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Compare Best Mortgage Rates for November 2020
Buying a home is typically a long term investment. When you buy a home, you generally have several decades to pay off the loan. In fact, while there are different loan terms to choose from, most home buyers opt for mortgage loans that have a standard 30-year repayment term. Given the time and financial investment it takes to buy a home, you need to choose a mortgage from the top mortgage lenders on the market. Buying a home is, after all, one of the most important decisions you can make — and it’s important to make sure you’ve secured the best loan for your needs.
Today’s mortgage and refinance rates
The interest rate table below is updated daily to reflect the most current purchase rates available in the market. According to Bankrate’s latest survey of the nation’s largest mortgage lenders, these are the current average rates for a 30-year, 15-year fixed mortgage and 5/1 adjustable-rate mortgage (ARM) rates among others.
|30-Year Fixed Rate||2.920%||3.230%|
|30-Year FHA Rate||3.000%||3.750%|
|30-Year VA Rate||2.980%||3.140%|
|30-Year Fixed Jumbo Rate||2.970%||3.070%|
|20-Year Fixed Rate||2.830%||3.130%|
|15-Year Fixed Rate||2.410%||2.730%|
|15-Year Fixed Jumbo Rate||2.380%||2.440%|
|5/1 ARM Rate||3.020%||4.060%|
|5/1 ARM Jumbo Refinance Rate||2.890%||4.030%|
|7/1 ARM Rate||2.920%||3.950%|
|7/1 ARM Jumbo Refinance Rate||2.930%||3.930%|
|10/1 ARM Rate||2.980%||3.900%|
Rates data as of 11/25/2020
Why trust The Simple Dollar?
The SimpleScore makes it easy to compare current mortgage rate products and services featured here on The Simple Dollar in a transparent, open and honest way. We rate these products and services using five factors and average them to come up with a single SimpleScore For mortgages, we compare: perks, credit impact to check rates, customer satisfaction, product variety and fees.
While you shop for your next mortgage loan, use our ratings and comparisons to help you choose the best mortgage lender that fits your specific needs.
Mortgage rates in today’s environment
Mortgage rates have been on a steady decline since the start of the pandemic, making it the perfect time to refinance or purchase your home and reap the savings benefits. If you want to take advantage of these rates, though, be aware that you should move quickly, as rates are on the rise again and may continue to fluctuate with demand.
For example, the 30-year fixed-rate mortgage was hovering near record lows in mid-October. As of Nov. 11, 2020, the average 30-year fixed mortgage rate was about 2.84% — which was a slight increase from the record-breaking low rate of 2.78% we saw the week prior, but still extremely low for a purchase loan.
“Mortgage rates jumped this week as a result of positive news about a COVID-19 vaccine,” Sam Khater, Freddie Mac’s chief economist, said in a statement about the rate hike. “Despite this rise, mortgage rates remain about a percentage point below a year ago and the low rate environment is supportive of both purchase and refinance demand. Heading into late fall, the housing market continues to grow and buttress the economy.”
The lowest 30-year fixed mortgage rate we’ve seen during this pandemic was 2.78%, which broke records in early November. That’s also the lowest mortgage rates have been since 1971. For perspective, the average rates were 3.57% just one year ago.
Most experts predict that rates will stay low for the rest of 2020, making the buyer’s market more competitive. Fannie May is predicting declining rates into 2021, and other experts have echoed this prediction.
“The low-interest-rate environment is expected to persist for the remainder of the year, with mortgage rates potentially falling below 3% by the start of 2021, which, combined with our expectation of a recovery in employment, should support housing activity,” the Fannie Mae forecast said.
If the rates follow this predicted course, buyers will get some of the best deals on interest rates, but will have increased demand and tighter lending parameters to contend with.
In turn, lenders are expecting steady income and high credit scores for approval during this time, so you’ll need to talk to your preferred lender to see how you can get the heftiest savings possible.
What the spike in 10-year Treasury rates means for mortgages
The COVID-19 pandemic is seeing a new, swift uptick across the nation, but the Treasury rate appears to be somewhat immune to the fallout. Thanks to changes to our recovering labor market, the completion of the 2020 presidential election and news about how a potential coronavirus vaccine is on the horizon, the 10-year Treasury rate recently to jump to its highest level in months.
