Banking

Today’s mortgage and refinance rates: July 5, 2021

Mortgage and refinance rates are low across the board today, so it could be a good day to lock in a low rate.

We’re showing the national average mortgage rates. Your exact rate will depend on where you live, so take a look at our state-by-state guide below.

Your mortgage rate will also depend on your finances and which type of mortgage you get. But overall, mortgage rates are at historic lows.

Current mortgage rates

Conventional rates from Money.com; government-backed rates from RedVentures.

Current refinance rates

Conventional rates from Money.com; government-backed rates from RedVentures.

How are mortgage rates determined?

Mortgage rates are largely determined by the economy. Rates are higher when the US economy is flourishing and lower when it’s struggling.

Employment and inflation are the two main economical factors that impact mortgage rates. When employment numbers and inflation go up, mortgage rates tend to follow suit.

You do have some power over your mortgage rate, though. Here are the factors you can control:

  • Credit score. The higher your credit score, the lower your mortgage rate should be. To improve your score, focus on paying all your bills on time and paying down debts.
  • Debt-to-income ratio. Your DTI ratio is the amount you pay toward debts each month, divided by your gross monthly income. The lower your DTI ratio, the better. The minimum DTI ratio depends on the lender and type of mortgage you get, but it typically ranges from 36% to 50%. If your ratio is even lower than the lender’s minimum, you could get a better interest rate.
  • Down payment. Depending on which type of mortgage you get, you may need 0% to 20% for a down payment. If you can place more than the minimum down payment, you’ll probably get a lower rate.
  • Type of mortgage. Rates on conforming mortgages (which you probably think of as “regular mortgages”) are already low right now. You’ll pay less on a government-backed mortgage through the FHA, VA, or USDA. You’ll pay a higher rate on a jumbo mortgage.
  • Mortgage term. The shorter your mortgage term, the lower your rate will be. For example, you’ll pay less on a 15-year term than a 30-year term. Keep in mind that your monthly payments will be higher on a shorter term, though.

When to lock in a mortgage rate

It’s typically a good idea to lock in your mortgage rate when you’re ready to start shopping for homes.

To lock in your rate, apply for preapproval with a lender. Once you’ve received your preapproval letter, your rate is usually locked in for 60 to 90 days.

It’s useful to get a preapproval letter before you make an offer on a house. Showing the seller a preapproval letter indicates that you’re a competitive buyer who is in good financial standing, and it could give your application a leg up over other offers.

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