Banking

Today’s mortgage and refinance rates: July 6, 2021

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Some mortgage and refinance rates are up since last Thursday, but the increases aren’t drastic. Some rates are down since last month, and rates remain low in general.

Mortgage rates will probably stay low for at least a few more months, so you don’t need to rush to take advantage of today’s low rates if you aren’t prepared. But if you are ready to buy or refinance, shop around for lenders to compare their rates.

Ask each lender for a loan estimate. This is an itemized list of fees that helps you compare what you’ll pay from lender to lender. Ideally, you’d choose a lender that charges both a relatively low rate and low fees.

Mortgage rates on Tuesday, July 6, 2021

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

Learn more and get offers from multiple lenders »

Rates for conventional mortgages, which you may think of as “regular mortgages,” are currently low. But you can usually get an even better rate with a government-backed mortgage through the FHA or VA, depending on which term length you want. Government mortgages are good options if you’re eligible.

Refinance rates on Tuesday, July 6, 2021

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

Compare offers from refinancing lenders »

Adjustable refinance rates are significantly higher than fixed or government-backed refinance rates.

How to get a low mortgage rate

Mortgage rates are at all-time lows, so it could be a good day to lock in a rate — especially if you know you want to buy soon.

But rates will probably stay low for a while, so you don’t necessarily need to rush to take advantage of low rates if you aren’t quite ready yet. You have time to boost your financial profile, which could help you get an even better rate.

To get the best possible rate, consider these steps before applying:  

  • Increase your credit score by making payments on time, paying down debt, or letting your credit age. The higher your score, the better.
  • Save more for a down paymentThe minimum down payment you’ll need depends on which type of mortgage you are after. But if you can make more than the minimum down payment, you’ll probably be rewarded with a higher rate.
  • Lower your debt-to-income ratio. Your DTI ratio is the amount you pay toward debts each month, divided by your gross monthly income. Most lenders want your ratio to be 36% or lower. To improve your ratio, pay down debts or look for ways to increase your income. 

You can secure a low rate now if your finances are in good shape, but you don’t need to rush to get a mortgage or refinance if you’re not prepared.

Mortgage rate trends

Refinance rate trends

15-year fixed-rate mortgages

A 15-year fixed mortgage locks in your rate for the entire 15 years you’ll spend paying down your mortgage.

A 15-year term comes with higher monthly payments than a longer term, because you’re paying off the same loan principal in fewer years. 

But a 15-year term will cost you less than a 30-year term in the long run. You’ll get a lower interest rate and pay off your mortgage in a half the time. 

30-year fixed-rate mortgages

If you get a 30-year fixed mortgage, you’ll pay a set rate for 30 years. A 30-year fixed mortgage has a higher interest rate than a 15-year fixed mortgage.

You’ll make smaller monthly payments with a 30-year term than with a 15-year term because you’re dividing your payments over an extended period.

On the other hand, you’ll pay more in interest with a 30-year fixed mortgage than with a shorter term, as you’re paying a higher interest rate for more years. 

ARMs

An adjustable-rate mortgage, often known as an ARM, will lock in your rate for a set period. Then your rate will change regularly. A 7/1 ARM keeps your rate constant for seven years, then your rate will increase or decrease once per year. 

You may consider choosing a fixed-rate mortgage over an ARM, even though ARM rates are currently at all-time lows. The 30-year fixed rates are lower than ARM rates, so you might want to secure a low rate with a fixed mortgage. Additionally, you won’t risk a future ARM rate increase.

If you’re thinking about getting an ARM, discuss with your lender what your rates would be if you chose a fixed-rate versus an adjustable-rate mortgage.

Government-backed mortgages

We’re also providing rates for FHA and VA home loans, two kinds of government-backed mortgages.

Government mortgages are backed by government agencies. The government pays the lender if you fail to make mortgage payments.

Government-backed home loans are less risky than conventional mortgages, so lenders have more lenient requirements for your credit score, debt-to-income ratio, or down payment. Government mortgages also come with lower interest rates. These mortgages can be great deals if you qualify. Here are your options:

  • FHA mortgage: FHA loans are mostly for people with lower credit scores. But these mortgages aren’t limited to a certain type of person, like VA and USDA loans.
  • VA mortgage: You may be eligible if you’re an active military member or veteran.
  • USDA mortgage: You could qualify if you live in a rural area and fall under a certain income limit.
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