This upswing in the Treasury rate happened in early November, increasing the yield on government bonds and offering hope that the U.S. economy is on the path to recovery. But while the Treasury rate increase is a good thing for investors, it could have a long-lasting (and unwelcome) impact on the mortgage industry.
In general, the higher the 10-year Treasury notes, the more of a mortgage rate hike we’ll see. Higher Treasury note rates signal that investors believe we’re on a good path economically, which, in turn, has historically prompted a rate hike on mortgage products. In other words, mortgage rates are lowered when the economy is in rough shape, but raised when there is a high demand for loan products or when the economy is stable.
This isn’t your typical economic climate, though. The pandemic has caused unusual ebbs and flows to occur in almost every facet of lending and investing. This isn’t the first time we’re seeing a Treasury rate spike. The yields on 10-year Treasury bonds have actually spiked several times in recent months, but then quickly lost momentum again. Mortgage rates have not followed suit, though. They have continued to drop to lower and lower points for the last nine months or so, even as Treasury bonds have spiked.
We don’t really know what’s going to happen with mortgage rates in the near future. They could follow the trends we’re seeing in Treasure rate spikes, or they could continue to slide downward as experts predict. It will all depend on what happens politically, economically and from a public health perspective as we try to get through the pandemic.
The higher cost of refinancing due to COVID-19
It’s important to note that mortgage refinancing has become more expensive due, in part, to COVID-19. As of Sept. 1, 2020, Fannie Mae and Freddie Mac began imposing a new fee of 0.5% on refinances. The move was unexpected, but according to the mortgage giants, this emergency fee will help cover “risk management and loss forecasting precipitated by COVID-19 related economic and market uncertainty.”
What that means for homeowners who are refinancing is that a refi will now be significantly more expensive than it was prior to Sept. 1. For example, a borrower who’s refinancing a $150,000 loan will now have to pay an extra $750 with the new fee on top of the typical fees and closing costs that come with refinancing. Borrowers with loan amounts of $300,000 will pay an extra $1,500 on top of the closing costs for the loan.
This new fee could add a significant amount to the cost of refinancing, so it’s important to note it when you’re weighing the other costs of your refi. If you only stood to save a small amount by refinancing, this new fee could make it more expensive to refinance than it’s worth. Whether that’s the case for you is your call, but be sure to take it into account when doing the math.
There are also a few ways you can offset this fee. The best approach to help offset the extra fees that are associated with any refinancing is to simply shop around. Research from Freddie Mac shows that getting more than one quote can save homeowners an average of $1,500 over the life of a loan, which should, in many cases, help negate that extra fee. The savings jump even higher if you get five quotes, which saves an average of $3,000. But despite the opportunity for savings, nearly half of consumers don’t shop around for a better rate.
Finding the best mortgage interest rates could save you tens of thousands of dollars or more on your interest payments over the life of the loan. We’ve used our SimpleScore methodology to access the nation’s largest lenders on current rates, customer service, product variety, fees, and credit impact.
Compare best mortgage rates from top lenders
|Lender||APR||Interest rate||Term length|
|Rocket Mortgage by Quicken Loans||2.75%–3.75%||3.402%–4.798%||10-, 15 and 30-year fixed-rate loans|
|Guild Mortgage||3.335%–3.816%||2.90%–3.51%||10 to 30-year fixed-rate mortgages |
3, 5, 7 and 10-year ARM
|Navy Federal Credit Union||2.338%–4.149%||2.750%–3.875%||10 to 30-year fixed and adjustable-rate home loans|
|Chase||2.611%–2.933%||2.490%–2.875%||15 to 30-year fixed-rate mortgages |
5 and 7-year ARM
|USAA Mortgage||3.717%–4.850%||3.500%–4.625%||10 to 30-year fixed-rate mortgages |
|SunTrust Mortgage||2.4858%–2.9303%||2.700%–2.800%||15 to 30-year fixed-rate mortgages |
|New American Funding||2.610%–2.940%||2.250%–2.750%||15 to 30-year fixed-rate mortgages |
3, 5 and 7-year ARM
Survey: 30% of Americans think 2020 is an ideal time to buy a home
To say the economy has been tough in 2020 would be an understatement. The coronavirus pandemic has caused significant damage to the job market, which has led to a record-breaking number of unemployment claims filed in recent months. And, as the months roll on, the hits from the COVID-19 pandemic just keep coming.
