The best way to refinance: Avoid these 6 mistakes

Reduce your refinance costs

Starting the mortgage refinance process can be intimidating.

The goal is to trade in your current mortgage for a new one that helps you reduce your rate and build equity faster.

But making mistakes during the process can result in higher costs.

The best way to refinance involves knowing the most common mistakes and how to avoid them.

Six mistakes are most common in today’s refinance market. Here’s how not to make them.

Verify your refinance eligibility (Sep 18th, 2020)


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The best way to refinance is to know the most common mistakes and how to avoid them:

  1. Not optimizing your credit score
  2. Failing to comparison shop
  3. Tapping home equity too aggressively
  4. Refinancing too often
  5. Not checking your property value
  6. Assuming fees are non-negotiable
  7. The best way to refinance a mortgage

1. Not optimizing your credit score

Your credit history is one of the most important criteria lenders look at when you refinance.

A one-point credit score increase — from 679 to 680 — could reduce your mortgage fees by one point. That’s $1,000 for each $100,000 borrowed.

Purging errors with a rapid rescore can raise your credit score by as much as 100 points in less than a week.

According to the Federal Trade Commission (FTC), 20 percent of credit reports contain wrong information. Five percent are so serious that they may burden the consumer with a much higher mortgage interest rate.

Before you start a refinance, order your credit reports from Equifax, TransUnion and Experian. Consumers, by law, are entitled to one free credit report per year from each major bureau.

Immediately report any errors. The bureau must remove any line it can’t prove is yours.

2. Failing to comparison shop

A Consumer Financial Protection Bureau (CFPB) survey discovered that nearly half of all homeowners requested a quote from just one lender.

Consumers who received rate quotes from multiple lenders cut their interest rate by as much as 50 basis points (0.50%).

That’s more than $14,000 in mortgage interest savings on a three hundred thousand dollar loan over ten years.

Your current lender or local bank may not offer the best deal. Compare rates and fees from three to four lenders before you decide on one.

Compare refinance rates. Start here (Sep 18th, 2020)

3. Tapping home equity too aggressively

About one-in-four homeowners are “equity-rich,” according to a recent study.

That means they have at least 50% equity in their home — money that can be tapped to accomplish other financial goals.

But one common mistake is financing short-term expenses with a long-term loan.

For instance, a car with a five-year life may not justify a 30-year mortgage loan. Likewise, a mortgage is an expensive way to pay for a month-long cruise.

Homeowners may receive more value by investing in home improvements, a college education, or a promising business venture with proceeds from a cash-out refinance.

Will your equity, if tapped, yield long-term returns? If the answer is “yes,” then a cash-out refinance might be your next step.

Check your eligibility for a cash-out refinance (Sep 18th, 2020)

4. Refinancing too often

Mortgage interest rates are far below their historic norm.

Homeowners who purchased a home as little as one year ago likely stand to save by refinancing at today’s rates.

Buy a refinance isn’t always the right decision.

Here’s why: frequent refinancing extends the mortgage term again and again.

Remember, a refinance after five or ten years “resets” the loan, often to 30 years. The rate and payment fall dramatically while yielding little or even negative savings.

Sometimes the lowest possible payment is priority one for a homeowner with limited cash flow. Perhaps a divorce, layoff, or illness reduced income. In these cases, extending the loan could be a wise move.

However, financially stable borrowers should focus on lifetime savings.

One strategy many homeowners employ is to refinance into a mortgage with a shorter term. 15-year refinances are growing in popularity

Alternatively, make additional principal payments to avoid extending your repayment timeframe.

Verify your refinance eligibility (Sep 18th, 2020)

5. Not checking your property value

A survey by Fannie Mae revealed that a substantial number of U.S. homeowners underestimate the value of their homes – in part because they don’t realize how much home prices have risen in recent years.

Without an accurate estimate of your home’s value, you could easily pay too much to refinance the mortgage.

If your estimate is too low, you can overlook savings opportunities. Adequate equity lets you eliminate mortgage insurance or obtain a lower interest rate.

Conversely, if your estimate is too high, you may not receive your desired mortgage rate. Less equity can mean higher rates.

Yet, some loan products do not take into consideration your home’s value.

The FHA streamline refinance does not require an appraisal, and is available to current FHA homeowners.

Likewise, VA loan rates are not based on the home’s value. Your current VA loan is the litmus test for eligibility. The lender does not typically request an appraisal, saving the applicant the associated fee.

However, if your loan type requires documented home value, there are several ways obtain a realistic estimate.

Online valuation tools have improved. Even better, request a Broker’s Price Opinion (BPO) or Comparative Market Analysis (CMA) from a local real estate agent. The cost, if any, is a fraction of a typical appraisal fee.

6. Assuming fees are non-negotiable

You don’t have to accept a refinance offer “as is.”

In addition to interest rates, many fees may be negotiable. Multiple offers may persuade lenders to compete against each other for your business.

Third-party fees like title and escrow may be negotiable, depending on your state’s laws.

Provided you have good credit and have done a little comparison shopping, you should have enough leverage to bargain for a better deal.

The best way to refinance a mortgage

A refinance is simply trading your current loan for a new loan that is better in some way.

Some homeowners refinance to lower their payment or interest rate. Some refinance to turn pent-up home equity into needed cash. Still others refinance into a shorter term, like a 30-year loan into a 15-year one.

Any refinance is completed with essentially the same process:

  1. Make sure the refinance benefits you. Know your ultimate goal and see if you can achieve that. If you need a lower rate, make sure current rates are low enough. If you need cash out, make sure you have enough equity
  2. Contact a lender. Yes, this can seem scary, but, by law, there is never any obligation to proceed with a refinance. You can cancel the whole thing up to the day before closing! But a lender, in minutes, can give you an accurate rate quote, check your credit, and send you numbers in writing
  3. Shop for rates. You can reduce your rate by as much as 0.50% by contacting a few different lenders
  4. Make full application with your chosen lender
  5. Sign initial disclosures that the lender will send you. Verify loan terms on the disclosures. Make sure you are still accomplishing your goal (lower rate, cash out, shorter term, etc.)
  6. Provide documentation to the lender such as income and asset verification
  7. Submit loan conditions. The lender will submit your paperwork to the underwriter, who will request additional needed items, if any
  8. Sign final paperwork which the lender prepares. You will sign at the escrow company
  9. Wait 3 days. This is the rescission period — a “cooling off” period in which you have the chance to cancel the refinance at no cost. (Remember: your current loan is still intact and no changes have been made to it. Simply continue making payments)
  10. Check with the lender on the 4th day. The loan will “fund,” meaning it’s a done deal. Your previous loan has been paid off in full.
  11. Start making payments on the new loan. The first one will be due 30-60 days after funding

Follow these steps, and you should be able to meet your refinance goals — whether you want to save money, pay off your mortgage faster, or cash out on your equity.

Verify your refinance eligibility (Sep 18th, 2020)

What are today’s mortgage rates?

Mortgage rates are low and continue to sit below historical levels. Today’s rates combined with refinance best practices yield solid value for homeowners.

Request a refinance rate today to see how much you could save.

Verify your new rate (Sep 18th, 2020)

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Mortgage and refinance rates today, September 18, 2020

Today’s mortgage and refinance rates 

Average mortgage rates edged lower yesterday. Assuming you’re not affected by the surcharge on certain Fannie Mae and Freddie Mac refinances, yours may have changed little this week. And conventional loans today start at 2.875% (2.875% APR) for a 30-year, fixed-rate mortgage. 

Find and lock a low rate (Sep 18th, 2020)

Current mortgage and refinance rates 

Program Mortgage Rate APR* Change
Conventional 30 year fixed 2.875% 2.875% Unchanged
Conventional 15 year fixed 2.625% 2.625% Unchanged
Conventional 5 year ARM 3.375% 2.892% Unchanged
30 year fixed FHA 2.25% 3.226% Unchanged
15 year fixed FHA 2.25% 3.191% Unchanged
5 year ARM FHA 2.5% 3.245% Unchanged
30 year fixed VA 2.25% 2.421% Unchanged
15 year fixed VA 2.25% 2.571% Unchanged
5 year ARM VA 2.5% 2.426% Unchanged
Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Find and lock a low rate (Sep 18th, 2020)


COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

Should you lock a mortgage rate today?

The Federal Reserve restated this week its commitment to keep buying huge numbers of mortgage bonds. And that should provide real comfort to borrowers. Since it started this process, the Fed’s pushed rates noticeably lower, even when markets wanted them to be higher.

How mortgage rates are determined and why you should care

But nothing’s ever certain — and that’s especially true during these exceptional times. So it would be perfectly rational for you to choose to lock your rate now, regardless of your closing date.

However, I think there’s still a possibility of some further modest falls in mortgage rates. Just note that any rate chart is going to have a jagged line, complete with rises as well as falls. The overall trend may be friendly, but the closer you get to closing, the greater the possibility of your being trapped in a period of upward movement.

And that’s why my personal recommendations are:

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • FLOAT if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

Compare top refinance lenders

Market data affecting today’s mortgage rates 

Here’s the state of play this morning at about 9:50 a.m. (ET). The data, compared with about the same time yesterday morning, were:

  • The yield on 10-year Treasurys inched up to 0.68% from 0.67%. (Bad for mortgage rates.) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
  • Major stock indexes were mixed but mostly lower. (Good for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
  • Oil prices rose to $41.16 from $39.85. (Bad for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
  • Gold prices rose to $1,956 an ounce from $1,944. (Neutral for mortgage rates*.) In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower.
  •  CNN Business Fear & Greed index increased to 59 from 55 out of a possible 100 points. (Bad for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are better than higher ones

*A change of less than $20 on gold prices or a matter of cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

Once upon a time, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. The Fed is now a huge player in the mortgage market and some days can overwhelm investor sentiment.

So use markets only as a rough guide. They have to be exceptionally strong (rates are likely to rise) or weak (they could fall) to rely on them. Today they’re looking uneventful for mortgage rates. Unless things change in coming hours, this looks likely to be a quiet day with only a small change in rates — if any — currently on the cards.

Find and lock a low rate (Sep 18th, 2020)

Important notes on today’s mortgage rates

Here are some things you need to know:

  1. The Fed’s ongoing interventions in the mortgage market (at least $1 trillion; some say nearly $2 trillion) should put continuing downward pressure on these rates. But it can’t work miracles all the time. So expect short-term rises as well as falls. And read “For once, the Fed DOES affect mortgage rates. Here’s why” if you want to understand this aspect of what’s happening
  2. Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions
  3. Only “top-tier” borrowers (with stellar credit scores, big down payments and very healthy finances) get the ultralow mortgage rates you’ll see advertised
  4. Lenders vary. Yours may or may not follow the crowd when it comes to rate movements — though they all usually follow the wider trend over time
  5. When rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
  6. At times of high demand, lenders can push up rates as a way of managing their workflow. Neither markets nor the Fed can help when that happens

So there’s a lot going on here. And nobody can claim to know with certainty what’s going to happen to mortgage rates in coming hours, days, weeks or months. But check out what 10 experts think could happen between now and the end of this year:

Are mortgage and refinance rates rising or falling?

Over the last few months, the overall trend for mortgage rates has clearly been downward. A new all-time low was set early in August and another looked possible a couple of weeks ago — before better-than-expected employment data snatched that possibility away. Still, a new one remains a real possibility.

Looking further ahead, Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

Expert mortgage rate forecasts

And here are their current rates forecasts for the last two quarters of 2020 (Q3/20 and Q4/20) and the first two of 2021 (Q1/21 and Q2/21).

Note that Fannie’s (published on Tuesday) and the MBA’s are updated monthly while Freddie’s are published quarterly So Freddie’s sometimes feel stale. The numbers in the table below are for 30-year, fixed-rate mortgages:

Forecaster Q3/20 Q4/20 Q1/21 Q2/21
Fannie Mae 3.0% 2.8% 2.8% 2.7%
Freddie Mac 3.3% 3.3% 3.2% 3.2%
MBA 3.0% 3.1% 3.1% 3.1%

So expectations vary considerably. You pays yer money …

Find your lowest rate today

Everyone — from federal regulators to personal finance gurus — agrees that shopping around for your new mortgage or refinance is important. You could save thousands over just a few years by getting quotes from multiple lenders. And more, if you keep your mortgage for a long time or have a large loan.

But you’ve rarely had more to gain by shopping around than you do now. The mortgage market is currently very messy. And some lenders are offering appreciably lower rates than others. Worse, some are making it harder to get any mortgage at all if you want a cash-out refinance, a loan for an investment property, a jumbo loan or if your credit score is damaged.

So comparison shopping could get you the loan you want — and save you a bundle.

Verify your new rate (Sep 18th, 2020)

Compare top refinance lenders

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

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Refinance soon to avoid the FHFA adverse market refinance fee

FHFA fee starts on December 1, but rates will go up before that

Starting on December 1, a new “Adverse Market Refinance Fee” will be imposed on most conventional refinances.

Homeowners won’t pay the new fee at closing.

Instead, lenders will cover it by raising refinance rates — likely by as much as 0.125% to 0.25% on average.

