Compare Current Mortgage Rates
CONTINUE DOWNLOAD: CLICK HERE
Most people simply do not have the money to buy a home. Instead, they use a mortgage, which is a loan to buy a home. After paying a down payment of 3% to 25%, they receive a mortgage to cover the remaining costs of purchasing the home.
The mortgage is set up so that you repay the loan within a certain period called the term. The most common term is 30 years. Each payment includes a combination of principal and interest, plus property taxes and mortgage insurance if required. (Homeowners insurance may be included, or the homeowner may pay the insurance company directly.) The principal amount is the original amount you borrowed while the interest is the amount you are charged for borrowing money.
» More: Estimating your monthly mortgage payments
How do mortgage rates work?
The mortgage rate your lender offers you is determined by a combination of your own factors and larger forces beyond your control.
Lenders will have a base rate that takes the big deals into account and gives them some profit. They adjust the prime rate up or down for individual borrowers depending on perceived risk. If that sounds like a safe bet to the lender, you'll likely be offered a lower interest rate.
Factors you can change:
Your credit score. Mortgage lenders use credit scores to assess risk. Higher ratings are considered safer. In other words, the leader is more confident that you will make the mortgage payments.
The first series. Paying a higher percentage of the home's price upfront reduces the amount of money you're borrowing and makes it appear less risky to lenders. You can calculate your loan-to-value ratio to check this. A survival rate of 80% or more is considered high.
Your loan type. The type of loan you apply for can affect the mortgage rate you are offered. For example, mega loans tend to have higher interest rates.
How do you use the house? Mortgages for primary residences — the place you'll actually live — generally get lower interest rates than home loans for real estate, second homes or investment properties.
Forces beyond your control:
The American economy. Of course, that means Wall Street, but non-market forces (eg, elections) can also affect mortgage rates. Changes in inflation and unemployment rates tend to put pressure on interest rates.
international economy. What happens around the world will affect the US markets. Global political concerns may lower mortgage rates. Good news can push prices up.
Federal Reserve. The country's central bank is trying to steer the economy with two goals: spurring job growth while keeping inflation under control. Decisions by the Federal Open Market Committee to raise or lower short-term interest rates can sometimes cause lenders to raise or lower mortgage rates.
» More: What determines mortgage rates?
How (and why) to compare mortgage rates
Mortgage rates like the ones you see on this page are typical rates. In this case, they are average rates from multiple lenders, which are provided to NerdWallet by Zillow. They let you know where mortgage rates are today, but they may not reflect the rate you are being offered.
When you look at a lender's website and see mortgage rates, these are also typical rates. To generate these rates, the lender will use a set of assumptions about a "sample" borrower, including credit score, location and down payment amount. Sample rates sometimes also include discount points, which are optional fees that borrowers can pay to lower their interest rate. Including discount points will make the lender's rates appear lower.
To see more personalized pricing, you'll need to provide some information about yourself and the home you want to buy. For example, at the top of this page, you can enter your zip code to start comparing prices. On the next page, you can edit your approximate credit score, how much you want to spend, down payment amount and loan term to see which quotes best reflect your individual situation.
Whether you look up typical rates on lender websites or compare your own rates here, you'll notice that interest rates vary. This is one of the reasons why it is important to shop around when looking for a mortgage lender. Fractions of a percentage may not seem like they make much of a difference, but you're not only shaving a few dollars off your monthly mortgage payments, you're.