Still, despite this year’s economic turmoil, a surprising number of Americans think that 2020 is an ideal time to make a property purchase. According to a recent survey by TheSimpleDollar, about 30% of the participants agreed that this is an ideal time to buy a home or property — and nearly 7 in 10 of those in agreement think that 2020 is the best time for them to purchase a house or property due to low mortgage interest rates (68%).
So, if you want to ensure a smooth home purchase during this time, you should:
- Clean up your finances. If you want to get approved for a loan right now, you’ll need to make sure your finances reflect that you can afford to pay it back. This means socking away some money into savings, paying off other loan or credit card balances and avoiding large or significant purchases in the time leading up to the loan application.
- Pay close attention to your credit. You should pull copies of all three credit reports to go over before you apply for your mortgage. These reports are usually free to pull once a year at Annualcreditreport.com, but all three reports have been made available for free each week through April 2021 due to the coronavirus pandemic.
- Get preapproved. The best way to get an idea of your rates is to go through the preapproval process with a lender. This will give you an idea of where you, as a buyer, fall on the borrowing spectrum. You’ll need to have financial information on hand, but in many cases, you can complete the process fully online and receive an answer in 1-3 days or less.
- Consider ways to be flexible. The reality of the current housing market is that in some markets — especially in larger metro areas — there are fewer houses for sale than the demand calls for. If you’re shopping in those areas, you’ll have to find ways to make concessions — and you may end up paying the full asking price or more than list price for the home if there’s a ton of competition. As more people aim to take advantage of the record-breaking interest rates, the more demand you’ll have for the homes on the market.
Will mortgage rates go down?
There are conflicting assumptions that mortgage rates will go down or skyrocket due to the COVID-19 pandemic and the recent market changes. Some experts expect rates to rise due to an increase in yields and the recent rush for mortgage-backed securities (MBS) — which are mortgages sold on a secondary market that are bought from banks and sold as investments.
On the flip side, we’ve seen historical low mortgage rates during the pandemic have given homeowners a chance to refinance. In 2020, there has been an 84% rise in refinances compared to 2019.
Furthermore, lenders are becoming stricter on borrower qualifications, which can lead to lower rates due to less borrower demand. Mortgage rates will also continue to drop as concern over economic stability continues.
If you can qualify for a loan, the combination of refinancing, forbearance, unemployment and the hope that investors will see a return on their assets make it the perfect time for prospective borrowers to buy.
Guide to understand how mortgages work
What is a mortgage?
A mortgage is the type of loan you use to purchase a house. Unless you have the cash to pay for a house upfront, you’ll need a mortgage. Even if you do have the cash to pay in full, it can be a good idea to use a mortgage loan instead for building good credit and freeing up the cash for other investments.
How does a mortgage work?
A mortgage is a secured loan, where the house you purchase with it is used as collateral. If you stop making payments, your home will go into foreclosure (when the lender claims that collateral.)
Once you’ve chosen a lender, they’ll give you the amount of money agreed upon to purchase the home. You’ll then pay back the loan, with interest, in ongoing monthly payments. The exact amount you borrow will be determined by the fair market value of your home (calculated by an appraisal.)
The full process for getting and using a mortgage loan can be broken down into eight steps:
- Submit an application. Apply for a loan with the lender you’ve chosen, either online or via phone. You’ll need to provide documentation about your income, assets and any debt.
- Get preapproval.The lender will give you an estimate of the amount of money you can borrow based on the information you provided
- Shop for a home and make an offer. Now that you have a budget, you can shop for your home and choose the one you’d like to buy.
- Order a home inspection.Once your offer is accepted, you’ll schedule a home inspection. The results of the inspection may allow you to negotiate the price, repairs or other contract details before closing.
- Purchase homeowners insurance. Lenders will require proof of homeowners insurance before the mortgage loan can reach final approval.
- Appraise the home. Your lender will then have your home appraised to ensure that the purchase price is aligned with the home value.
- Finalize your loan. You’ll finalize the amount, rate and terms of your mortgage loan.
- Close on the sale.You’ll pay your down payment, receive the loan money and finalize your home purchase. There will also be a lot of paperwork.