To avoid higher rates, you’ll want to refinance before the fee takes effect.

But there’s a catch: to avoid FHFA’s fee, your refinance loan needs to be closed and delivered to Fannie Mae or Freddie Mac before December 1.

That means you need to apply 2-3 months before December 1 — which is pretty much right now.

Verify your refinance eligibility (Sep 18th, 2020)

What is the Adverse Market Refinance Fee?

On August 12, Fannie Mae and Freddie Mac announced they would assess a new fee on all conventional refinance loans.

The fee is equal to 0.5% of the loan amount.

That means if you had a $200,000 refinance, the new fee would amount to an additional cost of $1,000.

Refinances take a long time to close and deliver, so a September 1 start date meant the fee was already being added to refinances in process.

Originally, the fee was meant to start on September first — meaning it would have applied to all loans not yet delivered to Fannie or Freddie by that date.

But because refinances take a long time to close and deliver, the fee effectively started being added to loans that were already in process prior to September 1.

However, Fannie and Freddie have since changed the rules (and delayed the start date for the fee) in response to a strong industry backlash against it.

Changes to the FHFA refinance fee

On August 25th, FHFA announced two changes to the new refinance fee.

  • The start date moved from September 1 to December 1
  • The new charge will not apply to loan amounts below $125,000, or to HomeReady and Home Possible loans

This is good news for borrowers. It means rates may stay a little lower, a little longer.

It also means that borrowers who were already in the process of refinancing might not see their rates go up as a result of the fee.

In fact, loans currently in the pipeline might have their loan costs re-adjusted in borrowers’ favor, notes Matthew Graham of Mortgage News Daily.

But each lender will handle its own loans differently, so make sure you talk to your mortgage company if you were in the process of refinancing.

Also, note that loans must be delivered to Fannie or Freddie before December 1 to avoid the fee.

That means the refinance will have to close much earlier (in October or early November), so time your refinance accordingly.

Find and lock a low refinance rate (Sep 18th, 2020)

The new fee could push refinance rates up by 0.125% or more

When the new fee does go into effect, borrowers won’t pay it directly.

Instead, it’s likely to be charged to borrowers in the form of higher rates.

“The fee is 50bps [0.50%] in terms of PRICE, and that equates to roughly 0.125% in terms of interest rate,” says Graham.

Though others have estimated that refinance rates could rise as much as 0.375% on average when the fee goes into effect.

Either way, that’s a significant difference in refinance rates for borrowers.

For those who planned to refinance in the near future, it makes sense to get the ball rolling as soon as possible.

The earlier you start your refinance, the better your odds of closing and having the loan delivered to Fannie Mae or Freddie Mac before the fee once again goes into effect.

Find a low refinance rate today (Sep 18th, 2020)

Will all refinances be affected by the new fee?

The Adverse Market Refinance Fee will only apply to refinance loans sold to Fannie Mae and Freddie Mac.

In other words, it applies to ‘conventional’ refinance loans.

But other types of mortgages could be affected indirectly.

In fact, the initial announcement set off higher rates for both purchase and refinancing loans, including some not intended for sale to Fannie Mae and Freddie Mac.

Those who had not locked in rates suddenly faced higher interest costs.

So in the coming months, it seems safe to assume that conventional refinances won’t be the only type affected by rising rates.

No refinance fee on loans under $125,000

One piece of good news from Fannie and Freddie’s most recent announcement is that the refinance fee won’t be charged on loans under $125,000.

Note, that’s based on the loan balance — not the home’s value.

So if your home is worth significantly more than $125,000, but you’ve paid down a lot of the balance, you might end up refinancing less than $125K and the fee won’t affect you.

In addition, the fee won’t be charged to those refinancing a Freddie Mac Home Possible loan or Fannie Mae HomeReady loan.

Why was a new fee developed?

We have faced the COVID-19 economy for months. Some 55 million people have filed for unemployment, and lenders have had to adjust many of their policies to account for the added uncertainty.

But did something new happen to justify this extra fee?

According to Freddie Mac, the new fee was necessary “as a result of risk management and loss forecasting precipitated by COVID-19 related economic and market uncertainty.”

Fannie Mae explained that it was adding the fee “in light of market and economic uncertainty resulting in higher risk and costs.”

But on August 25th, a different answer emerged.

According to the Federal Housing Finance Agency (FHFA) — the regulator that runs Fannie Mae and Freddie Mac — the new money was “necessary to cover projected COVID-19 losses of at least $6 billion at the Enterprises.”

“Specifically,” says FHFA, “the actions taken by the Enterprises during the pandemic to protect renters and borrowers are conservatively projected to cost the Enterprises at least $6 billion and could be higher depending on the path of the economic recovery.”

This refers to relief packages passed during COVID-19, which allowed borrowers to skip mortgage payments without penalty and prevented lenders from foreclosing on any delinquent loans.

But this amount is a fraction of the $109.5 billion in profits Fannie and Freddie have added to government coffers, even after paying back bailout funds they received during the 2008 housing crisis, according to ProPublica.

Using a small percentage of past years’ profits to help homeowners through a worldwide pandemic seems like a good idea to us, anyway.

Will Congress stop the new fee before it goes into effect?

The Adverse Market Refinance fee is now set to start after the November election.

So, could the results of the election impact whether or not the fee actually goes into effect?

That’s not certain. Both Congresswoman Maxine Waters (D-CA), Chairwoman of the House Committee on Financial Services, and Congressman Wm. Lacy Clay (D-MO), Chair of the Subcommittee on Housing, Community Development and Insurance, oppose the new charge.

If opposition to the fee is strong enough, there could potentially be an investigation into the fee and an attempt to stop it. But there’s no guarantee this will happen.

What to do if you want to refinance

Rates are still sitting near record lows — below 3% in many cases. This is basically unheard of in the mortgage world.

Rates are likely to go up as the new refinance fee start date nears. But that’s just one of the many, many factors that can impact mortgage and refinance rates.

If the economy starts to see a real recovery any time soon, rates could start going up regardless of what happens with the refinance fee. On the flip side, they’re not likely to go much lower than they are now.

So for borrowers hoping to refinance at record-low rates, it makes sense to get started sooner rather than later.

Verify your new rate (Sep 18th, 2020)

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The best VA mortgage lenders: Rates and reviews for 2020

The best VA loan lenders for 2020

The problem with creating a list of the best VA lenders is that there are just so many excellent ones.

Still, that’s a plus for you — because this list comprises the best of the best.

The top VA lenders offer exceptional service, reliably low rates, and perks for military home buyers, like ultra-low rates and no down payment.

Find out which lender is right for you.

Check your VA loan rates today (Sep 17th, 2020)

Company Minimum Credit Score Average Customer Satisfaction Score1 Average 30-Year VA Loan Rate, 20192
Navy Federal Credit Union 580 4.7/5 3.56%
Stearns Lending 580 5/5 3.92%
Movement Mortgage 580 5/5 3.98%
Quicken Loans 620 4.5/5 3.68%
Veterans United 660 4.9/5 4.0%
New American Funding 580 4.9/5 3.98%
Guild Mortgage Co. 580 4.5/5 3.97%
The Federal Savings Bank Unpublished 4.5/5 3.86%

Check your VA loan rates today (Sep 17th, 2020)

Editor’s note: The Mortgage Reports may be compensated by some of these lenders if you choose to work with them. However, that does not affect our reviews. See our full editorial disclosures here.


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Important note on today’s VA loan rates

This review cites the average 30-year VA rate each lender delivered to its customers in 2019, according to the public record.

Of course, mortgage rates have fallen significantly since then. Our figures do not represent rates you may be offered today.

However, these averages should give you an idea of how competitive each lender is.

Note, every VA lender on this list offered below-average rates among the 25 lenders considered for our review.

Compare today’s VA rates from top lenders (Sep 17th, 2020)

Best VA loan lender reviews

Remember, the “best” VA lender is different for everyone.

To find yours, pick 3-4 companies that stand out to you, then request rates to see which one can offer the best deal for your situation.

  1. Navy Federal Credit Union
  2. Stearns Lending, LLC
  3. Movement Mortgage, LLC
  4. Quicken Loans Inc.
  5. Veterans United Home Loans
  6. New American Funding
  7. Guild Mortgage Company
  8. The Federal Savings Bank

1. Navy Federal Credit Union

Navy Federal tops our list mainly because it offered the lowest VA rates in our survey during 2019.

Its average VA mortgage rate that year was 3.56%, which was a little lower than some on this list and substantially lower than a few.

  • Average 30-year VA loan rate in 2019: 3.56%
  • Minimum credit score: 580
  • Average customer service score: 4.7 / 5

True, Navy Federal isn’t the highest scorer for customer satisfaction. But it does well, even judged by that criterion.

Navy Federal came third in the J.D. Power 2019 U.S. Primary Mortgage Origination Satisfaction Study. Only USAA and Veterans United beat it.

The company did have more complaints filed against it with the CFPB than others on this list. But “more” in this case was still less than one complaint per 100 VA mortgage customers.

In our estimation, Navy Federal deserves to be on just about anyone’s VA loan shortlist.

2. Stearns Lending, LLC

Stearns took the no. 2 slot because it has the best customer service. Alongside Movement Mortgage, it scored a perfect 5.0 score from customers on online review websites.

And, very few of Stearns’ customers have complained about it to the Consumer Financial Protection Bureau (which collects mortgage complaints).

  • Average 30-year VA loan rate in 2019: 3.92%
  • Minimum credit score: 580
  • Average customer service score: 5 / 5

Stearns Lending also doesn’t do badly for VA loan rates: it was fourth-lowest out of 10 ranked companies.

Some lenders had lower rates. But of those lenders, many had a minimum FICO score of 620. Requiring higher credit scores likely kept their average rates lower. But Stearns will look at applications with scores as low as 580, a huge benefit to those with lower credit.

3. Movement Mortgage, LLC

Movement Mortgage may be speedier at getting your VA loan ready than any others on our list of the best VA lenders.

Movement aims to have applications approved in six hours, processed in seven days, and ready for a one-day closing at least two weeks before the date.

And its technology gives you the option of an all-online experience, which is especially handy in today’s stay-at-home environment.

  • Average 30-year VA loan rate in 2019: 3.98%
  • Minimum credit score: 580
  • Average customer service score: 5 / 5

Meanwhile, Movement Mortgage’s service is exceptional, with customers giving it an average of five stars on the review forums we checked.

Indeed, it had even fewer complaints to the CFPB than Stearns. But its average VA loan rates were slightly higher in 2019 than some others.

4. Quicken Loans Inc.

Quicken Loans is the first (but not the only) lender on our list to require a 620 credit score before it will look at your application.

That said, it can be more helpful than others if your existing debt burden is high. Quicken says it’s OK with debt-to-income ratios as high at 60% for some VA loans. For reference, DTI is typically capped around 45%.

  • Average 30-year VA loan rate in 2019: 3.68%
  • Minimum credit score: 620
  • Average customer service score: 4.5 / 5

Customers tend to love Quicken for its convenience. The company, like Movement, can process loans completely online in many cases.

Quicken has also earned the top score — at least, for non-VA-specific lenders — in J.D. Power’s satisfaction survey 10 years running.

When all lenders are considered, VA specialists like Navy Federal and Veterans United typically beat Quicken for customer service.

That said, if you want an all-online experience (with telephone support available), this lender may be for you.

5. Veterans United Home Loans

Veterans United is the biggest VA lender in the U.S. — despite having a higher credit threshold and (according to our survey) somewhat higher rates than others.

This can only mean the company is doing something right for borrowers. And indeed, it earns a near-perfect 4.9 out of 5 for customer service.

  • Average 30-year VA loan rate in 2019: 4.00%
  • Minimum credit score: 660
  • Average customer service score: 4.9 / 5

Likely, many borrowers don’t mind Veterans United’s higher credit threshold thanks to its Lighthouse program.

If your FICO score is too low to qualify for a VA loan, VU’s Lighthouse program provides free, one-on-one counseling to help you reach the threshold. (Note: This service is only open to veterans, service members and military families.)

And as far as rates go, remember that those vary by customer. Though Veterans United looks just a bit higher on average, it could very well still have the best deal for you.

6. New American Funding

New American Funding customers love it, even though it had a marginally higher VA loan rate than some others on our list.

Some of that may be down to its accessibility: that 580 minimum credit score will be attractive to many.

  • Average 30-year VA loan rate in 2019: 3.98%
  • Minimum credit score: 580
  • Average customer service score: 4.9 / 5

NAF also says that it has deployed advanced technologies to simplify and speed up the loan process. And it talks about its focus on Latinx customers, which may generate additional loyalty within that community.

7. Guild Mortgage Company

The volume of VA loans Guild originated in 2019 is among the highest for a non-VA specialist. And you might infer that means it’s doing a great job.

  • Average 30-year VA loan rate in 2019: 3.97%
  • Minimum credit score: 580
  • Average customer service score: 4.5 / 5

Guild’s website suggests a solid, middle-of-the-road company rather than a standout innovator. And its customers clearly like that.

True, Guild didn’t score especially highly on online reviews. But it came third in the J.D. Power 2019 U.S. Primary Mortgage Origination Satisfaction Study, which is a serious achievement.

