Mortgages rates are the interest rates a borrower obtains when taking out a mortgage. Regardless of the term of the mortgage, favorable rates are one of the most important elements to consider when choosing a mortgage lender. The rates a borrower can obtain depends on factors such as credit score, reported income, loan amount, down payment, and loan term.

The home’s location and price, in conjunction with the strength of the loan application, are another key element in how the lender calculates their risk. A lower risk will translate into a lower interest rate.

When choosing a mortgage lender, it’s important to consider whether the mortgage is conventional or government-backed, as this will affect the resultant mortgage rates. Conventional loans can have fixed or variable rates. Fixed rate mortgages have predictable monthly payments through the duration of their term. Variable rate mortgages adjust according to market fluctuations, along an agreed-upon timeline. While they’re less predictable,it’s possible that variable rate payments can decrease over time. Government-backed mortgages are backed by either the Federal Home Administration, the Department of Veterans’ Affairs, or the Department of Agriculture. They have very specific qualification requirements, whereas conventional loans are more attainable.

Before finalizing a mortgage, make sure to understand the associated costs. In addition to the monthly payments, there are additional fees and costs, such as recording fees, origination fees, appraisal fees, and closing costs. By asking questions and reading the fine print, these additional expenses do not have to be hidden costs.


Top 10 Companies

#1
Our Partner
9.8 / 10
  • Our #1 Choice, A+ Rating with the BBB
  • Rates as low as 3.25% APR (15 yr fixed)
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#2
Our Partner
9.6 / 10
  • Low Interest Rates and Award-Winning Customer Service
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  • Equal Housing Lender
  • Fannie Mae, Freddie Mac and GNMA Seller/Servicer
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  • Wide variety of mortgage programs: 15-year and 30-year fixed rate mortgages
  • Borrow up to 96.5% of your home’s value
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#3
Our Partner
9.5 / 10
  • As little as 10% down payment on Jumbo Mortgages up to $3M with no PMI
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#10
Our Partner
8.0 / 10
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How We Compare Mortgage Rates

Types of Mortgage

20%

The single biggest decision you'll make when purchasing a home is figuring out which mortgage is best for you. With so many choices and variables, it can be hard to understand what options are available to you, and which companies will be able to offer you the best deal. With that in mind, we've put together a guide, in order to help you make an informed choice. Here's an overview.

Conventional Loans

These loans are not insured by a goverment agency. In practical terms, that means that you can avoid private mortgage insurance (PMI) entirely, if your downpayment is at least 20% of purchase price. On average, PMI increases your monthly payment between $60-$90.

Fixed Rate Mortgages (FRM) are the most common sort of home loan, and the most straightforward to understand. As the name implies, their interest rate remains the same during the entire period of the loan repayment, making it easier to budget. This is especially convenient if you plan on staying in your house and keeping the same mortgage for many years. Fixed Rate Mortgages are traditionally made for terms of 15 or 30 years, but some lenders may also offer 10 or 20 year periods as well. Mortgage lenders offering Fixed Rate Loans oftentimes require at least a 10-20% down payment (percentage of the house purchase price paid upfront by the borrower), and applicants must have good to excellent credit, as well as be able to prove their financial stability in order to qualify.

Adjustable Rate Mortgages (ARM) are a less popular option, in which purchasing a home is initially made more affordable thanks to lower downpayments and mortgage rates. Generally speaking, rates remain low and set for a specific period of time, and then are reset at fixed times, according to market rates. If you're being offered a 3/1 or 5/1 ARM, the first number corresponds to the period in which the rate will remain fixed, and the second number indicates the frequency of adjustment in years. So, a 3/1 ARM keeps the same rate for three years, and beginning on the fourth year, the rate changes according to the market every subsequent year. 

Because of that changing rate, Adjustable Rate Mortgages are considered  riskier, and you may end up paying more in interest down the road than you would with an FRM. Like the former, adjustable rate mortgages are traditionally given for 15 or 30 year periods, but other options may be available. Adjustable Rate Mortgages also have downpayment minimums that range between 5-20% of the purchase price. Likewise, applicants will need to have good to excellent credit and prove financial stability in order to qualify. This may be the loan for you if you know you'll be moving within the next few years.

