage rate is 6.81%, according to Freddie Mac. This is an increase from the previous week.

The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.

The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates. 

15-year Fixed Mortgage Rates

The average 15-year fixed mortgage rate is 6.24%, up from the prior week, according to Freddie Mac data.

If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.

When Will Mortgage Rates Go Down?

Mortgage rates started ticking up from historic lows in the second half of 2021 and increased over three percentage points in 2022. Though rates had initially been trending down this year, they’ve since ticked back up. 

As inflation starts to come down, mortgage rates will recede somewhat as well. If we experience a recession, rates may drop a little faster. But average 30-year fixed rates will likely remain somewhere in the 6% to 7% range throughout 2023.

For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.

A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.

Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans. 

How Do Fed Rate Hikes Affect Mortgages?

The Federal Reserve has been increasing the federal funds rate this year to try to slow economic growth and get inflation under control. So far, inflation has slowed, but it’s still above the Fed’s 2% target rate.

Mortgage rates aren’t directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy. 

As inflation starts to come down, mortgage rates should, too. But the Fed has indicated that it’s watching for sustained signs of slowing inflation.

Molly Grace

Mortgage Reporter

Source: businessinsider.com

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With house prices rising in many markets across the country, millions of homeowners are choosing to stay in their current homes and go the home improvement route instead. Not only will that increase the value of your home, but it will also help you avoid the need to make a costly and disruptive move. 

But home improvements can also be expensive, rising to the level of needing a loan to complete the work. For that reason, MU30 has created this home improvement loan calculator to help you determine the real cost of making home improvements. 

What’s Ahead:

Home improvement loan calculator

Getting a home improvement loan

How the home improvement loan calculator works 

The home improvement loan calculator allows you to calculate a new loan either by loan term or by monthly payments. That will give you a choice over how you want to handle repayment on the loan. You can either choose a shorter term to get the loan paid off as soon as possible, or you can select a monthly payment amount that fits neatly within your budget.

The calculator will ask you to supply three pieces of information:

  • Loan amount.
  • Loan APR (the approximate interest rate you expect to pay).
  • Your choice to either calculate my loan term or by monthly payment, as described above.

If you choose to calculate by loan term, you’ll also be given a choice of terms ranging from 12 to 84 months, as well as an option to make an extra monthly payment to reduce the loan term and the amount of interest you’ll pay. You’ll then hit the calculate button to get your results.

Those results will include:

  1. Your estimated monthly payment.
  2. The amount of interest you will pay over the course of the loan.

If you choose to calculate by monthly payment, you’ll then be asked to enter an expected monthly payment. For example, if you take a $25,000 loan at 7%, and you decide $300 will neatly within your budget, you’ll enter $300 and hit the calculate button.

The results will include the 1) months to pay off the loan, 2) the years to pay off the loan, and 3) the interest paid over the course of the loan. 

An example using the home improvement calculator

Let’s say you determine that you need $50,000 to complete home improvements on your property. But you want to know what the monthly payment will be as well as any options that will affect the amount of that payment.

You can use the calculator choosing to both Calculate by Loan Term and by Monthly Payment. 

You’ll start by entering the following:

  • Loan amount: $50,000.
  • Loan APR: 7%.
  • Select a choice: Calculate by loan term.
  • Loan term (months): 60.
  • Extra monthly payments (optional): $0.

Then hit calculate.

The calculator will reveal your estimated monthly payment will be $990.06, with $9,403.60 in interest paid over the 60-month term.

But let’s say you decide a $990 monthly payment is too high for your budget. You can go back to “Select a Choice” and click the calculate by monthly payment bubble. Another box will appear below, “Expected monthly payment”. If you decide a $600 monthly payment is a better fit for your budget, enter that in that box, then hit Calculate.

The calculator will show you three results:

  • Months to payoff: 114 months.
  • Years to payoff: 9.50 years.
  • Interest paid: $18,400.

Whether you use the calculate by loan term or calculate monthly payment method, you’ll be able to enter different numbers and run various scenarios to come up with a loan amount, rate, term, and monthly payment that will work for you.

When you find a combination that will work for you, you can then begin your search for a home improvement loan lender. 

Where to get a home improvement loan

Fiona

Fiona stands out among aggregators (a place where you can shop for multiple loan rates from a variety of companies) because their application process is ridiculously easy. They partner with some of the most popular lenders, such as SoFi, Prosper, and Marcus by Goldman Sachs, and you’ll get your potential rates in seconds. 

When you decide which lender is right for you, Fiona can help walk you through the often rigorous loan application process. The good news is, you’ll already know the rate you’ll likely get.

You can shop for personal loans through Fiona, which can easily be used for home improvement projects – in fact, it’s even one of the designated categories you can get rates for.