Difference between interest rate vs. APR
Interest rate is the percentage of interest charged on the borrowed money — the rate can be fixed or variable.
APR is that same interest cost, but it also includes fees and other charges associated with the loan — origination fees, mortgage insurance, closing costs, discounts and broker fees. These fees are usually a percentage of your loan amount rather than a fixed number, so the APR is also expressed as a percentage.
The APR is a better estimate of the total amount it will cost you to borrow money but the interest rate is what your monthly payment is based on (along with the principal balance.)
How are mortgage rates calculated?
Interest rates on a mortgage are determined by the current market, your financial profile and your down payment. Basically, the less of a financial risk the lender deems you, the lower your interest rate — specifically, your credit report and debt-to-income ratio. If you put more of a down payment on your house, that improves your debt-to-income ratio and can get you a better interest rate.
There are two types of mortgage interest rates — fixed and adjustable. With a fixed-rate mortgage, the interest percentage stays the same for the entire time you repay the loan. For an adjustable-rate mortgage, the interest percentage will change based on the market. For most adjustable-rate mortgages, the first 5 to 10 years will have a fixed rate and then adjust based on the market once a year.
What is the best mortgage loan term for me
A loan term is the length of time you have to repay the loan. Most lenders will give you a few options for your mortgage loan terms, usually ranging between 10-30 years. Longer loan terms will mean lower monthly payments, but also higher interest rates and thus more interest paid overall.
A shorter-term loan will have a much higher monthly payment, but a lower interest rate and less interest paid in the lifetime of the loan. You may save more in the long run with a shorter term, but the monthly payments on a longer loan term are often more affordable.
A 30-year loan term is the most popular option, but there are pros and cons to the other mortgage terms, too. If you’re trying to pay off your home quickly, a 15-year mortgage loan will achieve that — and these loan terms often come with lower interest rates, which will help save you money. However, you’ll have to contend with higher payments because you’re paying the loan off in half the time that you normally would. So before you opt for a 15-year loan, make sure you can afford it now and in the future.
There’s also the option of a 20-year mortgage loan. This loan term is a sweet spot between the 30- and 15-year mortgage loans. You’ll again have to contend with higher monthly payments, but they won’t be as high as they would with a 15-year loan. The only real caveat is that you need to make sure you can afford the payments. They’ll be significantly higher than they would with a longer mortgage term. You may not get a much lower interest rate with a 20-year loan, either. These rates can be lower than the rates with 30-year loans, but that isn’t always the case.
The only way to know which loan term to choose is to weigh your priorities for your loan and do the math on what you can afford. If you can swing payments on a shorter loan term, you’ll save money in the long run on interest. If you can’t swing those higher payments, don’t try to force it. Otherwise, you could end up in dire straights financially — which could put you at risk of losing your home.
Types of mortgages
There are a few different types of mortgage loans you can choose from that have slightly different structures and come from different kinds of lenders.
1. Conventional mortgages
A conventional mortgage is the most common type of mortgage loan. It basically means the loan isn’t back or issued through a government agency.
- Fixed-rate loans: The interest rate stays the same throughout the loan term. If you plan on staying in your home for a long time and don’t want to risk interest rate fluctuations or changes to your monthly mortgage payment, a conventional fixed-rate loan may be best.
- Adjustable-rate mortgages (ARM): Type of loan with a period of fixed low interest initially followed by years of fluctuating interest rates that can fall or rise depending on certain economic changes. ARM loans are best for buyers who are either a.) only planning to stay in their homes for a short period of time, or b.) don’t mind taking a risk on fluctuating interest rates.
2. Government mortgages
There are some mortgage loan options issued by the government. They will typically have specific eligibility requirements.
- FHA: Federal Housing Association (FHA) loans are designed to help lower-income borrowers buy with a lower down payment (as low as 3.5% in some cases) or a credit score as low as 500.
- VA: Department of Veterans Affairs (VA) loans are available to veterans and may not require a down payment or private mortgage insurance depending on the lender.
- USDA: U.S. Department of Agriculture loans (USDA) Provide no down payment loans to qualified homebuyers in designated rural areas.
3. Nonconforming mortgages
A nonconforming mortgage loan does not conform to the Federal National Mortgage Associated and Federal Home Loan Mortgage Corporation purchasing guidelines. These loans will have higher interest rates. A mortgage may become noncomforming if it exceeds conforming loan limits or based on the borrower’s down payment, DTI, credit score and documentation requirements. For example, if a borrower has a DTI above 42% it may be considered a nonconforming loan.