8. The Federal Savings Bank

This veteran-owned lender originated plenty of VA loans in 2019 — even more than Guild did. And, like Guild, it offers a range of other types of mortgages, so it’s not a VA specialist.

  • Average 30-year VA loan rate in 2019: 3.86%
  • Minimum credit score: Unpublished
  • Average customer service score: 4.5 / 5

The Federal Savings Bank’s website says, ” … we start with a discussion to truly understand the dreams, hopes, aspirations and needs of our customers.”

It also suggests it will offer help to borrowers who need to improve their credit score before applying for a VA loan.

So you may receive a more personal service from the Federal Savings Bank than with some of the others featured above.

How to choose a VA lender 

Here are some tips for choosing your ideal VA lender:

  1. Pick lenders that work with borrowers like you — If you have a low credit score or a troubled financial history, look out for ones with low score thresholds
  2. Get multiple quotes — Don’t just choose one lender you like the look of. Request quotes from a number of lenders; the more the merrier. Shopping around in this way can easily save you thousands
  3. Compare your quotes carefully — Mortgage quotes now come as standardized Loan Estimates. So it’s easy to identify the one that suits you best. We have a how-to guide to help you find the most important information
  4. Prepare your paperwork— Get your documents together (here’s a checklist) and make sure you know your most important financial figures, including your current credit score and your debt-to-income ratio. Your quotes are only as good as the information you provide

Also, ask plenty of questions. Lenders often don’t list all their products online, so there could be hidden perks you’re not aware of from doing online research.

Ask each lender:

  • What are your rules about VA cash-out refinancing?
  • Do you offer 100% VA cash-out refinancing?
  • Do you offer the VA IRRRL (VA Streamline Refinance)?
  • Is IRRRL refinancing available without a new credit check or home appraisal?
  • Are any of the loan origination fees negotiable?

If all this sounds too time-consuming, remember the sums that are at stake.

You might save thousands of dollars by investing a few hours of time.

And when you increase your borrowing power by getting the best loan terms available, you can lower your monthly payments. This creates more financial stability, especially for first-time home buyers.

That’s what the
VA loan program is all about anyway.

Is a VA mortgage always better than a conventional mortgage?

Every borrower has different needs.

But military families should always consider the benefits of a VA loan before applying for a conventional mortgage — especially when you’re new to home buying.

Some of the
most obvious benefits of a VA mortgage include:

  • No down payment — Military members can qualify for a VA mortgage without any down payment, unlike conventional loans and most other subsidized loans
  • No PMI — Even the most generous FHA loans and USDA loans require borrowers to pay for mortgage insurance. This is an added cost that helps the lender, not the borrower. But VA loans never require mortgage insurance — just a one-time, upfront fee that can be rolled into the loan amount
  • Lower credit score requirements — Our best-of list includes several lenders that will issue mortgages with FICO scores starting at 580. If your credit history isn’t stellar you may still qualify for a mortgage through the VA loan program
  • Generous loan limits — As of 2020, there is no limit to the amount you can borrow with a VA loan. However, you need to qualify for the loan based on income, credit, and debt, so extra-large loans are still tougher to get

Verify your VA mortgage eligibility (Sep 17th, 2020)

VA loan eligibility requirements

The VA’s certificate of eligibility kicks off the VA loan underwriting process. Military service members and veterans will need a COE on file to apply for a loan.

Many lenders
will help you get a COE. Service requirements for getting a COE include:

  • Serving on active duty in the Air Force, Army, Coast Guard, Marines, or Navy, for 90 consecutive days during a time of war
  • Serving on active duty in the Air Force, Army, Coast Guard, Marines, or Navy during peace time for 181 consecutive days
  • Serving in the National Guard or Air Force or Navy Reserves for six years

Surviving
spouses of service members killed in the line of duty can also qualify for a VA
home loan.

The COE tells
lenders you qualify for a VA loan, but you’ll still have to meet the lender’s
borrowing requirements.

For example, if you applied with Quicken Loans and your credit score is below 580, Quicken has the right to reject your application even when you have a COE.

When you have a
COE and you meet the lender’s qualifications, getting a loan pre-approval
should be easy. 

Start your mortgage pre-approval (Sep 17th, 2020)

Disadvantages of the VA home loan program

The VA loan program exists to help veterans, active-duty military members, and their families buy safe and affordable housing.

But the loan
program isn’t the best option for all situations.

  • Not for investment properties — Your VA home loan must be used to buy a primary residence. It can’t be used for real estate investments such as rental homes or business properties
  • Not for vacation homes — You can’t use VA borrowing for a second home or vacation home, either
  • VA funding fee — There’s no PMI required on a VA loan, but there is a one-time “funding fee.” If you pay it upfront, the funding fee will add to your closing costs. Most borrowers choose to roll it into the loan amount, though this means you’ll pay interest on the extra sum
  • Lower home equity — Making no down payment has a down side; you’ll start your homeownership journey with no equity. This complicates the selling process if you needed to sell the home quickly.
  • Lender reluctance — Not all VA-authorized lenders fully understand this mortgage program, and your loan officer may try to direct you into another loan type instead. Stick with the lenders on the best-of list above and you won’t have this problem; other VA specialists include USAA and PenFed

Despite these drawbacks, the VA loan is often the best choice for eligible borrowers

With no down payment required and ultra-low mortgage rates, the VA loan is hard to beat — especially for first-time or credit-challenged home buyers.

VA mortgage lender FAQ

Do VA loan rates vary by lender?

You bet! As you can see above, rates can vary considerably even among the best VA lenders. That’s why it’s so important to compare estimates from at least 3-4 companies before choosing one.

Do most VA loans get approved?

Probably; it’s easier to get approved for a VA loan than pretty much any other type of mortgage. However, lenders can impose their own standards. So if you’re on the borderline of qualifying, you may have to shop around for a VA lender that can help you.

Can I get a VA loan with a 500 credit score?

In theory, yes. The VA says, “Unlike many loan programs, a lower credit score, bankruptcy or foreclosure does not disqualify you from a VA home loan.” But you may have to really hunt to find a lender offering VA loans with a 500-579 score. Most mainstream lenders only go as low as 580.

What is a good VA loan rate? 

VA loan rates are typically the lowest on the market; below FHA, USDA, or conventional loans in almost every case. So if you qualify for a VA loan, you have a head start on getting a low mortgage rate.

That said, rates vary a lot even between the best VA lenders. In our sample, the averages ranged from 3.56% to 4.00% in 2019.

And those are just averages. Many borrowers with great credit and sound finances will pay considerably less. And others, with more troubled financial histories, will receive higher rates.

So it really has as much to do with you as the lender. And the only way to find your own, personal, good VA loan rate is to shop around multiple lenders and compare your quotes.

How do I get my VA funding fee waived?

Read this page on the VA’s website. It details all those who don’t have to pay the funding fee. You may also be able to persuade your seller to pay it for you. But that’s a matter of individual negotiation and only works occasionally.

The VA funding fee increases if you’ve used your VA home buying benefit before.

Where can I find a VA construction loan lender?

Lenders willing to fund VA construction loans used to be rare. And some still refuse to offer those. But it’s easier to find one now than ever. If you can’t, consider financing the construction using a different sort of loan, and then refinancing to a VA mortgage for a lower rate.

Where can I find a VA loan for a manufactured home?

Again, not all lenders will help with these. But they’re out there. You may want to call up a few lenders — or a broker — and ask about manufactured home loans. Odds are, this information will be harder to find online than info about standard VA loans.

Where can I find a Jumbo VA loan?

Jumbo VA loans are a bit of a gray area. The VA eliminated loan limits in 2020, so new homebuyers can technically get a loan of any size (provided they qualify) and it won’t be considered a jumbo loan.

Eligible VA homebuyers can even get a mortgage above conventional loan limits (i.e. a “jumbo loan”) with 0% down. But lenders can set their own loan caps, so these may be hard to find in practice. You’ll have to do some extra shopping around.

In addition, buyers using their “remaining entitlement” — meaning they’re still paying off a previous VA loan — may be subject to local loan limits. In this case, a VA mortgage above conventional loan limits may be considered a jumbo loan and may require a down payment.

Does a Certificate of Eligibility ensure you’ll get a VA loan?

Not necessarily. You must get a COE to apply for a VA loan, but private lenders partner with the United States government to offer them. And the lenders can enforce their own qualifications.

How else can I avoid paying a down payment?

The VA loan program is one of only two mainstream mortgages that allow no down payment. The other is the USDA home loan, which is reserved for low- to moderate-income buyers in rural areas.

Other popular home loans require a down payment, though these can be quite low. Conventional mortgages start at just 3% down and FHA loans start at 3.5% down.

When is making no down payment a disadvantage?

It depends. Making a down payment means you have home equity from the day you close on the house. Without a down payment, you’ll need to make monthly payments for several years before building equity.

As your home equity grows, your home can become a financial asset. As long as you don’t plan to sell the home within the first few years of homeownership, avoiding the down payment should be fine.

Who pays closing costs on a VA home loan?

The home buyer is expected to pay most closing costs on a VA home loan. One notable exception is the VA funding fee, which can be rolled into the loan amount rather than paid upfront. 

The buyer is also allowed to negotiate “seller concessions,” allowing the seller to pay up to 4% of the loan amount in closing costs. The amount a seller covers can even exceed 4% if they pay more in certain areas, like discount points.

VA closing costs usually equal about 3-5% of the loan amount, including an origination fee equal to 1% of the loan amount, and additional fees worth around 2-4%.

See the VA’s list of closing costs and who pays them for more information.

Recap: The 8 best VA loan lenders

So let’s review our eight picks again. Remember, the ones at the top are the ones we think will appeal to most readers. But that’s not necessarily you. And you should pick the ones that offer what you want.

As importantly, don’t forget to get quotes from multiple lenders. Getting just one or two really does put thousands of dollars of your money at risk.

  • Navy Federal Credit Union — Lowest VA loan rates in our survey
  • Stearns Lending — Excellent customer service
  • Movement Mortgage — Excellent customer service
  • Quicken Loans — Simple online application process
  • Veterans United — Free help for credit-challenged borrowers
  • New American Funding — Allows lower credit scores
  • Guild Mortgage Company — Excellent customer service
  • The Federal Savings Bank — Veteran-owned, personalized service

Happy hunting for your own very best VA loan!

Verify your new rate (Sep 17th, 2020)

1Average customer satisfaction scores include J.D. Power survey ratings and customer reviews from Zillow and Lending Tree, where available for each lender.

2Average mortgage rates are sourced from public data that lenders are required to file under the Home Mortgage Disclosure Act (HMDA). Rates reflect the average for 30-year, fixed-rate VA financing in 2019. Your own mortgage rate will vary.

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Mortgage and refinance rates today, September 17, 2020

Today’s mortgage and refinance rates 

Average mortgage rates inched up yesterday by the smallest measurable amount. There’s a good chance your lender didn’t bother to change yours. And conventional loans today start at 2.875% (2.875% APR) for a 30-year, fixed-rate mortgage. 

Find and lock a low rate (Sep 17th, 2020)

Current mortgage and refinance rates 

Program Rate APR* Change
Conventional 30 yr Fixed 2.875 2.875 Unchanged
Conventional 15 yr Fixed 2.625 2.625 Unchanged
Conventional 5 yr ARM 3.375 2.892 -0.01%
30 year fixed FHA 2.25 3.226 Unchanged
15 year fixed FHA 2.25 3.191 Unchanged
5 year ARM FHA 2.5 3.245 Unchanged
30 year fixed VA 2.25 2.421 Unchanged
15 year fixed VA 2.25 2.571 Unchanged
5 year ARM VA 2.5 2.426 Unchanged
Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Find and lock a low rate (Sep 17th, 2020)


Last week, we slimmed down this daily article to make it easier for you to read. But we transferred much of the detail to a new stand-alone article:

COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

Should you lock a mortgage rate today?

Yesterday’s key meeting of the Federal Reserve’s policy committee had little effect on mortgage rates. Its statement and news conference told markets what they wanted — and expected — to hear about the organization’s future steps. It confirmed it would continue to buy mortgage bonds in bulk.

Tuesday’s big rise in mortgage rates was a result of the average being skewed. Only those wanting particular sorts of Fannie Mae and Freddie Mac refinances should have been affected much.

So we can return to our advice earlier in the week. Namely, that your mortgage rate is likely only to inch, edge or nudge up and down. But there’s always a danger of some exceptional and unexpected event arising that could suddenly push them sharply higher or lower.

As long as that calm situation continues, there’s little downside to floating or locking. So you can be guided by your personal tolerance for risk. My personal recommendations are:

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • FLOAT if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

Compare top refinance lenders

Market data affecting today’s mortgage rates 

Here’s the state of play this morning at about 9:50 a.m. (ET). The data, compared with about the same time yesterday morning, were:

  • The yield on 10-year Treasurys held steady at 0.67%. (Neutral for mortgage rates.) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
  • Major stock indexes were sharply lower. (Good for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
  • Oil prices nudged up to $39.85 from $39.21. (Bad for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
  • Gold prices fell to $1,944 an ounce from $1,976. (Bad for mortgage rates*.) In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower.
  •  CNN Business Fear & Greed index fell to 55 from 57 out of a possible 100 points. (Good for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are better than higher ones

*A change of less than $20 on gold prices or a matter of cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

Once upon a time, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. The Fed is now a huge player in the mortgage market and on some days can overwhelm investor sentiment.