LendingTree

LendingTree is probably the biggest and best-known online loan marketplace on the web. It’s a source for all types of financing, including home loans, personal loans, credit cards, auto loans, student loans, and business loans. And because it includes participation by dozens of major lenders in each loan category, it’s an opportunity to get multiple loan quotes after completing a single application. That will give you an opportunity to do a side-by-side comparison of the loan products that will work best for you and offer the most favorable pricing.

If you get a home improvement loan on LendingTree, you can certainly get a home loan, such as either a refinance or secondary financing, like a home equity loan or a home equity line of credit. But if you don’t want to pledge your home as security for a new loan, you should also consider investigating personal loans for your home improvement needs. You can borrow as much as $40,000 to $100,000, with no collateral whatsoever, and pay the loan off in installments with a fixed term, interest rate, and monthly payment. Since the funds from a personal loan can be used for any purpose, you can also use them for home improvement. 

Credible 

Credible is also an online lending marketplace, but one that specializes in personal loans, student loans, home financing, and credit cards. Once again, you can consider either direct home financing, like a home equity loan or line of credit, or a personal loan.

Like LendingTree, you can get quotes from several different lenders after completing a single application. Personal loan lenders on Credible include some of the top names in the industry, including Avant, Discover Personal Loans, Prosper, SoFi, Upgrade, and Upstart. 

Credible Operations, Inc. NMLS# 1681276, “Credible.” Not available in all states. www.nmlsconsumeraccess.org.”

Credible Credit Disclosure – Requesting prequalified rates on Credible is free and doesn’t affect your credit score. However, applying for or closing a loan will involve a hard credit pull that impacts your credit score and closing a loan will result in costs to you.

What you should know about home improvement loans 

Though there are loans specifically titled “home improvement loans”, it’s really a catchall phrase that describes several different loans that can be used for that purpose.

When shopping for a home improvement loan, it’s important to keep that fact in mind. While getting a home equity loan or a home equity line of credit may seem like the instinctive loan choice, it’s certainly not the only one. And it may not even be an option if you lack sufficient equity in your home. As well, you may find the restrictions on using a home equity loan for home improvement to be greater than it is with other loan types.

That’s why it’s mission-critical to consider all loan options when it comes to home improvement.

How to finance your home improvement project 

Fortunately, there are several different financing options when it comes to home improvement. The one you select will depend on your financing needs and personal preferences. Let’s take a quick rundown of the options available.

0% introductory APR credit card

Many credit cards offer either introductory 0% APR on purchases or will make them available periodically on an existing credit line. The advantage of this type of financing is that it’s very simple to use. If you qualify for a card with the offer – which usually requires good or excellent credit – you’ll have access to several thousand dollars in borrowing power that you can use at your own pace.

Another advantage of this type of financing for home improvement is the flexibility you’ll get. You can borrow only as much as you need and repay on your own terms. However, be aware that the 0% introductory APR typically lasts only 12 to 18 months. The maximum loan amount will generally be no more than $10,000, so this method will only be suitable for smaller improvement jobs.

One of the best cards on the market right now is the Chase Freedom Flex℠ which offers a 0% Intro APR on Purchases for 15 months. But it also offers a TON of cash back opportunities, including  5% back on bonus categories that rotate each quarter, 5% back on travel purchases (booked through Chase Ultimate Rewards), 3% cash back on dining and drug store purchases, and finally, 1% cash back on all other purchases. 

Personal loans 

Available through LendingTree and Credible as described above, the major advantage of this type of loan is that it can be available in higher loan amounts – as high as $100,000 – and is totally unsecured. That makes them an especially good option if you don’t have sufficient equity in your home to complete the home improvements you want.

The major disadvantage is that the monthly payment on a large loan amount can be high since the loan term is typically no more than five years. However, some of the lenders participating in the above platforms will go out even farther on the term, from seven years to as long as 12.

Home equity loans and home equity lines of credit (HELOCs)

These are the most traditional sources of home improvement loans and may be the very best option if you have sufficient equity to cover your home improvement needs. Interest rates are low, and you’ll have more control over the term of the loan, and therefore the monthly payment. But once again, the major disadvantage is that if you don’t have sufficient home equity, this won’t be a viable route. 

Cash-out refinance 

Using this method, you’ll do a full-on refinance of your home, repaying any existing indebtedness, and taking out sufficient equity to cover your home improvement costs. It works especially well if you have a lot of equity in your home and prefer to handle all your home financing needs under a single loan and monthly payment.

But much like a home equity line of credit or a home equity loan, its success will depend on the amount of home equity you have. Also, be aware there are significant closing costs involved in doing a refinance, which can range between 2% and 4% of the new mortgage taken.

Summary

When you need to do a home improvement project, there’s a good chance you’ll need to find a loan in order to complete the process. Using Money Under 30’s calculator above, you’ll be able to tell how much you can borrow comfortably to fit the payment into your budget.

Read more:

Source: moneyunder30.com

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If high mortgage rates are holding you back from buying a house, there are strategies that might help.

