10 Best Mortgage Rates of 2018
Our editors have spent 300+ hours putting together today's mortgage and refinance interest rates across a variety of mortgage products to help consumers determine which mortgage option is best given their personal financial situation.
Mortgage loans are particularly useful for most Americans who, having to juggle many more pressing financial responsibilities than ever before, may not have enough in savings to cover the full cost of a new property. While the choice of lender should be based on a multiplicity of factors, since interest rates can have the most single impact on a borrower’s monthly repayment amount, this should be among the most important elements to consider when comparing loan offers. Although interest rates fluctuate with the market, a borrower can increase his or her chances of qualifying for a fair rate by having a good credit history, stable source of income, and sufficient funds for both their down payment and closing costs. Applicants with fair to excellent credit profiles looking to purchase a home that is well within their means generally pose less of a risk for lenders. The lower the risk, the lower the interest rate.
When choosing a mortgage lender, borrowers should also consider the type of mortgage they’re looking to qualify for, especially whether it’s conventional or government-backed. Government-backed loans like FHA, VA, and USDA loans are insured by the U.S. Federal Government, which regulates borrower qualifications to ensure that these products remain accessible to middle- and low-income individuals or people with subpar credit histories. However, interest rates can be just as low for conventional loans as they are for government-backed loans, and both can have either fixed or variable rates. While fixed-rate mortgages maintain the same interest rate for the entire loan term, adjustable-rate mortgages have an initial period where the interest rate is fixed, after which it adjusts every year according to market fluctuations. There is a wide variety of mortgage loans available, so your choice will come down to the most favorable rates and terms for the location and type of home you want to purchase, as well as your credit profile.
To determine which type of mortgage and interest rate is best for you, make an honest assessment of your financial situation, factoring in how long you plan to live in your new home and how much you can afford to pay on a monthly basis. When choosing a mortgage lender, look at the loan program and interest rates they offer, and request a loan estimate to make the process as accurate and straightforward as possible. Remember that aside from making monthly payments, you’ll be required to cover additional fees and costs associated with the mortgage application and origination. Ask questions, find out your lender’s policies on locking and floating interest rates, and request a breakdown of the lender’s fees to know exactly what you can expect upon closing. The better informed you are, the easier the process of comparing mortgage rates will be.
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How We Compare Mortgage Rates
The single biggest decision you'll make when purchasing a home will be figuring out which type of mortgage is best for your current situation and borrowing needs. With so many types of loans and lenders available, making a choice can seem stressful and overwhelming. In order to help you navigate your way through the complex mortgage rate industry, we've put together a list of the most common types of home loans currently available.
These loans are not insured by a government agency. In practical terms, that means 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.
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 altogether.
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 strongly 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.
Type of Mortgage Loans
There are many types of mortgage loans available to you, based on your financial needs and the property you want to finance. Flat Rate Mortgages attract borrowers because the interest rate will remain the same throughout the life of the loan, which ranges between 15-30 years. Loan payments for Adjustable Rate Mortgages or ARMs vary with the frequency of adjustments and market rates. Government-backed loans, FHA, USDA, and VA, are insured by the federal government.These loans offer qualified borrowers the possibility of financing their home with no down payment, as is the case with USDA and VA loans or with a 3.5% minimum down payment with the FHA.
Minimum and Maximum Loan Amounts
Typically, the minimum loan amount lenders are willing to underwrite is between $50,000-$75,000. A lower amount would affect their profit margin, yielding significantly fewer profits for the same amount of work.The minimum loan amount also varies by area.
he FHA's maximum is $294,515 in low-cost areas, up to $1,307,175 in high-cost areas for a four-unit property. Alaska, Hawaii, Guam, and the Virgin Islands are considered "special areas" due to construction costs, with loan limits of up to $1,960,750 for a four-unit property. Conventional mortgages acquired by Fannie Mae or Freddie Mac have a new base-line limit of $871,450 up to $1,386,650 in a high-cost area for a four-unit property.
Lender fees vary by mortgage type and lender. For example, borrowers financing a property using a government-backed loan will incur in fees that are not charged to a mortgagee using a conventional loan. Consequently, lenders are required to provide a Good Faith Estimate (GFE) that lists all the fees associated with obtaining a mortgage before completing the transaction.