 

Government-backed

What this means is that the Federal Housing Administration or the U.S. Department of Veterans Affairs insure your loan, and you have to meet both the government's and the private lender's guidelines and requirements. These mortgages have lower requirements than privately insured ones, which can make them an excellent option if your credit isn't very good or you can't afford a large downpayment.

FHA Loans – FHA loans are insured by the Federal Home Administration, lessening the risk for lenders in the event you are unable to make your mortgage payments. With this type of loan, you can put down as little as a 3.5% downpayment and your credit score can be as low as 500 (580, for the 3.5% option). Your debt-to-income ratio (DTI) is another key element. FHA loans accept borrowers with a higher than 50% DTI ratio, whereas conventional loans generally put a cap at 45%. These loans are also more forgiving of bankruptcies and foreclosures in your past. Because of the lower down payment and credit requirements, FHA loans are a popular option for first-time homebuyers. Be aware, however that with an FHA loan, the house you intend to purchase will need to pass inspection from an appointed FHA inspector. If the house fails, the required improvements may have to be made before the sale can be finalized, or you may have to walk away from the house all together.

VA Loans – If you yourself currently are, have been, or are the surviving spouse of a member of the U.S. Armed Forces, you may qualify for a VA Loan. If this is the case, we suggest taking the time to explore this option further. A VA Loan is a government-backed mortgage (insured by the Department of Veteran Affairs), which is considered a benefit of service, and is one of the only loan types that does not require a down payment. Credit requirements still factor in, but they may be more flexible than with other loan types. Just as with an FHA loan, the house must meet certain requirements and pass an inspection performed by an appointed VA certified inspector. If the house fails the inspection, improvements may need to be made before the sale is finalized, or you may have to find another option that meets VA requirements. 

United States Department of Agriculture – The USDA supports low and moderate income families who otherwise might not be able to afford a home through two different loan programs, the Single Family Housing Direct Home Loans and the Single Family Housing Guaranteed Loans. The benefits can include 100% financing, low income requirements, 1% interest rate, and an option for zero down payment. The Guaranteed Loans are processed through a third party lender, however, whose requirements you must meet in order to qualify, (generally speaking, a 640 credit score is standard). The Direct Loans, on the other hand, are handled directly by the U.S. government. The properties these finance must be smaller than 2,000 square feet, and the payback period is a 33 or 38 term. Both categories of loans are only available for small-town, rural areas.

 

The best type of loan for you really depends on your individual situation as a borrower, so in our search we looked for mortgage lenders and brokers that offer a variety of options to choose from. The wider the selection, the better, as it maximizes your chances of being able to qualify.


Mortgage Rates

20%

Mortgage rates change all the time, according to estimates by lenders, foreign markets' rise or fall, U.S. stocks, money supply by the Federal Reserve, unemployment rates, and the degree of inflation. In terms of your specific mortgage rate, other variables factor in, like your home's location, price and loan amount; your credit score, down payment, interest rate type, and loan term and and type. Lenders have different ways of assessing risk, so where one company may look at your application and see you as low-risk, another might have problems with the amount of debt you carry relative to income. A third may assign more importance to down payments, and offer better rates solely for people who can put down 20% or more upfront.

It's in your best interest to comparison shop, and it will probably help you decide which loan type best suits your needs. Be sure to look at the full costs of each loan offer, since lender fees, points and insurance can add up rather quickly, meaning that great deal you thought you were getting might not be such a good idea after all. In order to get an idea of what the lender thinks you can afford, a good tip is to ask for pre-approval if you're planning on buying within the next 90 days, before you set your heart on that gabled four-bedroom with a sun porch and heated pool.

The strength of your loan application determines both your approval for a mortgage, and the interest rate you’ll pay. Applicants with excellent credit scores, a long history of responsible borrowing, timely debt repayment, balanced monthly spending, and steady income will receive more favorable interest rates. Conversely, anybody whose financial history has been challenging may still gain approval for a mortgage, but find themselves saddled with much higher interest rates. 

The type of loan you choose also plays a part in how much interest you’ll pay over the life of the mortgage. For instance, adjustable rate mortgages will ordinarily start off with lower interest rates than fixed rate mortgages, but after a certain period the interest rate will be subject to fluctuations, which may mean paying either more or less interest. Another example are VA loans. Since they are a benefit for those who have served in the US military, they often boast lower interest rates than other loan types.