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Buying a home can be challenging these days. Home prices remain high, and interest rates are up significantly compared to a few years ago. In fact, according to Freddie Mac, the average rate on 30-year loans is now creeping toward 7%.

Will rates stay high for the foreseeable future? There’s no way to tell for sure, but there are ways to get around them if they do.

Find out what today’s mortgage rates are here.

What to do if mortgage interest rates stay high

If you’re looking to purchase a house but high mortgage rates are holding you back, here are the strategies that might help.

Buy now, refinance later

One clear option is to buy a house now, at today’s rate, and then refinance your loan when interest rates inevitably drop.

According to Robert Esposito, director of sales at RelatedISG Realty, mortgage refinancing is a particularly good option for those searching for average-priced homes, as their value will only increase in price as time goes on.

“They will encounter the most competition,” Esposito says. “A property worth $500,000 today might be worth $600,000 a year from now, and then you realize you didn’t save any money.”

Check out current mortgage rates here to start exploring your options.

Make a larger down payment

Making a big down payment can help in two ways. First, “it could offer a lower interest rate,” says Sam Sharp, executive vice president of national sales at Guaranteed Rate. 

It will also reduce your total loan balance and help you avoid private mortgage insurance, which means lower monthly payments.

“Making a large down payment lowers the total loan amount and interest rate,” Esposito says.” It also makes you eligible for better loan terms or even to avoid private mortgage insurance altogether.”

Consider different loan options

Exploring less-common mortgage products is another option. Adjustable-rate mortgages, for example, offer lower rates than fixed ones for the first few years of the loan. These are good if you only plan to be in the home for a few years — before your rate can increase.

“Having worked with buyers in every stage of life over the years, we find that most people overestimate the amount of time they will live in a property and thus end up with a rate higher than necessary,” says Lindsay Barton Barrett, a licensed associate real estate broker at Douglas Elliman. “If you can get an ARM, you can save substantially — even if you stay beyond the adjustment date. What happens is that you pay a higher mortgage rate for one year in five years versus paying a higher rate for all six years.”

Getting a shorter-term loan can help, too. For example, the current average rate on 30-year loans is 6.71%, according to Freddie Mac. With 15-year loans, though, the average drops to just 6.06%. This could save you quite a bit in long-term interest. Just keep in mind that you’ll have a higher payment due to the shortened pay-off timeline.

Begin comparing your loan options online today.

Stay put and improve your current home instead

If you already own a home, tapping into your equity with a home equity loan, home equity line of credit (HELOC) or cash-out refinance may be another strategy. These allow you to borrow from your home equity, which could provide funds for improving or expanding your current home as needed.

According to CoreLogic, the typical homeowner has a whopping $274,000 in home equity, so this could be a viable option for many. Still, it depends on where you live. If you’re in a condo or tight urban area, for example, there may not be space to expand. 

Using your home equity also means taking on more debt, often at variable rates. These rates can be volatile, particularly as the Federal Reserve continues to fight inflation. 

“Home equity lines at a variable rate track higher interest rate numbers since they are tied to factors like benchmark rates, which are currently very high,” Barrett says. 

See today’s home equity rates and find out how much you may be eligible to borrow.

Buy down your rate 

Buying down your rate can work as well. In this scenario, you purchase “points” — usually for 1% of the loan amount — which reduces your interest rate by a nominal amount (typically 0.125% to 0.25%).

“In recent years, we’ve found it very common for buyers to buy points, which act as prepayment interest and reduce the overall interest rate on the mortgage,” Esposito says. 

Some lenders also offer temporary buydowns, where a seller or lender pays to reduce a buyer’s interest rate for a set period. After that, it goes back to the normal rate.

“This will allow for a credit from the seller that will pay the interest difference on a loan over the course of one to three years, resulting in a temporary rate reduction as high as 3% below the market rate,” Sharp says. “This is a great way to lower the monthly payment for homebuyers.”

Wait for rates to drop

Finally, you can always wait it out. As they say, “what goes up, must come down,” so mortgage rates will inevitably fall at some point. The question is when.

Fannie Mae’s forecast currently projects rates will finish out 2023 at an average 6.3%. The Mortgage Bankers Association predicts a bigger drop to 5.8%.

Still, these aren’t guarantees. And even if rates drop, it could mean more buyers in the market, which could drive up home prices.

“If rates decrease because inflation is deemed under control, then the economy overall will be more stable and lend itself to confidence,” Barrett says. “Between more purchasing power and confidence in the market, home prices would increase — meaning many will have missed the opportunity to buy real estate.”

Ready to see your mortgage options? Start by viewing today’s rates here.

Every situation is different

There’s no clear-cut strategy for dealing with today’s high mortgage interest rates. The right move for you will depend on your goals, your budget and your personal situation, so make sure to talk to a mortgage professional before deciding how to proceed.

And once you do decide to move forward, make sure to shop around for your mortgage. Freddie Mac estimates that getting at least four rate quotes can save you up to around $1,200 every year.

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Source: cbsnews.com