What Is a Good Mortgage Interest Rate?

To know what is a good mortgage interest rate, one must include different factors such as the financial situation of the borrower, the current mortgage market, and what is the federal average interest rate. Also, it depends on what kind of loan the borrower takes – for some, adjustable-rate mortgages make more sense, while for others, fixed-rate mortgages are the best option.

A good interest rate is one that is the same as the federal average interest rate or lower. The current federal interest rate is 6.72% which is one of the highest rates the US had in the last decade. However, some lenders do offer lower interest than the national average.

The lower the interest rate, the better. However, sometimes a low-interest rate for a long period of time can cost you more.

How to Know Which Mortgage Rate Is Good?

You can read some of the best mortgage books and you still will not have a clear answer to a question: what is a good mortgage rate? Because mortgage rates vary and you can not expect to have the same rate as someone a decade ago had. Also, mortgage rates depend on the type of loan you take and the time period. As you know, the mortgage doesn’t expire, which means borrowers need to calculate how long they will be capable of paying off this debt. But in essence, when searching for a mortgage lien, borrowers should compare lenders’ rates with the current federal average and go from there.   

Average Mortgage Rates

There are many factors you can not control when it comes to mortgage rates. First and foremost, the state of the economy will have a huge impact on mortgage rates, so high inflation and high unemployment rates will, in most cases, influence the mortgage rates to go higher. Also, Federal Reserves have a saying as well. If the Federal Open Market Committee decides to raise short-term interest rates, the lenders will raise their mortgage rates as well. But this will depend on the lender still, so you can have Bank Of America with low-interest rates compared to AMCAP mortgages which can have higher interest rates. Then again, some lenders will have low rates but higher closing costs, insurance premiums, life insurance for mortgages, or other fees.

Average Mortgage Rates in 2022

If you are not sure whether to sign a loan agreement or not, the best is to hire a mortgage broker to find you the best possible deal. This way, you will save time and money, and in the end, you will find the best possible deal you can. If you want to go through all the Zillow mortgage rates by yourself, then you should know how these rates look on a national level. Here are the average rates for conventional loans.

How to Find the Lender with Best Mortgage Rates?

Now that we know what mortgage rates are on average in the US, we can search among lenders and find the ones with the best rates. Lenders that have lower rates for the same time period and the same loan type can be considered to be lenders with good rates. But a simple comparison will not be enough because many factors can influence whether some deal is good or bad for you.

This mostly depends on your financial situation, the purpose of your loan, and the type of loan you choose. For example, if you are eligible for VA or FHA loans, then these rates and conditions will be much more affordable, but you will be forced to live in the house you wish to buy, so any flipping of the property will be impossible.

Also, some lenders have lower interest rates but ask for a higher down payment. The best is to apply for a mortgage from three different lenders and wait for their offer. That’s because in this offer other fees you must pay will be included which can influence your decision by far. Here are some other things that can influence the rate that you can control and improve:

• Down payment,
• Income stability,
• Debt to income ratio,
• FICO score.

FICO Score and Mortgage Rates?

As you may know, to get approved for a mortgage, lenders must check your credit score. This score shows how much you owe and how good you are at repaying your debts. FICO score can influence your mortgage rate by far. In essence, the lower your FICO score, the higher the mortgage rate will be. Here is how that looks on 30 years fixed conventional mortgage loan:

What Can We Expect to Happen with Mortgage Rates in the Future?

In January 2021 average national mortgage rate was 3%, now a year later it is 6,23% for conventional loans. As you can see it is a huge increase and this happened mainly because of the inflation and increase in short-term interest rates of the Federal Reserve. However, the rate of 3% was one of the lowest in a decade so this was also an unusual phenomenon. Currently, rates are stable at 6% and we can expect as inflation comes down that the rates will follow this trend.