For the pre-approval process, you must submit a mortgage application and other required documents. Lenders then examine your financial history to determine the specific loan amount you can be approved for.
Many people start the house hunting process by getting pre-qualified. Lenders review the information you submit and discuss the different loan options available to you.
In many instances, especially in cases in which borrowers are looking to qualify for a government-backed mortgage, the choice of lender will rely on their customer experience. Savvy borrowers will look for reputable lenders offering service features that could help them speed up the application and funding process. If you're keeping up with the times, look for a mortgage lender or brokerage that offers online quotes as well as an online application. Be wary of online lenders or aggregators asking for too much personally identifying information, and don't provide your social security number unless you are 100% certain that the company you're working with follows ethical business practices. If you need to be approved for a mortgage as quickly as possible, do take into account the estimated decision and funding times, but bear in mind that these are merely estimates and approval may take longer, depending on the strength of your application or lack thereof. Additional tools and resources such as calculators, articles, and guides are also a good indicator that your lender cares about providing you with all the information you need to make the best decision for your borrowing needs.
By completing an online mortgage application, you can start the process without having to visit a brick-and-mortar financial institution. Another advantage is the reduced amount of paperwork involved in the application process.
As a potential home buyer, you can take advantage of requesting an online mortgage quote. Not only does the process save you time, but it can also save you money. By accepting online quotes, financial institutions save money and often pass the savings onto their customers by offering a discount on fees.
SSN Required for Quote
If an online lender asks for your Social Security number in order to provide you with mortgage quote, make sure that the financial institution you are using is trustworthy, is using encryption software to protect your personal information and makes responsible use of it.
Additional Tools and Resources
Many online lenders have additional tools and resources that can help you prepare to become a homeowner. You can find videos, articles, and FAQs on various mortgage-related topics with information about the process, requirements, and loan options available to you. There are also calculators to figure out the costs involved in purchasing a new home.
Decision and Closing Times
Decision time varies by lender and your financial situation. The process could take anywhere from a few hours to a couple of days.
The closing time for a mortgage varies by lender, your financial situation, and the type of mortgage. The current national average is 40-50 days.
To qualify for a mortgage, borrowers have to meet certain minimum credit and income requirements stipulated by the lender or, in the case of government-backed loans, the lender as well as the U.S. Federal Government. In most cases, applicants will be required to provide proof of uninterrupted employment or stable income, have a minimum FICO credit score—which varies between lenders and loan programs—and, with the exception of VA loans, be able to provide a down payment amount of at least three percent. Other requirements will depend on the type of mortgage loan you're requesting, such as the debt-to-income limit, which can be slightly higher for government-insured loans than for conventional loans. If you have little or no credit history, you may still be able to qualify for a mortgage through a lender that accepts non-traditional credit histories. These can include career prospects, timely payments for services such as utilities, school tuition, and even gym memberships. Different lenders will have different qualifying criteria, and some even offer non-conforming loans with very few requirements, so don't be discouraged if your initial attempts don't yield favorable results.
Minimum FICO Score
The minimum FICO Score required depends on the type of loan and lender For Conventional loans, lenders traditionally ask for a 620 score. Government-insured FHA loans require a 580 score, for VA loans the requirement is between 620-640, and USDA borrowers need a 640 score. These scores are standard, but most lenders will work with you if you have a lower score.
Non-Traditional Credit History Considered?
For borrowers without a credit history, some lenders will accept information from their landlord, utility providers, and health insurance providers as non-traditional credit. Other lenders also take the unusual step of also considering projected future income or career prospects.
Minimum Down Payment
The minimum down payment varies by type of mortgage loan, credit history, and property. While VA loans require no down payment, buyers using an FHA loan need a minimum of 3%. Also, to avoid paying mortgage insurance, a 20% down payment must be made.
Borrowers should have a debt-to-income ratio of 43% or less. This quotient tells lenders if you can afford to make your mortgage payments. Nevertheless, there are lenders that will work with you if your debt-to-income ratio is higher.
