📚 Mortgage Information

Understanding Mortgages

A mortgage is a loan used to purchase a home, where the property serves as collateral. Key terms include:

  • Principal: The loan amount borrowed.
  • Interest Rate: The cost of borrowing, typically fixed or adjustable.
  • Down Payment: Initial payment, often 3–20% of the home price.
  • Loan Term: Duration of the loan (e.g., 15 or 30 years).
  • PMI: Private Mortgage Insurance, required if down payment less than 20%.

Fixed-rate mortgages maintain the same interest rate, while adjustable-rate mortgages (ARMs) may change. Use our calculators to estimate affordability.

Historical Mortgage Rates

Rates sourced from Freddie Mac PMMS, updated weekly.

Factors Affecting Mortgage Rates

Types of Loans

Different loan types influence mortgage rates due to varying risk levels and terms:

  • Fixed-Rate Mortgages: Offer stable rates (e.g., 6.5% for 30-year, 5.8% for 15-year as of June 2025). Shorter terms like 15-year loans often have lower rates due to reduced lender risk.
  • Adjustable-Rate Mortgages (ARMs): Start with lower rates (e.g., 5.5% for a 5/1 ARM), but rates can rise after the initial period (e.g., 5 years), tied to market indices, increasing risk and potentially cost.
  • FHA Loans: Backed by the government, often have lower rates (e.g., 6.2%) but require mortgage insurance, appealing to first-time buyers with lower credit.
  • VA Loans: For veterans, often feature competitive rates (e.g., 6.0%) with no down payment, reducing lender risk.
  • Jumbo Loans: For high-value properties, carry higher rates (e.g., 7.0%) due to larger loan amounts and increased risk.

Land Types

The type of land or property location impacts rates due to perceived risk and value:

  • Urban Properties: Often have standard rates (e.g., 6.5%) due to stable demand and resale value.
  • Rural Properties: May see higher rates (e.g., 6.8%) because of lower liquidity, limited appraisal data, and higher risk of value fluctuation.
  • Agricultural Land: Rates can be higher (e.g., 7.0%) due to specialized use, fewer buyers, and potential income volatility.
  • Waterfront or Luxury Land: Often tied to jumbo loans, resulting in higher rates (e.g., 7.2%) due to high value and risk.
  • Raw Land Loans: Finance undeveloped land with no infrastructure (e.g., roads, utilities). Rates are higher, often 8.0% to 9.5% (vs. a base of 6.5%), due to high risk, no income potential, and limited resale value.
  • Improved Land Loans: Cover land with utilities, roads, or grading, ready for building. Rates are moderate, e.g., 7.0% to 8.0% (vs. a base of 6.5%), as improvements boost value and reduce risk compared to raw land.
  • Construction Land Loans: Fund land and building costs, with rates of 7.5% to 8.5% (vs. a base of 6.5%) during construction due to risks like delays. Rates may adjust to around 6.5% upon conversion to a permanent mortgage.

Credit Score

Your credit score reflects your borrowing reliability, directly affecting rates:

  • Excellent (760+): Qualifies for the best rates (e.g., 6.3%) due to low risk.
  • Good (700–759): Slightly higher rates (e.g., 6.5%) as risk increases.
  • Fair (620–699): Rates rise (e.g., 7.0%) due to moderate risk; may require extra fees or PMI.
  • Poor (<620): Highest rates (e.g., 7.5% or more) or loan denial due to high risk.

Lenders use scores from agencies like FICO; check yours before applying.

Debt-to-Income Ratio (DTI)

DTI measures monthly debt payments against income, signaling repayment ability:

  • Low DTI (<36%): Best rates (e.g., 6.3%) as lenders see strong ability to pay.
  • Moderate DTI (36–43%): Slightly higher rates (e.g., 6.6%) due to increased burden.
  • High DTI (44–50%): Rates climb (e.g., 7.0%) as risk grows; approval may be tougher.
  • Very High DTI (>50%): May face high rates (e.g., 7.5%) or rejection due to limited repayment capacity.

Calculate DTI: (Total monthly debt payments / Gross monthly income) × 100. Lower DTI by paying off debt or increasing income.

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