So use markets only as a rough guide. They have to be exceptionally strong (rates are likely to rise) or weak (they could fall) to rely on them. Today they’re looking neutral for mortgage rates. This morning’s weekly claims for unemployment insurance were slightly better than expected. But housing starts disappointed. And the long-term economic outlook foreseen by the Fed continues to be grim.

Find and lock a low rate (Sep 17th, 2020)

Important notes on today’s mortgage rates

Here are some things you need to know:

  1. The Fed’s ongoing interventions in the mortgage market (at least $1 trillion; some say nearly $2 trillion) should put continuing downward pressure on these rates. But it can’t work miracles all the time. So expect short-term rises as well as falls. And read “For once, the Fed DOES affect mortgage rates. Here’s why” if you want to understand this aspect of what’s happening
  2. Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions
  3. Only “top-tier” borrowers (with stellar credit scores, big down payments and very healthy finances) get the ultralow mortgage rates you’ll see advertised
  4. Lenders vary. Yours may or may not follow the crowd when it comes to rate movements — though they all usually follow the wider trend over time
  5. When rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
  6. At times of high demand, lenders can push up rates as a way of managing their workflow. Neither markets nor the Fed can help when that happens

So there’s a lot going on here. And nobody can claim to know with certainty what’s going to happen to mortgage rates in coming hours, days, weeks or months. But check out what 10 experts think could happen between now and the end of this year:

Are mortgage and refinance rates rising or falling?

Over the last few months, the overall trend for mortgage rates has clearly been downward. A new all-time low was set early in August and another looked possible a couple of weeks ago — before better-than-expected employment data snatched that possibility away. Still, a new one remains a real possibility.

Looking further ahead, Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

Expert mortgage rate forecasts

And here are their current rates forecasts for the last two quarters of 2020 (Q3/20 and Q4/20) and the first two of 2021 (Q1/21 and Q2/21).

Note that Fannie’s (published on Tuesday) and the MBA’s are updated monthly while Freddie’s are published quarterly So Freddie’s sometimes feel stale. The numbers in the table below are for 30-year, fixed-rate mortgages:

Forecaster Q3/20 Q4/20 Q1/21 Q2/21
Fannie Mae 3.0% 2.8% 2.8% 2.7%
Freddie Mac 3.3% 3.3% 3.2% 3.2%
MBA 3.0% 3.1% 3.1% 3.1%

So expectations vary considerably. You pays yer money …

Find your lowest rate today

Everyone — from federal regulators to personal finance gurus — agrees that shopping around for your new mortgage or refinance is important. You could save thousands over just a few years by getting quotes from multiple lenders. And more, if you keep your mortgage for a long time or have a large loan.

But you’ve rarely had more to gain by shopping around than you do now. The mortgage market is currently very messy. And some lenders are offering appreciably lower rates than others. Worse, some are making it harder to get any mortgage at all if you want a cash-out refinance, a loan for an investment property, a jumbo loan or if your credit score is damaged.

So comparison shopping could get you the loan you want — and save you a bundle.

Verify your new rate (Sep 17th, 2020)

Compare top refinance lenders

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

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Mortgage rates today, September 3, 2020, plus lock recommendations

Forecast plus what’s driving mortgage rates today

Average mortgage rates had another good day yesterday as they edged ever closer to the all-time low set a month ago. Conventional loans today start at 2.875% (2.875% APR) for a 30-year, fixed-rate mortgage. 

Some believe the recent falls are temporary and that rates will rise again when a delayed fee imposed by a federal regulator finally becomes effective. But this writer can’t follow that logic. Lenders raised rates in mid-August because they’d been left financially exposed by the suddenness of the regulator’s announcement. And they passed on the pain to all applicants who hadn’t locked. But this time they won’t be on the hook and can simply pass on the fee to those whose loans require it. Why should that cause average mortgage rates to rise? (Read “The FHFA Debacle,” below)

Find and lock current rates. (Sep 17th, 2020)

Program Rate APR* Change
Conventional 30 yr Fixed 2.875 2.875 Unchanged
Conventional 15 yr Fixed 2.625 2.625 Unchanged
Conventional 5 yr ARM 3.625 3.006 -0.01%
30 year fixed FHA 2.25 3.226 Unchanged
15 year fixed FHA 2.25 3.191 Unchanged
5 year ARM FHA 2.5 3.239 -0.01%
30 year fixed VA 2.25 2.421 Unchanged
15 year fixed VA 2.25 2.571 Unchanged
5 year ARM VA 2.5 2.419 -0.01%
Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

• COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.


In this article (Skip to …) 


Market data affecting (or not) today’s mortgage rates

Are mortgage rates again aligning more closely with the markets they traditionally follow? It’s certainly an inconsistent relationship, confused by behind-the-scenes interventions by the Federal Reserve. That is currently buying mortgage bonds and so invisibly affecting rates.

And the Fed’s influence is not insignificant. It’s bought more than $1 trillion in mortgage-backed securities purchases since the restarting of quantitative easing on March 16.

But, if you still want to take your cue from markets, earlier this morning things were looking good for mortgage rates today. Why? While this morning’s weekly jobless numbers were better than predicted, investors may hold off until tomorrow’s monthly employment situation report before acting decisively. If that’s spectacularly better than expected, mortgage rates could rise. If worse, they might hit that all-time low — assuming they don’t today.

The numbers

Here’s the state of play this morning at about 9:50 a.m. (ET). The data, compared with about the same time yesterday morning, were:

  • The yield on 10-year Treasurys fell to 0.64% from 0.68%. (Good for mortgage rates.) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
  • Major stock indexes were mixed but mostly lower. (Good for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
  • Oil prices dropped to $40.80 from $42.53 (Good for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
  • Gold prices fell to $1,946 an ounce from $1,958. (Bad for mortgage rates*.) In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower.
  •  CNN Business Fear & Greed index inched down to 74 from 75 out of a possible 100 points. (Good for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are better than higher ones

*A change of a few dollars on gold prices or a matter of cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

Rate lock advice

My recommendation reflects the success so far of the Fed’s actions in keeping rates uberlow combined with relatively benign markets. I personally suggest:

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • FLOAT if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

But it’s entirely your decision. And you might wish to lock anyway on days when rates are at or near all-time lows.

The Fed may end up pushing down rates even further over the coming weeks, though that’s far from certain. And, separately, continuing bad news about COVID-19 could have a similar effect through markets. (Read on for specialist economists’ forecasts.) But you can expect bad patches when they rise.

As importantly, the coronavirus has created massive uncertainty — and disruption that seems capable of defying in the short term all human efforts, including perhaps the Fed’s. So locking or floating is a gamble either way.

Compare top refinance lenders

Important notes on today’s mortgage rates

Freddie Mac’s weekly rates

Don’t be surprised if Freddie’s Thursday rate reports and ours rarely coincide. To start with, the two are measuring different things: weekly and daily averages.

But also, Freddie tends to collect data on only Mondays and Tuesdays each week. And, by publication day, they’re often already out of date.

By all means, rely on Freddie’s accuracy over time. But not necessarily each day or week.

Long-term hope?

Last week, the Federal Reserve changed its long-standing policy. From now on, it will prioritize boosting employment over containing inflation. Of course, it has no intention of letting inflation run riot. But the subtle shift is important.

And it may well lead to low or lower interest rates (including those for mortgages) for years to come. However, don’t expect a smooth ride. When it comes to mortgage rates, ups and downs are pretty much inevitable.

The rate you’ll actually get

Naturally, few buying or refinancing will actually qualify for the lowest rates you’ll see bandied around in some media and lender ads. Those are typically available only to people with stellar credit scores, big down payments and robust finances (“top-tier borrowers,” in industry jargon). And, even then, the state in which you’re buying can affect your rate.

Still, prior to locking, everyone buying or refinancing typically stands to lose when rates rise or gain when they fall.

When movements are very small, many lenders don’t bother changing their rate cards. Instead, you might find you have to pay a little more or less on closing in compensation.

The future

Overall, we still think it possible that the Federal Reserve’s going to drive rates even lower over time. It’s already bought more than $1 trillion worth of mortgage-backed securities.

And, following the last meeting of its policy committee, the organization confirmed that it planned to maintain this strategy for as long as proves necessary. At a news conference, Fed chair Jay Powell promised:

We are committed to using our full range of tools to support our economy in this challenging environment.

However, there was a lot going on here, even before the green shoots of economic recovery began to emerge. There’s even more now. And, as we’ve already seen, the Fed can only influence some of the forces that affect mortgage rates some of the time. So nothing is assured.

Read “For once, the Fed DOES affect mortgage rates. Here’s why” to explore the essential details of that organization’s current, temporary role in the mortgage market.

What economists expect for mortgage rates

Mortgage rates forecasts for 2020

The only function of economic forecasting is to make astrology look respectable. — John Kenneth Galbraith, Harvard economist

Galbraith made a telling point about economists’ forecasts. But there’s nothing wrong with taking them into account, appropriately seasoned with a pinch of salt. After all, who else are we going to ask when making financial plans?

Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

The latest numbers

And here are their latest forecasts for the average rate for a 30-year, fixed-rate mortgage during each quarter (Q1, Q2 …) in 2020. In mid-August, Fannie and the MBA refreshed theirs. Freddie’s, which is now a quarterly report, was published in mid-June.

Forecaster Q1 Q2 Q3 Q4
Fannie Mae 3.5% 3.2% 3.0% 2.9%
Freddie Mac 3.5% 3.4% 3.3% 3.3%
MBA 3.5% 3.2% 3.0% 3.1%

The Aug. 17 update from Fannie included the prediction of a 2.9% average rate for the fourth quarter of this year. That was the first time we’ve seen a forecast from any of these organizations for a sub-3.0% rate during 2020.

Of course, none of these quarterly forecasts excludes daily or weekly averages below (or above) the levels they suggest during any quarter. After all, quarterly averages can include some quite sharp differences between highs and lows.

Fannie and the MBA were a bit more optimistic about future rates in their August (monthly) forecasts. And that’s leaving Freddie’s June (quarterly) one looking stale.

What should you conclude from all this? That nobody’s sure about much but that wild optimism about the direction of mortgage rates might be misplaced.

Further ahead

The gap between forecasts is real and widens the further ahead forecasters look. So Fannie’s now expecting that rate to average 2.8% during the first quarter of next year and then inch down to 2.7% for the remainder of 2021.

Meanwhile, Freddie’s anticipating 3.2% throughout that year. And the MBA thinks it will be back up to 3.1% for the first three quarters of 2021 and then nudge up to 3.2% for the last. Indeed, the MBA reckons rates will average 3.6% during 2022. You pays yer money …

Still, all these forecasts show significantly lower rates this year and next than in 2019, when that particular one averaged 3.94%, according to Freddie Mac’s archives.

And never forget that last year had the fourth-lowest mortgage rates since records began. Better yet, this year may well deliver an all-time annual low — barring shocking news. Of course, shocking news is a low bar in 2020.

Mortgages tougher to get

The mortgage market is currently very messy. And some lenders are offering appreciably lower rates than others. When you’re borrowing big sums, such differences can add up to several thousands of dollars over a few years — more on larger loans and over longer periods.

Worse, many have been putting restrictions on their loans. So you might have found it harder to find a cash-out refinance, a loan for an investment property, a jumbo loan — or any mortgage at all if your credit score is damaged.

All this makes it even more important than usual that you shop widely for your mortgage and compare quotes from multiple lenders.

The FHFA debacle

This is the story behind the sharp increases in mortgage rates on Aug 13 and 14. If you’re planning to refinance to a loan backed by Fannie Mae or Freddie Mac, you may have to pay more for the privilege. Because the Federal Housing Finance Agency, which regulates the two enterprises, has imposed a new, additional closing cost.

This only applies to those Fannie and Freddie refinances with balances higher than $125,000. And HomeReady and Home Possible refinances are exempt.

Unless your loan closes before Dec. 1 (it was Sept. 1 before last Tuesday), the FHFA will make you pay an additional 0.5% of the loan amount, supposedly to cover additional market risk. For a $200,000 loan, that’s $1,000 added to your closing costs (divide your loan amount by 200).

That Dec. 1 cutoff date applies to the date on which Fannie or Freddie actually guarantees your loan. And that may be after you close. So, if you’re after one of their refinances and want to stand a good chance of getting in under the wire, you need to get a move on.

Change from the FHFA — Aug. 25 announcement

Until last Tuesday, if you’d already locked in your refinance but would close after Aug. 31, it may have been the lender who picked up the tab. But mortgage companies often operate on wafer-thin margins. So they passed on the cost — through higher mortgage rates — to new applicants (and those who are yet to lock) for all types of mortgages. Hence the higher mortgage rates all round following the announcement.