Borrowers should not forget they also have the ability to scrutinize lenders and choose one that is truly deserving of their business. If you're looking to enter into a mortgage agreement, you should feel fully confident in your decision to go with a particular loan product and lender. The best way to ascertain a company's reputability is to look for reviews and feedback from borrowers who have worked with them in the past. There are various customer review websites that can be excellent resources for useful information on companies and comments from past clients, such as the Better Business Bureau and TrustPilot. Compare positive and negative reviews for the lenders you're considering, but keep in mind that larger lenders tend to have a higher number of complaints and that unsatisfied customers are more likely to provide feedback than satisfied ones. Other resources you may use to determine the reliability of a lender is the Nationwide MultiState Licensing System (NMLS), which collects licensing information and reports regulatory actions taken against businesses, and the Consumer Financial Protection Bureau, which reports and takes action against companies that practice unfair or deceptive business practices.
The Better Business Bureau is a nonprofit organization offering verified, unbiased information on more than 30 million North American companies and their business practices. Their goal is to set the foundation for marketplace trust by enforcing ethical standards of business behavior and monitoring compliance among their member companies. The BBB is an essential resource for consumers wanting to determine a business' reputability. Although not all companies are registered with the BBB, participating members demonstrate a greater commitment to developing business acumen and enhancing customer satisfaction.
Trustpilot is an online review community offering overall customer satisfaction ratings for over 179,000 businesses as well as access to customer-provided feedback on verified orders for their products and services. Just as with the BBB, not all businesses are registered with Trustpilot, yet participating companies—especially those who actively engage with their clients—can be assumed to be more concerned about their customers' experience and satisfaction than those who fail to establish an online presence.
Nationwide Mortgage Licensing System ID
The Nationwide Multistate Licensing System (NMLS) is a storage system for licensing and registration information on financial service providers. Besides managing and organizing data regarding state-based regulations applicable to the finance industry, the system aims to enhance consumer protection by sharing information related to mortgage loan originators (MLOs). Through their NMLS ID numbers, consumers can look up details about their mortgage lenders, including the number of regulatory actions taken against them.
The Nationwide Mortgage Regulatory Actions
The NMLS requires MLOs to disclose all disciplinary actions brought against them, which are then publicly displayed on the consumer-access section of their registry. These actions may include civil, disciplinary, and regulatory measures taken against a company or individual by federal or state regulators.
What's important to know about Mortgage Rates?
- What are the different types of mortgages?
- What documents do I need for a mortgage?
- Do I qualify for a mortgage loan?
- Is there a minimum or maximum mortgage amount?
- What is a home mortgage pre-approval, and do I qualify?
- Should I lock or float my mortgage?
What are the different types of mortgages?
There are several types of home purchase loans, some of which are marketed under more than one name. For simplicity's sake, we'll classify mortgage types according to their principal differences. These include whether or not the loan is insured by the U.S. Federal Government, whether it has a fixed or adjustable interest rate, and whether or not it conforms to standard underwriting guidelines regulated by the Federal Housing Finance Agency.
The most common mortgage classification is based on the loan’s interest rate and whether that rate will remain the same throughout the life of the loan. While fixed-rate mortgages have the same interest for the entire loan term, adjustable-rate mortgages start out with fixed rates for a certain number of years—usually ranging between one and ten—but then they fluctuate every year after that initial period. However, there are other loan products that don't fall under either of these categories and feature particular characteristics, such as interest-only mortgages and balloon payment loans.
Mortgages are also classified by whether or not they are insured by the government. Government backed-loans, which include FHA, VA, and USDA loans, are subject to federal regulations that ensure they are accessible to subprime borrowers, while conventional loans are subject to the particular lender’s eligibility requirements and often require higher down payment amounts and minimum FICO credit scores. Government loans are also limited to specific uses and intended to aid low and middle-income individuals, veterans, and rural residents in the purchase, reconstruction, or purchase and rehabilitation of a residence of up to four units.
Conforming loans refer to debt instruments that meet the underwriting guidelines of government-sponsored enterprises Fannie Mae and Freddie Mac, which are in turn regulated by the Federal Finance Housing Agency. Conforming loans have set limits or maximum loan amounts, while non-conforming loans, often referred to as jumbo loans, have higher loan limits, carry a greater risk for lenders, and may require the borrower to provide additional documentation.
Regardless of the type of loan you choose, there will be qualifying criteria you will have to meet and considerations you should keep in mind. Look up the terms and specifics of the loan product you’re considering before making a final decision, and look for an online affordability calculator to help you get a clearer picture of how much you can afford.
What documents do I need for a mortgage?
