Mortgage Rates Today: January 3, 2024—Rates Remain Fairly Steady
Special Note: We receive a commission from associate links on Forbes Advisor. However, the commission has no impact on the viewpoints or assessments of our editors.
At present, the mean interest rate for a thirty-year fixed mortgage is 7.29%, which is slightly higher than the rate of 7.22% recorded just a week before.
If you're looking for a mortgage with a shorter term, the mean interest rate for a 15-year fixed mortgage stayed steady at 6.35% from the previous week.
If you wish to obtain a cheaper interest by refinancing, you should assess your current mortgage rate and compare it with the prevailing refinance rates.
Jan 3, 2024 Mortgage Rates: What's Now?
People who borrowed money for a 30-year mortgage paid a typical interest percentage of 7.29%. This figure increased from the preceding week's rate of 7.22%.
At present, the typical yearly percentage rate (APR) for a 30-year mortgage with a fixed interest rate is at 7.22%. This is an increase from the previous week's interest rate of 7.15%. The APR is a comprehensive cost indicator as it encompasses both the lender fees and the mortgage interest.
If you're curious about the expenses involved, let's consider a scenario. Suppose you take a mortgage of $100,000 with a 30-year fixed-rate loan. At present, the average interest rate is 7.29%. According to the Forbes Advisor mortgage calculator, you would have to pay around $685 every month, which includes the principal and interest. However, the taxes and charges are not included in this amount. Eventually, the total interest you'll have to pay over the life of the loan would come to about $146,610.
The typical interest rate for a 15-year mortgage with a fixed rate currently stands at 6.35%. It was at the exact same percentage last week.
The Annual Percentage Rate (APR) for a 15-year fixed loan remains constant at 6.30%. This has not changed since the previous week.
If you opt for a 15-year fixed-rate mortgage with an interest rate of 6.35%, your monthly payments for principal and interest would approximately be $863 for every $100,000 you borrow. By the end of the loan term, your total interest payments would be around $55,309.
The typical interest rate for a 30-year jumbo loan has dropped to 7.17%, which is a decrease from the previous week's rate of 7.20%.
If you have a 30-year fixed-rate jumbo mortgage with a current interest rate of 7.17%, you will have to pay $677 per month as the principal and interest payment for every $100,000. So, if you take a loan of $750,000, the monthly principal and interest payment will be approximately $5,078. Over the loan's life, you will have to pay about $1.08 million as total interest.
Why APR Matters: An Explanation
In simple terms, APR means annual percentage rate which comprises mortgage interest rate along with lender fees throughout the mortgage lifespan. It is an essential factor for borrowers as it provides a clear insight into the complete cost of the mortgage if it is kept for the whole term.
What Determines Mortgage Rates?
People who have good or excellent credit, keep their debt-to-income (DTI) ratio low and choose loan programs that do not have mortgage insurance premiums or other charges that make the loan's annual percentage rate (APR) increase, are eligible for lower mortgage rates.
It's a good idea to begin by comparing the interest rates offered by various mortgage lenders. In addition, you can also compare rates and fees for different types of loans, such as conventional loans, loans for first-time homebuyers, and government-backed loans like FHA and VA loans.
There are many economic factors that impact the direction of rates for new home loans. While the recent increases in Federal Reserve rates don't directly cause mortgage rates to climb, they do contribute to long-term loan interest rates going up. Whenever the Fed chooses to pause or lower its benchmark Federal Funds Rate, there is a higher chance that rates will decrease.
Moreover, the rate of inflation and the overall condition of the economy have a direct influence on the interest rates. When the economy is thriving and there is high inflation, it is indicative of the rates being higher. However, if there is a decline in consumer demand or inflation, it could result in lower rates.
Which Mortgage Loan Is Best?
Traditional housing loans are given out by private lenders and usually need a decent or outstanding credit score and a minimum of 20% upfront payment to secure the best interest rates. Certain lenders provide loans and monetary gifts for those purchasing their first home, with more laid back down payment stipulations starting at only 3%.
If you are a buyer who has limited credit or financial resources, then you'll most likely find a government-backed loan to be the preferred choice since the minimum loan requirements are much simpler to fulfill.
An instance of this is when opting for FHA loans, a minimum of 3.5% down payment may be required if the credit score is no less than 580. But if the credit score ranges between 500 and 579, a minimum of 10% down payment may be needed. Nonetheless, lifelong mortgage insurance premiums may be applicable, both upfront and annually.
If you're looking to purchase a home in a rural area and have a modest salary, you might want to explore USDA loans. This type of loan doesn't mandate a down payment, but you'll need to pay a fee upfront and each year thereafter to guarantee your loan. This fee structure remains in place for as long as you have the loan.
If you have a military background that qualifies, VA loans are the ideal choice for you. For one, no down payment is typically required. Additionally, unlike the FHA and USDA loan programs, borrowers are only required to pay a one-time funding fee and not an annual fee.
FAQs - Commonly Asked Questions
Ideal Mortgage Rates: What To Expect?
Right now, you can expect to find mortgage rates between 6% and 8% if you want to compete in the market. There are various elements that play into determining mortgage rates such as how long it will take to pay off, what kind of loan it is, and the borrower's credit score.
Reducing Mortgage Interest Rates: Tips
Looking at different lenders and loan options is a solid beginning. It's also important for borrowers to work towards having a credit score between 670 and 850, which is considered good or excellent, and a debt-to-income ratio of 43% or lower.
In addition, if you decide to pay at least 20% of the total cost upfront for a conventional mortgage, it can exempt you from being charged private mortgage insurance fees that can add to your overall expenses. Plus, if you opt to buy discount points or receive lender credits, this can lower your interest rate.
Maximum Mortgage Rate Lock Duration?
The majority of rate locks remain effective for 30 to 60 days, and during this initial period, you may not have to pay a fee to your lender. However, if you wish to prolong the rate lock period up to 90 or 120 days, this can be done, but extra charges may be incurred and it's subject to your lender's policies.