Last Tuesday, the FHFA caved under pressure from the mortgage industry and legislators. It hasn’t scrapped the new fee. But it has put back its implementation by three months. And that should get lenders off the hook for nearly all currently locked loans, and allow them to pass the new fee directly to the borrowers affected rather than spread the pain across all new borrowers.

It may well be that last Wednesday’s big fall in average mortgage rates was a result of those lenders adjusting to the previous day’s news. And that at least some of the subsequent falls also stem from this.

Economic worries

Mortgage rates traditionally improve (move lower) the worse the economic outlook. So where the economy is now and where it might go are relevant to rate watchers.

There have undoubtedly been huge improvements in many aspects of the economy since the darkest days of the pandemic. But some fear that the recovery from the worst effects of that time is slowing as Covid-19 spreads to previously unaffected parts of the country.

The Federal Reserve is concerned about:

  1. Stubbornly high unemployment
  2. Economic uncertainty
  3. Political deadlock that’s stalled further stimulus measures
  4. Possible credit tightening by banks and other lenders if things don’t get better quickly

COVID-19 still a huge threat

The COVID-19 pandemic and its economic implications are the single biggest influences on markets at the moment. And nationwide trends for new infections and deaths are looking encouraging.

But there remain plenty of states, cities, areas and neighborhoods that are hot spots with rising infections and deaths. And we’re not yet past seeing some shocking figures.

A second wave?

Now there are more grounds for concern. Several countries that seemed to have their outbreaks under control a couple of months ago (including South Korea, Spain, Germany, France and Italy) are experiencing new spikes in infections. As importantly for markets, recent economic data out of Europe suggest this may be causing a slowing of the recovery there.

Is such a second wave the fate that awaits the United States and its economy after it winds down antivirus measures?

Third quarter GDP

Need cheering up after all that? The Federal Reserve Bank of Atlanta‘s GDPnow reading suggests we might see growth in the current, third quarter of 28.5%, according to an Sept. 1 update.

But, again, that’s an annualized rate. So it has to be compared with the 32.9% lost in the second quarter. And there’s still time for the economy to fall back if more lockdowns are needed or if federal aid — whether those announced by the president or some subsequent Congressional package — takes a long time to implement.

Still, we might be looking at a light at the end of this pitch-dark tunnel.

Markets seem untethered from reality

Many economists are warning that stock markets may be underestimating both the long-term economic impact of the pandemic and its unpredictability. And some fear that we’re currently in a bubble that can only bring more pain when it bursts.

But it’s not just economists who are concerned. According to a survey published last Thursday by Deloitte, 84% of Fortune 500 chief financial officers (CFOs) reckon the US stock market is overvalued. As soberingly, only 42% expect better economic conditions in this country within the next year, according to a CNN Business report.

Economic reports this week

If one economic report dominates the minds of investors, analysts and traders it’s the monthly employment situation report. And that’s out tomorrow.

Those who saw yesterday’s ADP employment report, which measures private-sector jobs, as a bellwether for tomorrow’s official one would have been disappointed. It showed well under half the number of new jobs Wall Street was expecting. However, today’s weekly jobless figures (new claims for unemployment insurance) beat analysts’ predictions, leaving tomorrow’s report anybody’s guess.

Few others this week are likely to make it onto investors’ radar unless they’re shockingly good or bad.

Forecasts matter

More normally, any economic report can move markets, as long as it contains news that’s shockingly good or devastatingly bad — providing that news is unexpected.

That’s because markets tend to price in analysts’ consensus forecasts (below, we use those reported by MarketWatch) in advance of the publication of reports. So it’s usually the difference between the actual reported numbers and the forecast that has the greatest effect.

And that means even an extreme difference between actuals for the previous reporting period and this one can have little immediate impact, providing that difference is expected and has been factored in ahead.

This week’s calendar

This week’s calendar of important, domestic economic reports comprises:

  • Monday: Nothing
  • Tuesday: August ISM* manufacturing index (actual 56.0%; forecast 54.7%) and July construction spending (actual +0.1%; forecast +1.0%). Also, motor vehicle sales** for August will emerge during the day as manufacturers release their sales figures (no forecast but 14.5 million new vehicles sold in July )
  • Wednesday: August ADP employment report (428,000 new private-sector jobs; no MarketWatch forecast but CNBC says Wall Street expected 1.17 million) and July factory orders (actual +6.4%%; forecast +6.2%)
  • Thursday: Weekly new jobless claims to August 29 (actual 881,000 new claims for unemployment insurance; forecast 950,000). Also the July trade deficit (actual -$63.6 billion; forecast -$58.7 billion). Plus revisions to second-quarter productivity (actual +10.1%; forecast +8.3%) and unit labor costs (actual +9.0%; forecast +10.5%) figures. And finally, August ISM* services index (actual 58.1%; forecast 57.0%)
  • Friday: August employment situation report, comprising nonfarm payrolls (forecast 1.30 million new jobs), unemployment rate (forecast 9.8%) and average hourly earnings (forecast 0.0% — unchanged)

*ISM is the Institute for Supply Mangement, the body that conducts the survey and compiles the figures

**These figures are seasonally adjusted annual rates (SAARs). In other words, they show what would happen were the data for the reported period replicated for 12 consecutive months or four consecutive quarters. It sounds weird but it can be a useful measure, providing you understand what you’re looking at

Tomorrow’s the big day this week.

Rate lock recommendation

The basis for my suggestion

Other than on exceptionally good days, I suggest that you lock if you’re less than 15 days from closing. But we’re looking at a personal judgment on a risk assessment here: Do the dangers outweigh the possible rewards?

At the moment, the Fed mostly seems on top of things (though rises since its interventions began have highlighted the limits of its power). And I think it likely it will remain so, at least over the medium term.

But that doesn’t mean there won’t be upsets along the way. It’s perfectly possible that we’ll see periods of rises in mortgage rates, not all of which will be manageable by the Fed.

That’s why I’m suggesting a 15-day cutoff. In my view, that optimizes your chances of riding any rises while taking advantage of falls. But it really is just a personal view.

Only you can decide

And, of course, financially conservative borrowers might want to lock immediately, almost regardless of when they’re due to close. After all, current mortgage rates are near exceptional lows and a great deal is assured.

On the other hand, risk-takers might prefer to bide their time and take a chance on future falls. But only you can decide on the level of risk with which you’re personally comfortable.

If you are still floating, do remain vigilant right up until you lock. Make sure your lender is ready to act as soon as you push the button. And continue to watch mortgage rates closely.

When to lock anyway

You may wish to lock your loan anyway if you are buying a home and have a higher debt-to-income ratio than most. Indeed, you should be more inclined to lock because any rises in rates could kill your mortgage approval. If you’re refinancing, that’s less critical and you may be able to gamble and float.

If your closing is weeks or months away, the decision to lock or float becomes complicated. Obviously, if you know rates are rising, you want to lock in as soon as possible. However, the longer your lock, the higher your upfront costs. On the flip side, if a higher rate would wipe out your mortgage approval, you’ll probably want to lock in even if it costs more.

If you’re still floating, stay in close contact with your lender.

Closing help

At one time, we were been providing information in this daily article about the extra help borrowers can get during the pandemic as they head toward closing.

You can still access all that information and more in a new, stand-alone article:

What causes rates to rise and fall?

In normal times (so not now), mortgage interest rates depend a great deal on the expectations of investors. Good economic news tends to be bad for interest rates because an active economy raises concerns about inflation. Inflation causes fixed-income investments like bonds to lose value, and that causes their yields (another way of saying interest rates) to increase.

For example, suppose that two years ago, you bought a $1,000 bond paying 5% interest ($50) each year. (This is called its “coupon rate” or “par rate” because you paid $1,000 for a $1,000 bond, and because its interest rate equals the rate stated on the bond — in this case, 5%).

  • Your interest rate: $50 annual interest / $1,000 = 5.0%

When rates fall

That’s a pretty good rate today, so lots of investors want to buy it from you. You can sell your $1,000 bond for $1,200. The buyer gets the same $50 a year in interest that you were getting. It’s still 5% of the $1,000 coupon. However, because he paid more for the bond, his return is lower.

  • Your buyer’s interest rate: $50 annual interest / $1,200 = 4.2%

The buyer gets an interest rate, or yield, of only 4.2%. And that’s why, when demand for bonds increases and bond prices go up, interest rates go down.

When rates rise

However, when the economy heats up, the potential for inflation makes bonds less appealing. With fewer people wanting to buy bonds, their prices decrease, and then interest rates go up.

Imagine that you have your $1,000 bond, but you can’t sell it for $1,000 because unemployment has dropped and stock prices are soaring. You end up getting $700. The buyer gets the same $50 a year in interest, but the yield looks like this:

  • $50 annual interest / $700 = 7.1%

The buyer’s interest rate is now slightly more than 7%. Interest rates and yields are not mysterious. You calculate them with simple math.

Mortgage rates FAQ

What are today’s mortgage rates?

Average mortgage rates today are as low as 2.875% (2.875% APR) for a 30-year, fixed-rate conventional loan. Of course, your own interest rate will likely be higher or lower depending on factors like your down payment, credit score, loan type, and more.

Are mortgage rates going up or down?

Mortgage rates have been extremely volatile lately, due to the effect of COVID-19 on the U.S. economy. Rates took a dive recently as the Fed announced low-interest rates across the board for the next two years. But rates could easily go back up if there’s another big surge of mortgage applications or if the economy starts to strengthen again.

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

Verify your new rate (Sep 17th, 2020)

Compare top refinance lenders

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FHA cash-out refinance: Requirements and rates for 2020

What is the FHA cash-out refinance?

An FHA cash-out refinance is a government-backed loan that allows homeowners to tap their home equity.

The FHA cash-out lets homeowners refinance up to 80% of their home’s value and get cash back at closing.

FHA cash-out
requirements are lenient. Homeowners may be able to refinance with credit in
the low-600 range. And, you can refinance any type of mortgage using the FHA
cash-out. An existing FHA loan is not required.

FHA refinance
rates are near record lows right now, so it’s a good time to take cash-out and
lock in a low at the same time.   

Verify your FHA cash-out eligibility (Sep 16th, 2020)


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FHA cash-out refinance
requirements

Basic
requirements for an FHA cash-out refinance are as follows:

  • Credit
    score of at least 600 (in most cases)
  • More
    than 20% equity in the home
  • The home
    being refinanced must be your primary residence
  • You must
    have lived in the home at least 12 months prior to applying for an FHA cash-out
  • All
    mortgage payments must have been paid within the month due for the past 12
    months
  • You
    must be able to provide employment documentation or utility bills to prove you’ve
    occupied the home as your primary residence for the past 12 months

Unlike an FHA streamline refinance, the cash-out refi does not require your current mortgage to be an FHA loan.

You
can apply for the FHA cash-out refinance even if your existing mortgage is
conventional or another loan type.

Regardless of the type of loan you have now, using the FHA cash-out refinance will result in mortgage insurance on your new FHA loan.

However,
FHA refinance rates are often lower than conventional. So for many homeowners,
mortgage insurance is a fair tradeoff for cash-back and a new, lower rate.

Verify your FHA cash-out eligibility (Sep 16th, 2020)

FHA cash-out refinance
LTV

The maximum loan-to-value (LTV) for an FHA cash out loan is 80%.

This means that, after the cash-out has been subtracted, you must
still have 20% equity leftover in your home. So you’ll need have substantial home
equity for a cash-out refinance to be worth it.

Generally, the FHA cash-out refinance is best for homeowners who are sitting on lots of equity but don’t have a high enough credit score to use a conventional cash-out refi.

How
much cash can you take out with FHA?

The
max amount of cash you can get using an FHA cash-out refinance is dictated by
your equity.

Remember,
you must leave 20% equity in your home after the cash-back is withdrawn. So,
when thinking about the amount of cash you can take out, look at your total
equity and subtract 20% — plus closing costs — to get an estimate.

Here’s
an example of how the FHA cash-out calculation works:

Current Home Value  $220,000
Current Loan Balance $140,000
New FHA Loan (max 80% of value)  $176,000
Payoff Current Loan  -$140,000
Subtract Closing Costs  -$3,000
Max FHA Cash-Out  $33,000 

In
this example, the home is worth $220,000, and the homeowner only owes $140,000
on their mortgage. So they have $80K worth of equity.

However,
20% of the home’s value must remain untouched.

  • 20% of
    $220,000 is $44,000 —
  • So $44K
    must be subtracted from their total $80K equity,
  • This
    gives a max cash-out potential of $36,000

However,
the homeowner also uses some of their cash-out value to pay closing costs ($3,000).

So
they end up with a total of $33,000 cash back at closing — quite a bit lower
than the $80K of equity originally calculated.

Verify your FHA cash-out eligibility (Sep 16th, 2020)

FHA cash-out refinance calculator

Curious about how much you can borrow with an FHA cash-out refinance? You can calculate your own cash back value by downloading and filling out one of the free calculator templates below.

• MS Excel
• Google Sheets

FHA cash-out refinance rates

FHA
rates are low — even lower than conventional loan rates, in fact.

According to loan software company Ellie Mae, FHA rates average
about 10 to 15 basis points (.10 – .15%) below conventional rates on average.