The documents you need to apply for a mortgage may vary by lender. But you will need to complete the mortgage application, provide an identification, social security number, proof of employment and income, W-2 statements, bank statements, and a list of your monthly expenses. Depending on your circumstances, these requirements can vary, so remember to check with your lender.
Do I qualify for a mortgage loan?
To find out if you qualify for a mortgage loan, lenders consider several aspects. Your income and your monthly debt are essential to determining whether you qualify for a mortgage loan. Total monthly debts cannot exceed 36% of your gross monthly income. This is what is known as your debt-to-income ratio.
Lenders also look at your credit history and score. So, if you are considering applying for a mortgage loan, you should pay close attention to your credit history. Do not open new lines of credit and, if possible, pay off as much debt as you can. Paying off your debts will increase your credit scores and having a good credit score means that lenders can offer you a better rate. Another requirement is making a down payment. The only types of loan mortgages that do not have this requirement are VA and USDA mortgage loans.
Is there a minimum or maximum mortgage amount?
The maximum loan amount is the limit of what a person can borrow from a lender, a number determined by such factors as the borrowers’ credit history, the loan program they have applied for, and the value of the property they intend to purchase. Conversely, minimum loan amounts are the minimum a lender is willing to offer borrowers, a figure that generally doesn’t drop below $50,000 for mortgages.
Since there are costs associated with originating and servicing a loan and those costs are the same regardless of the size of the loan, it’s understandable that lenders are more willing to lend amounts on or above the $50,000 range. Again, maximum loan amounts will depend on the risk of lending to a particular borrower, meaning lenders will determine maximum loan amounts based on both the value of the borrower's property as well as their credit score, credit history, loan-to-value ratio, and debt-to-income ratio, among others.
What is a home mortgage pre-approval, and do I qualify?
A mortgage pre-approval is an official process in which a lender examines your credit, financial background and employment history to determine if you can afford to purchase a home. Whether you are pre-approved depends on your financial situation and history and lender requirements.
Additionally, having a pre-approval letter could give buyers an edge when negotiating with a seller. Nevertheless, remember that it is still possible for the lender to decline your mortgage loan application after being pre-approved.
Should I lock or float my mortgage?
As you may already know, your mortgage rate will determine the amount you’ll pay in overall interests towards your loan. The higher the interest rate, the higher the monthly payments and the overall costs of your mortgage. So, what is the difference between locking or floating a mortgage rate?
After your loan application has been approved, your mortgage lender will ask you whether you want to let your interest rate float or fluctuate with market changes or if you would rather secure it by locking it in. If you choose to float your rate, you are then able to call your lender at any time before the loan closes to lock in a rate you feel comfortable with. However, floating a rate also comes with the risk of ending up with a higher interest rate than the one originally quoted for you.
Because mortgage rates fluctuate daily, those wanting to play it safe may want to secure a low interest rate instead of running the risk of getting a worse offer later on. However, if you were originally quoted a higher rate that could potentially drop in the upcoming days, you may want to let your interest rate float. This decision should be based both on your current financial situation as well as projected market fluctuations.
So how do you determine if rates are likely to improve? The answer is that no one can know with certainty, but you can make an educated guess by keeping a close eye on market rates and mapping out trends. Some lenders may allow borrowers to drop to a lower rate after it has been locked it, yet those tend to be rare exceptions. Before making a decision, consider your options carefully and calculate whether trying to secure a slightly lower rate will truly make an impact on the overall cost of your loan.
Our Mortgage Rates Review: Summed Up
|Mortgage Rates||Best for|
|LendingTree Mortgage||Quotes from up to 5 Lenders|
|Quicken Loans Mortgage||Multiple Loan Options|
|JG Wentworth||No Points or Hidden Fees|
|JG Wentworth VA Loans||Low Mortgage Rates|
|Federal Trust Mortgage Rates||Multiple Quotes in Minutes|
|Better Mortgage Rates||A Transparent Mortgage Experience|
|Amerisave Mortgage||FHA, VA, USDA, and Jumbo Loans|
|North American Savings Bank||Quotes for the Latest Mortgage Rates|
- Our #1 Choice - Banks Compete, You Win!
- Rates as low as 3.75% APR (for 15-year fixed-rate mortgages)
- Compare quotes from up to 5 lenders in minutes, free of cost
- Save time, view offers online, and get your free credit score
- Take advantage of their extensive customer education section