Compare Today's Mortgage Rates

A mortgage is a type of loan used to purchase or maintain a home, land, or other types of real estate. The borrower agrees to pay the lender over time, typically in a series of regular payments that are divided into principal and interest. The property then serves as collateral to secure the loan.

Individuals and businesses use mortgages to buy real estate without paying the entire purchase price up front. The borrower repays the loan plus interest over a specified number of years until they own the property free and clear. Most traditional mortgages are fully-amortizing. This means that the regular payment amount will stay the same, but different proportions of principal vs. interest will be paid over the life of the loan with each payment. Typical mortgage terms are for 30 or 15 years.

In general, homeowners can afford a mortgage that’s two to two-and-a-half times their annual gross income. For instance, if you earn $80,000 a year, you can afford a mortgage from $160,000 to $200,000. Keep in mind that this is a general guideline and you need to look at additional factors when determining how much you can afford such as your lifestyle.

First, your lender will determine what it thinks you can afford based on your income, debts, assets, and liabilities. However, you need to determine how much you’re willing to spend, your current expenses—most experts recommend not spending more than 28% of your gross income on housing costs. Lenders will also look at your DTI, meaning that the higher your DTI, the less likely you’ll be able to afford a bigger mortgage. 

Don’t forget to include other costs aside from your mortgage, which includes any applicable HOA fees, homeowners’ insurance, property taxes, and home maintenance costs. Using a mortgage calculator can be helpful in this situation to help you figure out how you can comfortably afford a mortgage payment.

A mortgage rate is the amount of interest determined by a lender to be charged on a mortgage. These rates can be fixed—meaning the rate is set based on a benchmark rate—for the duration of the borrower’s mortgage term, as in the case of a 15-year fixed rate mortgage, or variable based on the mortgage terms and current rates. The rate is one of the key factors for borrowers when seeking home financing options since it’ll affect their monthly payments and how much they’ll pay throughout the lifetime of the loan. 

Mortgage rates are set based on a few factors, economic forces being one of them. For instance, lenders look at the prime rate—the lowest rate banks offer for loans—which typically follows trends set by the Federal Reserve’s federal funds rate, which is currently set at a range of 5.25% - 5.50%. Fed Funds rates are typically stated in this type of range which varies that rate by 0.25 percent.

The 10-year Treasury bond yield can also reveal market trends. If the bond yield goes up, mortgage rates tend to go up, and vice versa. The 10-year Treasury yield is usually the best standard to judge mortgage rates. That’s because many mortgages are refinanced or paid off after 10 years even if the norm is a 30-year fixed rate mortgage loan. 

Factors that the borrower can control is their credit score and down payment amount. Since lenders determine rates based on the risk they may take, borrowers who are less creditworthy or have a lower down payment amount may be quoted higher rates. In other words, the lower the risk, the lower the rate for the borrower.

While the central bank doesn’t decide mortgage rates, it does influence the rate indirectly. The Federal Reserve helps to guide the economy by keeping inflation under control and encouraging growth. That means the decisions the Federal Open Market Committee makes in raising or lowering short-term interest rates may influence lenders to raise or lower theirs. 

Mortgage rates can be different depending on the loan type. For instance, fixed-rate mortgages tend to be higher than adjustable-rate ones. However, adjustable-rate mortgages tend to have lower rates during a predetermined time, then fluctuates as it adjusts to current market conditions.  Generally, the shorter the amount of time to repay the loan, better known as the loan term, the lower the rate. So, 30-year mortgages usually have higher rates than 15 or 10-year mortgage rates.

Interest rates and APR are not the same. An annual percentage rate (APR) reflects additional charges associated with your mortgage, which includes the interest. The interest rate reflects the cost homeowners pay to borrow money. These fees include charges such as origination fees and discount points, which is why the APR is typically higher than the interest rate. 

Also known as discount points, this is a one-time fee or prepaid interest borrowers purchase to lower the interest rate for their mortgage. Each discount point costs 1% of your mortgage amount, or $1,000 for every $100,000 and will lower the rate by a quarter of a percent, or 0.25. For example, if the interest rate is 4%, purchasing one mortgage point will reduce the rate to 3.75%, which can save a significant amount of interest expense in your monthly mortgage payment and over the life of the loan.

According to Freddie Mac, the latest average 30-year mortgage rate is 7.23%. This marks a 22-year high and is the highest level recorded since June 2001.

Mortgage rates, which are tied to the 10-year treasury bond, will not go down until the Federal Reserve begins to ease monetary policy by lowering the federal funds rate. Mortgage rates have gone up dramatically in the past year as the Fed has raised the fed funds rate by over 5 percentage points to combat inflation. Once inflation reaches the Fed's target rate of 2% they may begin to lower the fed funds rate, which will in turn begin to lower mortgage rates.

While it is possible that mortgage rates will begin to moderate at some point later this year it is probably unlikely given that the Federal Reserve is still considering raising the Federal Funds rate in September or November depending on economic conditions. If the Fed doesn't raise rates they will likely leave them unchanged, which means mortgage rates will probably remain static rather than going down in the fourth quarter.

The minimum you’ll need to put down will depend on the type of mortgage. Many lenders require a minimum of 5% to 20%, whereas others like government-backed ones require at least 3.5%. The VA loan is the exception with no down payment requirements. 

Generally, the higher your down payment, the lower your rate may be. Homeowners who put down at least 20% will be able to save the most.