This is
due to FHA’s strong government backing. Lenders can issue these loans at lower
risk.

However,
consider FHA mortgage insurance, which raises the “effective” FHA rates as
follows:

   FHA Cash-Out   Conventional Cash-Out 
 Interest Rate   3.0%*  3.25%*
 Mortgage insurance   0.80%  0%
 Effective rate  3.80%  3.25%

*Sample rates only. May not be currently available

FHA
cash out loans may come with higher rates than standard FHA loans. Check around
with various lenders to find the best rate.

Conventional cash-out vs FHA cash-out: LTV and credit score

The big advantage of using an FHA cash-out
refinance over a conventional cash-out loan is that FHA has more lenient credit
requirements.

   FHA Cash-Out Conventional Cash-Out
Minimum Credit Score  500 (official), 600-660 (likely) 620 (official), 640-680 (likely)
Maximum LTV 80% 80%
Can Replace Any Loan Type Yes Yes
Occupancy Owner-occupied only Owner, 2nd home, rental 

Technically, you can
get an FHA cash-out loan with credit as low as 500. However, you’re much more
likely to find lenders starting in the 580-600 range, and even some as high as
600.

So if your credit is on
the lower end of that spectrum, you’ll want to be extra thorough when shopping
around for a lender that will approve your refinance and give you a fair rate.

FHA cash-out refinance drawbacks

The primary disadvantage to an FHA cash-out loan is the associated mortgage insurance.

FHA loans require an upfront and monthly mortgage insurance
premium (MIP). These fees are as follows:

  • Upfront mortgage insurance: 1.75%
    of the new loan amount upfront (wrapped into the loan amount)
  • Annual mortgage insurance: 0.85%
    of the loan amount yearly, paid in 12 installments with the mortgage payment

This is equal to $1,750 upfront and $67 monthly for each
$100,000 borrowed.

In return for the extra fees, FHA provides more credit score
flexibility and a higher maximum loan-to-value (LTV) than do conventional
loans.

Conventional cash-out refinances do not come with upfront or monthly mortgage insurance.

Also, conventional cash out can be used for second homes and investment properties. FHA must be used on the home you live in.

Verify your FHA cash-out eligibility (Sep 16th, 2020)

What are “FHA equity reserves”?

You may have received a notification from a lender stating that you haven’t tapped into your FHA equity reserves. This is a marketing gimmick that is trying to entice you to refinance via an FHA streamline refinance.

This is likely referring to the FHA mortgage insurance refund you are entitled to when replacing one FHA loan with another via an FHA streamline refinance.

Cash-out is not allowed when you get an FHA streamline refinance, however, you may save on your monthly payment. You can learn more about the FHA streamline program here

Best uses for the
FHA cash-out refinance

With an FHA cash
out, you can pay off any loan type, plus take equity out of your home in the
form of a check, or have it wired to an account of your choice.

You can use those
funds for any purpose. Some popular uses for cash-out funds include:

  • Home improvement projects
  • Credit card consolidation
  • Auto loan payoff
  • Student loan refinancing
  • Prepay college tuition
  • Consolidate a first and second mortgage
  • Pay off personal debts

There is almost no limit to what you can use the money for. Homeowners who want to reduce monthly payments on other debt, or just have a little extra cash in the bank, should examine this loan type.

Verify your FHA cash-out eligibility (Sep 16th, 2020)

FHA cash-out refinance FAQ

What credit score is needed for an FHA cash-out refinance?

The official credit score minimum for all FHA loans is 500. However, a realistic minimum that lenders will actually allow is somewhere between 600 and 660 or higher.

This is because lenders often set higher minimums than does FHA. If one lender can’t do your loan, keep looking until you find one with more lenient standards.

Can you get a cash-out refinance with bad credit?

It is possible to get a cash-out refinance with bad credit. FHA will be your best chance at getting approved.

Most cash-out loans such as conventional or home equity loans require good credit. But FHA may allow you to be approved with a credit score in the low 600s or even high 500s. The catch is, most lenders will set their own minimum credit score for these loans.

Why have I heard that there are FHA 95% and 85% LTV cash-out refinances?

FHA used to allow a maximum 95% cash-out refinance prior to April 1, 2009. It then reduced the LTV limit to 85%. Then, on September 1, 2019, it was lowered again to 80%.

FHA lowered its cash-out refinance limits in a bid to make lending more secure. The more equity you’re required to leave in your home, the less a lender stands to lose if the mortgage ever defaults.

How much can you take out on a cash-out refinance?

The cash available depends on the home’s current value, your current loan, and, for FHA cash-out refinances, FHA loan limits. There’s no stated limit to the amount of cash you can take. You can get a new loan up to 80% of the home’s current value and are entitled to any amount of cash that yields.

Is money from a cash-out refinance taxable?

A cash-out refinance is a debt, not income. Therefore, it’s usually not taxable as income. However, consult a tax advisor before filing.

When can I do an FHA cash out after purchase? Is there a seasoning requirement for FHA cash out?

In order to use the FHA cash-out refinance, you must have lived in the residence you’re refinancing for at least 12 months. In addition, you must have paid all your mortgage payments for the past year within the month they were due.

Does FHA offer an equity loan?

Equity loans usually refer to a home equity line of credit or home equity loan. These are typically second mortgages that are placed on top of an existing primary mortgage.

These types of loans are not available via FHA. An FHA cash-out refinance would be the closest thing.

If you have an FHA loan currently, you could potentially get a standard home equity loan through a bank or local credit union. This would require good credit and decent equity in the home.

What is the maximum debt-to-income (DTI) ratio for an FHA cash-out loan?

FHA loans require a DTI of 43 percent or less, unless significant compensating factors are present, such as high credit scores or lots of equity in the house. In these cases, a DTI of up to 50 is possible.

DTI is the portion of your future housing and other debt payments compared to your pre-tax income.

For instance, if your income is $7,000 per month, a 43% DTI would be $3,000. In this example, you could have a $2,000 house payment and $1,000 combined payments for a car, student loans, or other debts.

Can you add a co-borrower to an FHA cash-out loan?

You may not add any borrower to the loan who does not live in the home. These are known as “non-occupant co-borrowers,” and are not allowed for cash-out loans.

Can you add a second mortgage to a cash-out loan?

Generally, you can’t add a second mortgage to the FHA cash out loan unless both loans add up to 80% of the home’s value or less. However, you may be able to keep an existing second mortgage and subordinate it under the new FHA loan. Subordinating involves receiving a document from the second mortgage lender stating it’s okay to get a new first mortgage.

What are current FHA loan limits?

In most areas of the country, the maximum FHA loan limit is $331,760 for 2020. However, maximum loan amounts go up to $ 765,600 for one-unit homes in places like Los Angeles, California, and New York, New York. 

Check your FHA cash-out loan eligibility

Homeowners who don’t have great credit but need to tap home equity are the best candidates for FHA cash-out loans.

For those with good credit and at least 20% equity, a conventional cash out refinance or home equity loan might yield lower costs.

Current FHA refinance rates are low, leading to more homeowner eligibility for this program.

If you’re interested in an FHA cash-out refinance, be sure to shop around with a few lenders and find the best rate  for your new loan.

Verify your new rate (Sep 16th, 2020)

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Mortgage rates today, September 4, 2020, plus lock recommendations

Forecast plus what’s driving mortgage rates today

Average mortgage rates just inched higher yesterday. It’s not time to panic yet. They’re still very close to their all-time low. Conventional loans today start at 2.875% (2.875% APR) for a 30-year, fixed-rate mortgage. 

First thing, this morning’s good employment figures were enough for stock markets to recover some of the ground they lost yesterday and for Treasury yields to receive a boost. Normally, we’d expect that to feed through into higher mortgage rates. And it might well. But these are far from normal times and our confidence in such predictions is low.

Find and lock current rates. (Sep 16th, 2020)

Program Rate APR* Change
Conventional 30 yr Fixed 2.875 2.875 Unchanged
Conventional 15 yr Fixed 2.625 2.625 Unchanged
Conventional 5 yr ARM 3.625 3.006 Unchanged
30 year fixed FHA 2.25 3.226 Unchanged
15 year fixed FHA 2.25 3.191 Unchanged
5 year ARM FHA 2.5 3.239 Unchanged
30 year fixed VA 2.25 2.421 Unchanged
15 year fixed VA 2.25 2.571 Unchanged
5 year ARM VA 2.5 2.419 Unchanged
Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

• COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.


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Market data affecting (or not) today’s mortgage rates

Are mortgage rates again aligning more closely with the markets they traditionally follow? It’s certainly an inconsistent relationship, confused by behind-the-scenes interventions by the Federal Reserve. That is currently buying mortgage bonds and so invisibly affecting rates.

And the Fed’s influence is not insignificant. It’s bought more than $1 trillion in mortgage-backed securities purchases since the restarting of quantitative easing on March 16.

But, if you still want to take your cue from markets, earlier this morning things were looking worse for mortgage rates today. Why? It’s those pesky good employment figures this morning. But they’re not pesky if you need a job.

The numbers

Here’s the state of play this morning at about 9:50 a.m. (ET). The data, compared with about the same time yesterday morning, were:

  • The yield on 10-year Treasurys climbed to 0.68% from 0.64%. (Bad for mortgage rates.) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
  • Major stock indexes were mixed but mostly higher. (Bad for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
  • Oil prices nudged up to $40.83 from $40.80 (Neutral for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
  • Gold prices fell to $1,934 an ounce from $1,946. (Neutral for mortgage rates*.) In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower.
  •  CNN Business Fear & Greed index fell to 61 from 74 out of a possible 100 points. (Good for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are better than higher ones

*A change of a few dollars on gold prices or a matter of cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

Rate lock advice

My recommendation reflects the success so far of the Fed’s actions in keeping rates uberlow combined with relatively benign markets. I personally suggest:

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • FLOAT if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

But it’s entirely your decision. And you might wish to lock anyway on days when rates are at or near all-time lows.

The Fed may end up pushing down rates even further over the coming weeks, though that’s far from certain. And, separately, bad news about COVID-19 or its economic effects could have a similar effect through markets. (Read on for specialist economists’ forecasts.) But you can expect bad patches when they rise.

As importantly, the coronavirus has created massive uncertainty — and disruption that seems capable of defying in the short term all human efforts, including perhaps the Fed’s. So locking or floating is a gamble either way.

Compare top refinance lenders

Important notes on today’s mortgage rates

Freddie Mac’s weekly rates

Don’t be surprised if Freddie’s Thursday rate reports and ours rarely coincide. To start with, the two are measuring different things: weekly and daily averages.

But also, Freddie tends to collect data on only Mondays and Tuesdays each week. And, by publication day, they’re often already out of date.

By all means, rely on Freddie’s accuracy over time. But not necessarily each day or week.

Long-term hope?

Last week, the Federal Reserve changed its long-standing policy. From now on, it will prioritize boosting employment over containing inflation. Of course, it has no intention of letting inflation run riot. But the subtle shift is important.

And it may well lead to low or lower interest rates (including those for mortgages) for years to come. However, don’t expect a smooth ride. When it comes to mortgage rates, ups and downs are pretty much inevitable.

The rate you’ll actually get

Naturally, few buying or refinancing will actually qualify for the lowest rates you’ll see bandied around in some media and lender ads. Those are typically available only to people with stellar credit scores, big down payments and robust finances (“top-tier borrowers,” in industry jargon). And, even then, the state in which you’re buying can affect your rate.

Still, prior to locking, everyone buying or refinancing typically stands to lose when rates rise or gain when they fall.

When movements are very small, many lenders don’t bother changing their rate cards. Instead, you might find you have to pay a little more or less on closing in compensation.

The future

Overall, we still think it possible that the Federal Reserve’s going to drive rates even lower over time. It’s already bought more than $1 trillion worth of mortgage-backed securities.

And, following the last meeting of its policy committee, the organization confirmed that it planned to maintain this strategy for as long as proves necessary. At a news conference, Fed chair Jay Powell promised:

We are committed to using our full range of tools to support our economy in this challenging environment.

However, there was a lot going on here, even before the green shoots of economic recovery began to emerge. There’s even more now. And, as we’ve already seen, the Fed can only influence some of the forces that affect mortgage rates some of the time. So nothing is assured.

Read “For once, the Fed DOES affect mortgage rates. Here’s why” to explore the essential details of that organization’s current, temporary role in the mortgage market.

What economists expect for mortgage rates

Mortgage rates forecasts for 2020

The only function of economic forecasting is to make astrology look respectable. — John Kenneth Galbraith, Harvard economist

Galbraith made a telling point about economists’ forecasts. But there’s nothing wrong with taking them into account, appropriately seasoned with a pinch of salt. After all, who else are we going to ask when making financial plans?

Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

The latest numbers

And here are their latest forecasts for the average rate for a 30-year, fixed-rate mortgage during each quarter (Q1, Q2 …) in 2020. In mid-August, Fannie and the MBA refreshed theirs. Freddie’s, which is now a quarterly report, was published in mid-June.