- Jumbo mortgage: This loan is beneficial when you need to finance a home that is more expensive than a conventional loan will allow for. For most of the country, a jumbo loan is needed for loans of $510,400 or higher, although more expensive areas have a higher baseline of $765,600.
What percentage should I give as a down payment?
Typically, the minimum down payment recommended is 20%. Some lenders will require you to purchase private mortgage insurance (PMI) if you put down less than that.
The more money you put down, the lower your interest rate will be and the more money you’ll save in the long run. It’s best to save up a significant amount of money for a down payment before you begin the process of buying a house. On the other hand, you can get a house with as low as 5% down payment, you’ll just face larger interest rates and potentially a higher monthly payment.
How much can I borrow for a mortgage?
The maximum amount you can borrow for a mortgage will depend almost completely on your full financial picture. A lender’s job, in part, is to make sure you’re only approved for what you can realistically afford, so if you’re trying to buy a home that’s well out of the price range for your income, you’re not going to get approved. That’s a good thing, though — you don’t want to end up with late or missed payments. That can put your credit and your home at risk.
That said, there are rules to the maximum amount you can borrow for certain types of loans. The maximum limit you can borrow for conventional and government-backed loans is set each year, and if you want to borrow more than that amount, you’ll need to take out a jumbo loan. Jumbo loans have much stricter credit and income requirements, so you may not qualify with a lower income or credit blips.
In general, the conforming loan limit for 2020 is $510,400, which means that any amount over that will have to be borrowed with a jumbo loan. FHA loan limits for 2020, on the other hand, range from $331,760 to $765,600, but your particular maximum will depend on the area you live in and other factors. The best way to know your maximum is to talk to a lender about your unique situation. Otherwise, it’s anybody’s guess.
What is a discount point?
Discount points are basically a fee you pay to your lender that allows you to lower the interest rate on your loan. You can purchase these points if you want a lower interest rate but can’t qualify or rates just aren’t that low currently.
In general, each discount point will cost you about 1% of the principal amount of your loan, so the cost for discount points can add up quickly — especially with larger loan amounts.
You’ll need to do the math to figure out if discount points are worth the upfront costs. Each discount point you purchase lowers your loan’s interest rate by anywhere from 1/8 to 1/4 of a percent, so you may be paying more than you’re saving. Each situation is unique, though — and you won’t know whether the discount points make sense until you do the calculations with your loan rate and principal.
How do I find the best mortgage rate?
The key to finding the best mortgage rate is to shop around. Lenders offer a wide range of loan types and rates, and the only way to know what you qualify for is to compare the offers. Don’t discount smaller credit unions or online lenders, either — especially if you have a relationship with one currently. Credit unions are a great place to find super low mortgage rates, but they require you to be a member of the CU and you often need to build a relationship with them before they’ll offer those rates to you.
You should also be sure to do your homework on your own finances. Getting the best mortgage rate also involves a solid financial profile. If you have credit or financial issues, you won’t be offered the lowest rates — no matter how much you shop around. So be sure to get your money ducks in a row before you apply for any loans.
What are closing costs?
Mortgage closing costs are any additional fees you pay for your home loan aside from the loan principal and interest. These one-time costs are usually a small percentage of the home’s price, and, on average, cost between 2% to 5% of the total loan.
For example, if you’re interested in a $350,000 home, the closing costs would range from $7,000 to $17,500. The fees cover professionals and services needed to finalize your home buying process.
These closing costs cover a few fees, including the home appraisal to assess the value of your new home and in some cases, a credit reporting fee to cover the cost of reviewing your credit. A home inspection fee is also required to check the condition of your home before close.
Oftentimes, experts highly recommend negotiating lender service costs including application fees or any costs you don’t recognize. You can also ask about including some closing costs into your loan, but this choice may mean a higher interest rate.
You won’t be able to negotiate some of the closing cost fees, including taxes or title insurance required by the lender, but there are a few fees you can lower or ask the buyer to cover. For example, the buyer and seller can split the attorney or escrow fees for the attorney to handle the funds and closing process, or one party may offer to cover it.