The term of the loan will also impact the interest rate. For example, if you select a fixed rate mortgage with a 15-year term, you’ll probably pay a lower interest rate than if you selected a 30-year term for the same type of mortgage.

When looking at mortgage interest rates, you’ll also want to look at the APR, or Annual Percentage Rate. The APR is amount of interest on your total loan amount that you'll pay annually. Where interest rates simply reflect the current cost of borrowing, APR jumps off from there, and factors in any additional fees required to finance the mortgage.

Since mortgage rates are so dependent on the borrower, we look at the lowest interest rates offered by the mortgage lenders and brokers we reviewed when scoring this section. Those that offered lower starting interest rates received higher scores than those with higher starting interest rates.


Qualification

15%

Mortgage lenders will look at several factors in order to determine your qualifications for the types of loans they offer. They'll focus on credit score and history, financial stability, income-to-debt ratio, employment and income situation cash reserves, and downpayment amount, as well as any assets you may have (savings accounts, investment portfolios or retirement accounts). Don't be surprised if your lender also requests copies of your bank statements, as well as your W2s and tax returns for the last two years. The sum combination of these show you've managed past debt and give lender a good idea of the risk associated with giving you money.

The stronger your application, the higher the chances of being approved. So, if your credit cards are maxed out, you have a significant amount of debt, a bankruptcy or foreclosure in your past, your likelihood of meeting lenders' requirements will be hampered. Don't let that discourage you, there are always steps you can take to make yourself a more attractive candidate. Fundamentally, mortgage companies want to give loans. After all, it's how they stay in business. To that end, most lender are more than happy to talk to potential borrowers about their situation and will provide advice on how to make themselves better candidates for a mortgage. 

In this section, we looked at mortgage lenders who have flexible mortgage requirements and a high rate of loan approvals.


Mortgage-related fees

20%

The true cost of buying a home does not begin and end with monthly payments. Other elements can piggyback in, including closing costs, taxes and other lender related fees.

Closing Costs average 2-5% of the purchase price of the home, and are usually paid at the time of closing. Depending on the lender and type of loan you are looking for, you may be able to roll your closing costs into the loan amount, however remember that you’ll be paying interest on this every month.

Private Mortgage Insurance (PMI) is required for fixed rate and adjustable rate mortgages, when your down payment is less than 20%. In the event you default on your mortgage payments, PMI is added protection for the lender. In most situations, this is automatically added into your monthly payments.

Discount Points are usually paid at closing, and give buyers the chance to lower the interest rate by paying more upfront. One point usually translates to one percent of the cost of the house. Therefore, if you buy a $200,000 house, one point would be $2,000. The more points you pay, the lower the interest will be.

 

Other fees may include:

  • Origination fee
  • Appraisal fee
  • Credit report
  • Recording fee

What is a Good Faith Estimate?

The law requires that a Good Faith Estimate be provided to homebuyers within three days of a loan application. This contains an itemized list of the expected closing costs, or amount due at closing. Most lenders are happy to go over a good faith estimate with you if you have questions, but remember this is an estimate and can be subject to change.


Reviews and Support Services

15%

Last, we look at reviews on ConsumersAdvocate.org and other consumer review sites across the internet to see what consumers like you have said about the mortgage lenders and brokers we review. Those with more favorable reviews that demonstrate honest policies and practices, offer fair mortgage terms and rates, and have a reputation for great customer service received higher ratings in this area. We also looked at their standings and certifications, so we could find companies with a proven track record in the mortgage business, able to prove their reliability and trustworthiness, and without records of regulatory actions. Lastly, we focused on customer care, emphasizing availability, level of ease during the process, learning tools and competence. The best companies know that customer service is crucial, especially with a large investment like buying a house. 


Financial Reputation

10%

With so many mortgage lenders available, it can be hard to decide which one is best for you. Between direct lenders like national and local banks or credit unions, and brokerage companies that aggregate quotes from multiple lenders, choosing is a little like searching for the proverbial needle in a haystack. We judged each company’s reputation by looking at the following factors:

 

-BBB Grade

-BBB Complaints

-Market Share

-Years in Operation

-FHA/HUD approved

-No regulatory actions in NMLS (National Multi-State Licensing System)

-Registered member with one of the following: NAMB (National Association of Mortgage Brokers), FDIC (Federal Deposit Insurance Corporation), or HMDA (Home Mortgage Disclosure Act)