Forecaster Q1 Q2 Q3 Q4
Fannie Mae 3.5% 3.2% 3.0% 2.9%
Freddie Mac 3.5% 3.4% 3.3% 3.3%
MBA 3.5% 3.2% 3.0% 3.1%

The Aug. 17 update from Fannie included the prediction of a 2.9% average rate for the fourth quarter of this year. That was the first time we’ve seen a forecast from any of these organizations for a sub-3.0% rate during 2020.

Of course, none of these quarterly forecasts excludes daily or weekly averages below (or above) the levels they suggest during any quarter. After all, quarterly averages can include some quite sharp differences between highs and lows.

Fannie and the MBA were a bit more optimistic about future rates in their August (monthly) forecasts. And that’s leaving Freddie’s June (quarterly) one looking stale.

What should you conclude from all this? That nobody’s sure about much but that wild optimism about the direction of mortgage rates might be misplaced.

Further ahead

The gap between forecasts is real and widens the further ahead forecasters look. So Fannie’s now expecting that rate to average 2.8% during the first quarter of next year and then inch down to 2.7% for the remainder of 2021.

Meanwhile, Freddie’s anticipating 3.2% throughout that year. And the MBA thinks it will be back up to 3.1% for the first three quarters of 2021 and then nudge up to 3.2% for the last. Indeed, the MBA reckons rates will average 3.6% during 2022. You pays yer money …

Still, all these forecasts show significantly lower rates this year and next than in 2019, when that particular one averaged 3.94%, according to Freddie Mac’s archives.

And never forget that last year had the fourth-lowest mortgage rates since records began. Better yet, this year may well deliver an all-time annual low — barring shocking news. Of course, shocking news is a low bar in 2020.

Mortgages tougher to get

The mortgage market is currently very messy. And some lenders are offering appreciably lower rates than others. When you’re borrowing big sums, such differences can add up to several thousands of dollars over a few years — more on larger loans and over longer periods.

Worse, many have been putting restrictions on their loans. So you might have found it harder to find a cash-out refinance, a loan for an investment property, a jumbo loan — or any mortgage at all if your credit score is damaged.

All this makes it even more important than usual that you shop widely for your mortgage and compare quotes from multiple lenders.

The FHFA debacle

This is the story behind the sharp increases in mortgage rates on Aug 13 and 14. If you’re planning to refinance to a loan backed by Fannie Mae or Freddie Mac, you may have to pay more for the privilege. Because the Federal Housing Finance Agency, which regulates the two enterprises, has imposed a new, additional closing cost.

This only applies to those Fannie and Freddie refinances with balances higher than $125,000. And HomeReady and Home Possible refinances are exempt.

Unless your loan closes before Dec. 1 (it was Sept. 1 before last Tuesday), the FHFA will make you pay an additional 0.5% of the loan amount, supposedly to cover additional market risk. For a $200,000 loan, that’s $1,000 added to your closing costs (divide your loan amount by 200).

That Dec. 1 cutoff date applies to the date on which Fannie or Freddie actually guarantees your loan. And that may be after you close. So, if you’re after one of their refinances and want to stand a good chance of getting in under the wire, you need to get a move on.

Change from the FHFA — Aug. 25 announcement

Until last Tuesday, if you’d already locked in your refinance but would close after Aug. 31, it may have been the lender who picked up the tab. But mortgage companies often operate on wafer-thin margins. So they passed on the cost — through higher mortgage rates — to new applicants (and those who are yet to lock) for all types of mortgages. Hence the higher mortgage rates all round following the announcement.

Last Tuesday, the FHFA caved under pressure from the mortgage industry and legislators. It hasn’t scrapped the new fee. But it has put back its implementation by three months. And that should get lenders off the hook for nearly all currently locked loans, and allow them to pass the new fee directly to the borrowers affected rather than spread the pain across all new borrowers.

It may well be that last Wednesday’s big fall in average mortgage rates was a result of those lenders adjusting to the previous day’s news. And that at least some of the subsequent falls also stem from this.

Economic worries

Mortgage rates traditionally improve (move lower) the worse the economic outlook. So where the economy is now and where it might go are relevant to rate watchers.

There have undoubtedly been huge improvements in many aspects of the economy since the darkest days of the pandemic. But some fear that the recovery from the worst effects of that time is slowing as Covid-19 spreads to previously unaffected parts of the country.

The Federal Reserve is concerned about:

  1. Stubbornly high unemployment
  2. Economic uncertainty
  3. Political deadlock that’s stalled further stimulus measures
  4. Possible credit tightening by banks and other lenders if things don’t get better quickly

COVID-19 still a huge threat

The COVID-19 pandemic and its economic implications are the single biggest influences on markets at the moment. And nationwide trends for new infections and deaths are looking encouraging.

But there remain plenty of states, cities, areas and neighborhoods that are hot spots with rising infections and deaths. And we’re not yet past seeing some shocking figures.

A second wave?

Now there are more grounds for concern. Several countries that seemed to have their outbreaks under control a couple of months ago (including South Korea, Spain, Germany, France and Italy) are experiencing new spikes in infections. As importantly for markets, recent economic data out of Europe suggest this may be causing a slowing of the recovery there.

Is such a second wave the fate that awaits the United States and its economy after it winds down antivirus measures?

Third quarter GDP

Need cheering up after all that? The Federal Reserve Bank of Atlanta‘s GDPnow reading suggests we might see growth in the current, third quarter of 29.6%, according to an Sept. 3 update.

But, again, that’s an annualized rate. So it has to be compared with the 32.9% lost in the second quarter. And there’s still time for the economy to fall back if more lockdowns are needed or if federal aid — whether those announced by the president or some subsequent Congressional package — takes a long time to implement.

Still, we might be looking at a light at the end of this pitch-dark tunnel.

Markets seem untethered from reality

Many economists are warning that stock markets may be underestimating both the long-term economic impact of the pandemic and its unpredictability. And some fear that we’re currently in a bubble that can only bring more pain when it bursts.

But it’s not just economists who are concerned. According to a survey published last Thursday by Deloitte, 84% of Fortune 500 chief financial officers (CFOs) reckon the US stock market is overvalued. As soberingly, only 42% expect better economic conditions in this country within the next year, according to a CNN Business report.

Did the bubble start to burst in stock markets yesterday? Or was it just a bad day in Wall Street offices? Time will tell. But it was certainly a terrible few hours: the Dow Jones Industrial Average fell 2.78%, the S&P 500 was down 3.5% and the Nasdaq fell 4.9%

Economic reports this week

Employment has been on investors’, analysts’ and traders’ minds all this week. There had been a couple of less important employment reports earlier in the week (one good, one bad) but this morning’s official, monthly employment situation report was always the one that really counted.

And it contained better-than-expected news with more new jobs, a lower unemployment rate and higher average hourly earnings than most predicted.

Forecasts matter

More normally, any economic report can move markets, as long as it contains news that’s shockingly good or devastatingly bad — providing that news is unexpected.

That’s because markets tend to price in analysts’ consensus forecasts (below, we use those reported by MarketWatch) in advance of the publication of reports. So it’s usually the difference between the actual reported numbers and the forecast that has the greatest effect.

And that means even an extreme difference between actuals for the previous reporting period and this one can have little immediate impact, providing that difference is expected and has been factored in ahead.

This week’s calendar

This week’s calendar of important, domestic economic reports comprises:

  • Monday: Nothing
  • Tuesday: August ISM* manufacturing index (actual 56.0%; forecast 54.7%) and July construction spending (actual +0.1%; forecast +1.0%). Also, motor vehicle sales** for August will emerge during the day as manufacturers release their sales figures (no forecast but 14.5 million new vehicles sold in July )
  • Wednesday: August ADP employment report (428,000 new private-sector jobs; no MarketWatch forecast but CNBC says Wall Street expected 1.17 million) and July factory orders (actual +6.4%%; forecast +6.2%)
  • Thursday: Weekly new jobless claims to August 29 (actual 881,000 new claims for unemployment insurance; forecast 950,000). Also the July trade deficit (actual -$63.6 billion; forecast -$58.7 billion). Plus revisions to second-quarter productivity (actual +10.1%; forecast +8.3%) and unit labor costs (actual +9.0%; forecast +10.5%) figures. And finally, August ISM* services index (actual 58.1%; forecast 57.0%)
  • Friday: August employment situation report, comprising nonfarm payrolls (actual 1.37 million new jobs; forecast 1.20 million), unemployment rate (actual 8.4%; forecast 9.8%) and average hourly earnings (actual +0.4%; forecast 0.0% — unchanged)

*ISM is the Institute for Supply Mangement, the body that conducts the surveys and compiles the figures

**These figures are seasonally adjusted annual rates (SAARs). In other words, they show what would happen were the data for the reported period replicated for 12 consecutive months or four consecutive quarters. It sounds weird but it can be a useful measure, providing you understand what you’re looking at

Today was the big day this week.

Rate lock recommendation

The basis for my suggestion

Other than on exceptionally good days, I suggest that you lock if you’re less than 15 days from closing. But we’re looking at a personal judgment on a risk assessment here: Do the dangers outweigh the possible rewards?

At the moment, the Fed mostly seems on top of things (though rises since its interventions began have highlighted the limits of its power). And I think it likely it will remain so, at least over the medium term.

But that doesn’t mean there won’t be upsets along the way. It’s perfectly possible that we’ll see periods of rises in mortgage rates, not all of which will be manageable by the Fed.

That’s why I’m suggesting a 15-day cutoff. In my view, that optimizes your chances of riding any rises while taking advantage of falls. But it really is just a personal view.

Only you can decide

And, of course, financially conservative borrowers might want to lock immediately, almost regardless of when they’re due to close. After all, current mortgage rates are near exceptional lows and a great deal is assured.

On the other hand, risk-takers might prefer to bide their time and take a chance on future falls. But only you can decide on the level of risk with which you’re personally comfortable.

If you are still floating, do remain vigilant right up until you lock. Make sure your lender is ready to act as soon as you push the button. And continue to watch mortgage rates closely.

When to lock anyway

You may wish to lock your loan anyway if you are buying a home and have a higher debt-to-income ratio than most. Indeed, you should be more inclined to lock because any rises in rates could kill your mortgage approval. If you’re refinancing, that’s less critical and you may be able to gamble and float.

If your closing is weeks or months away, the decision to lock or float becomes complicated. Obviously, if you know rates are rising, you want to lock in as soon as possible. However, the longer your lock, the higher your upfront costs. On the flip side, if a higher rate would wipe out your mortgage approval, you’ll probably want to lock in even if it costs more.

If you’re still floating, stay in close contact with your lender.

Closing help

At one time, we were been providing information in this daily article about the extra help borrowers can get during the pandemic as they head toward closing.

You can still access all that information and more in a new, stand-alone article:

What causes rates to rise and fall?

In normal times (so not now), mortgage interest rates depend a great deal on the expectations of investors. Good economic news tends to be bad for interest rates because an active economy raises concerns about inflation. Inflation causes fixed-income investments like bonds to lose value, and that causes their yields (another way of saying interest rates) to increase.

For example, suppose that two years ago, you bought a $1,000 bond paying 5% interest ($50) each year. (This is called its “coupon rate” or “par rate” because you paid $1,000 for a $1,000 bond, and because its interest rate equals the rate stated on the bond — in this case, 5%).

  • Your interest rate: $50 annual interest / $1,000 = 5.0%

When rates fall

That’s a pretty good rate today, so lots of investors want to buy it from you. You can sell your $1,000 bond for $1,200. The buyer gets the same $50 a year in interest that you were getting. It’s still 5% of the $1,000 coupon. However, because he paid more for the bond, his return is lower.

  • Your buyer’s interest rate: $50 annual interest / $1,200 = 4.2%

The buyer gets an interest rate, or yield, of only 4.2%. And that’s why, when demand for bonds increases and bond prices go up, interest rates go down.

When rates rise

However, when the economy heats up, the potential for inflation makes bonds less appealing. With fewer people wanting to buy bonds, their prices decrease, and then interest rates go up.

Imagine that you have your $1,000 bond, but you can’t sell it for $1,000 because unemployment has dropped and stock prices are soaring. You end up getting $700. The buyer gets the same $50 a year in interest, but the yield looks like this:

  • $50 annual interest / $700 = 7.1%

The buyer’s interest rate is now slightly more than 7%. Interest rates and yields are not mysterious. You calculate them with simple math.

Mortgage rates FAQ

What are today’s mortgage rates?

Average mortgage rates today are as low as 2.875% (2.875% APR) for a 30-year, fixed-rate conventional loan. Of course, your own interest rate will likely be higher or lower depending on factors like your down payment, credit score, loan type, and more.

Are mortgage rates going up or down?

Mortgage rates have been extremely volatile lately, due to the effect of COVID-19 on the U.S. economy. Rates took a dive recently as the Fed announced low-interest rates across the board for the next two years. But rates could easily go back up if there’s another big surge of mortgage applications or if the economy starts to strengthen again.

Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

Verify your new rate (Sep 16th, 2020)

Compare top refinance lenders

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Fairway Independent Mortgage Review for 2020

Overview

Fairway Independent Mortgage is headquartered in Madison, WI, and was founded in 1996. Since then, it’s become one of the top mortgage lenders in the nation.

Fairway is licensed to lend mortgages in all 50 states and Washington DC. And it’s known for having exceptional customer service. This company came second overall in J.D. Power’s 2019 Mortgage Customer Satisfaction Study, and has a top A+ rating from the Better Business Bureau. Fairway has also invested heavily in technology, allowing customers to apply for a mortgage and track loan progress online or via app. As for mortgage rates and fees, Fairway seems to be competitive rather than industry-leading. But rates vary by customer, so you’ll have to get a quote to see if Fairway’s rates are best for you.


Fairway Mortgage rates 

Our table shows average rates and loan costs from 2019.

Your own rate will likely be lower, because mortgage rates have dropped significantly since then.

But what our table does help you see is how Fairway mortgage rates and fees generally compare to other top lenders.

Average 30-year mortgage rates at major lenders

 
Fairway Independent Mortgage
Wells Fargo 
Quicken Loans
Chase
Average 30-Year Interest Rate, 2019
4.33% 4.22% 4.16% 4.22%
Monthly P&I Payment*
$993 $980 $973 $980
Median Loan Costs, 2019
$3,954 $3,484 $5,075 $3,440
Median Origination Charge, 2019
$1,195 $1,199 $2,085 $1,279

It’s worth noting that Fairway helps more people with lower credit scores than many other lenders. And that can skew its rates higher on average.

So if you like what Fairway has to offer, it’s worth applying to see how low of a rate this company can offer you.

Average rate and fee data were sourced from public rate and fee records required by the Home Mortgage Disclosure Act (HMDA).

*Monthly principal and interest payment based on a $250,000 home price, with 20% down, at each company’s average 30-year interest rate for 2019. Your own rate and monthly payment will vary.

Verify your new rate (Sep 16th, 2020)

Fairway Mortgage review for 2020

Fairway Mortgage must be doing plenty right. Because its customer satisfaction scores place it near the very top of the industry, and the growth of its business has been impressive.

So what’s the secret to Fairway’s success? Well, it likely breaks down into three parts:

  1. The breadth of its loan portfolio means it can find the right mortgage for nearly all applicants — From those wanting multimillion-dollar loans to those with low savings and damaged credit
  2. Fairway offers highly personalized service over the phone or in its branches — But it also allows you to use its online, self-service technologies (including an app) as much as you like
  3. It seems to place genuine emphasis on customer satisfaction — Unlike those lenders that only talk the talk

The main drawback from our perspective is that you have to apply to see rates; they’re not advertised online.

But advertised rates are only a sample, and you have to apply to see your actual rate at some point anyway. So that’s not a huge drawback.

Working with Fairway Independent Mortgage 

Fairway has over 500 branches, with at least one in 48 states plus Washington DC.

This means you have a better chance of meeting a loan officer in person than with many other lenders, who might have fewer branches in fewer states.

However, Fairway does not require you to meet with a loan officer in person.

Fairway says that you can complete an online application in as little as 10 minutes.

Many applicants simply talk to a loan officer over the phone, or apply online through the lender’s website or mobile app.

Fairway says that you can complete an online application in as little as 10 minutes.

The Fairway Mortgage website also lets you securely upload loan documents and check on your loan progress. So you never have to wonder what stage your application is at.

Fairway can help lower-credit borrowers buy a home

Suppose your mortgage application fails because your credit score is too low. The company’s website says:

“If your Loan Officer determines that you can benefit from credit score improvement, you may be referred to work with Fairway’s internal Creditool team at which time you’ll be asked to take part in our program.

“One of our highly skilled credit analysts will be assigned to review your credit report and draft a credit improvement action plan for you. There is no cost to you to do so.”

Credit score is one of the most important factors when applying for a mortgage, so one-on-one counseling to help improve your score is a big benefit.

Fairway Mortgage customer service reviews

We’ve already praised Fairway’s customer service. But here are some details.

Company
Mortgage Originations 2019
CFPB Complaints 2019
Complaints Per 1,000 Mortgages
2019 JD Power Rating
Fairway Independent Mortgage
198,516 16 0.08 865/1,000
Wells Fargo
1,026,800 342 0.33 837/1,000
Quicken Loans
774,900 187 0.24 880/1,000
Chase
527,600 188 0.36 850/1,000

Fairway Independent Mortgage ranked second in the J.D. Power’s 2019 mortgage satisfaction study, coming in just behind Quicken Loans (the 10-year winner).

In addition, less than one customer per thousand complains about Fairway to the Consumer Financial Protection Bureau (which keeps a record of official mortgage complaints).

Fairway also scores highly on consumer forums. It gets 5 stars on SocialSurvey and Zillow, and four or five stars on various Yelp review pages.

Overall, these make it a top company for service out of the major mortgage lenders.

Mortgage loan products at Fairway

Fairway has an extensive list of mortgage options:

  • Fixed-rate mortgages — The most popular type of mortgage with an interest rate and payment that are fixed for the full loan term
  • Adjustable-rate mortgages — These start with a fixed rate for a few years, then your rate can move up or down annually
  • Conventional mortgages — Loans from private lenders or backed by Fannie Mae or Freddie Mac. These start at 3% down payment
  • Jumbo mortgages — Loans above the conventional limit, which is $510,400 in most parts of the U.S.
  • FHA mortgages — Good for those with lower credit. As little as 3.5% down payment
  • VA mortgages — Eligible veterans and service members can get great rates and a 0% down payment
  • USDA rural development mortgages — Zero down payment if you’re buying in an eligible rural area and have a qualifying income
  • Refinance programs — Get cash out or secure a lower mortgage rate and monthly payment
  • Physician Loan Program — Medics can put down as little as 5% with no mortgage insurance required
  • Reverse mortgages — For those 62 years or older who want to release some of their home’s equity to enhance their retirement. No monthly payments
  • Home renovation loans — It’s all in the name
  • Residential construction loans — For when you want to build your home instead of buying one
  • Residential lot loans — Used to buy a plot of land to build a home on
  • Investment property mortgages — Buy a home that you’ll rent out to others
  • Debt consolidation mortgages — AKA cash-out refinances

Chances are, one of those will suit you. Its just a matter of finding the right loan type based on your credit, down payment, location, and financing goals.

Verify your new rate (Sep 16th, 2020)

Where can I get a mortgage with Fairway? 

You can get a loan from Fairway mortgage anywhere in the US. It’s licensed to lend in all 50 states.

And there’s likely a branch near you, because there’s one or more in 48 states and Washington DC.

Fairway has branch locations in 48 states (shown in dark green above). Only Alaska and West Virginia (light green) are without branches.

The two states where Fairway doesn’t have a physical presence are Alaska and West Virginia. With the latter, you may be able to access a branch by popping across the border into a neighboring state.

But things aren’t that easy for Alaskans. So they’ll have to rely on the phone and mail or the internet — or any combination thereof.

Is Fairway Independent Mortgage the best lender for you? 

Fairway Mortgage may turn out to be the best lender for you.

Fairway has a wide enough range of home loans to suit most people, and its customer service earns top ratings.

We’d especially recommend looking at this company if your credit score is too low, or on the borderline, for mortgage qualifying. In that case, the company’s free credit counseling could be a huge help.

To decide whether Fairway Independent Mortgage is best for you, check rates and terms from a few different lenders and weigh your options carefully.

Verify your new rate (Sep 16th, 2020)

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Mortgage and refinance rates today, September 8, 2020

Today’s mortgage and refinance rates 

Average mortgage rates rose quite sharply last Friday, a possibility of which we warned that morning. Good employment data were behind the rise. Conventional loans today start at 2.875% (2.875% APR) for a 30-year, fixed-rate mortgage. 

Find and lock a low rate (Sep 16th, 2020)

Current mortgage and refinance rates 

Program Rate APR* Change
Conventional 30 yr Fixed 2.875 2.875 Unchanged
Conventional 15 yr Fixed 2.625 2.625 Unchanged
Conventional 5 yr ARM 3.875 3.094 Unchanged
30 year fixed FHA 2.25 3.226 Unchanged
15 year fixed FHA 2.25 3.191 Unchanged
5 year ARM FHA 2.5 3.239 Unchanged
30 year fixed VA 2.25 2.421 Unchanged
15 year fixed VA 2.25 2.571 Unchanged
5 year ARM VA 2.5 2.419 Unchanged
Your rate might be different. Click here for a personalized rate quote. See our rate assumptions here.

Find and lock a low rate (Sep 16th, 2020)


COVID-19 mortgage updates: Mortgage lenders are changing rates and rules due to COVID-19. To see the latest on how coronavirus could impact your home loan, click here.

Should you lock a mortgage rate today?

Some highly credible experts are warning that further rises in mortgage rates are inevitable in coming weeks. We’re not so sure. The Federal Reserve is still buying mortgages by the boat load and that’s applying downward pressure on these rates.

Still, if you are inclined to caution, you might choose to lock soon while great deals remain assured.

  • LOCK if closing in 7 days
  • LOCK if closing in 15 days
  • FLOAT if closing in 30 days
  • FLOAT if closing in 45 days
  • FLOAT if closing in 60 days

Compare top refinance lenders

Market data affecting today’s mortgage rates 

Here’s the state of play this morning at about 9:50 a.m. (ET). The data, compared with about the same time last Friday morning, were:

  • The yield on 10-year Treasurys inched lower to 0.67% from 0.68%. (Good for mortgage rates.) More than any other market, mortgage rates normally tend to follow these particular Treasury bond yields, though less so recently
  • Major stock indexes were sharply lower. (Good for mortgage rates.) When investors are buying shares they’re often selling bonds, which pushes prices of those down and increases yields and mortgage rates. The opposite happens when indexes are lower
  • Oil prices tumbled to $36.81 from $40.83 (Good for mortgage rates* because energy prices play a large role in creating inflation and also point to future economic activity.) 
  • Gold prices fell to $1,918 an ounce from $1,934. (Neutral for mortgage rates*.) In general, it’s better for rates when gold rises, and worse when gold falls. Gold tends to rise when investors worry about the economy. And worried investors tend to push rates lower.
  •  CNN Business Fear & Greed index fell to 56 from 61 out of a possible 100 points. (Good for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are better than higher ones

*A change of less than $20 on gold prices or a matter of cents on oil ones is a fraction of 1%. So we only count meaningful differences as good or bad for mortgage rates.

Time was when those numbers gave a good indication of where mortgage rates would move during a day. But with the Fed now intervening invisibly in the mortgage market, that’s no longer the case.

So follow our lead and use markets only as a rough guide. They have to be exceptionally strong (rates are likely to rise) or weak (they could fall) to rely on them. With that in mind, today may be a better day for mortgage rates.

Find and lock a low rate (Sep 16th, 2020)

Important notes on today’s mortgage rates

Here’s some stuff you need to know:

  1. The Fed’s ongoing interventions in the mortgage market ($1 trillion and counting) should put continuing downward pressure on these rates. But it can’t work miracles all the time. So expect rises as well as falls. And read “For once, the Fed DOES affect mortgage rates. Here’s why” if you want to understand that aspect of what’s happening
  2. Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions
  3. Only “top-tier” borrowers (with stellar credit scores, big down payments and very healthy finances) get the ultralow mortgage rates you’ll see advertised
  4. Lenders vary. Yours may or may not follow the crowd when it comes to rate movements — though they all usually follow the wider trend over time
  5. When rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
  6. At times of high demand, lenders can push up rates as a way of managing their workflow. Neither markets nor the Fed can help when that happens

With all that to bear in mind, accurately forecasting where rates will go in the short term is often impossible — or nearly so.

Are mortgage and refinance rates rising or falling?

Over the last few months, the overall trend for mortgage rates has clearly been downward. A new all-time low was set early in August and another looked possible last week — before better-than-expected employment data snatched that possibility away, though only for now.

Looking further ahead, Fannie Mae, Freddie Mac and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.

Expert mortgage rate forecasts

And here are their current rates forecasts for the last two quarters of 2020 (Q3/20 and Q4/20) and the first two of 2021 (Q1/21 and Q2/21).

Note that Fannie’s and the MBA’s are updated monthly while Freddie’s are published quarterly So Freddie’s sometimes feel stale. The numbers in the table below are for 30-year, fixed-rate mortgages:

Forecaster Q3/20 Q4/20 Q1/21 Q2/21
Fannie Mae 3.0% 2.9% 2.8% 2.7%
Freddie Mac 3.3% 3.3% 3.2% 3.2%
MBA 3.0% 3.1% 3.1% 3.1%

So expectations vary considerably. You pays yer money …

Find your lowest rate today

It’s always been important to shop widely for your new mortgage or refinance. You stand to save thousands over just a few years by getting quotes from multiple lenders and comparing them carefully.

But you’ve rarely had more to gain by shopping around than you do now. The mortgage market is currently very messy. And some lenders are offering appreciably lower rates than others. Worse, some are making it harder to get any mortgage at all if you want a cash-out refinance, a loan for an investment property, a jumbo loan or if your credit score is damaged.

So shop till you drop (off to sleep at your keyboard). You could save a bundle.

Verify your new rate (Sep 16th, 2020)

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Mortgage rate methodology

The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.

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