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What The Current State of Mortgage Rates Means For You


In this article:

  • Learning more about today’s mortgage rates will give you a better understanding of all the offers available to you.

  • Today’s mortgage rates are unpredictable but there are ways to lower your rate depending on a number of factors.

  • Paying down your debt and increasing your credit score are some ways to get a better mortgage rate.


There are many factors you need to consider when buying a home. Financing your purchase usually requires finding lending options and choosing the best one.


Let’s look at the mortgage interest rates and how this affects you. You’ll need to get a basic understanding of the mortgage rates today to avoid any mistakes in the future.


Here’s a look at everything you need to know about current mortgage rates.


What Are Mortgage Rates and Why Should You Compare Them?

A mortgage rate is the amount of interest a mortgage lender charges a borrower.


To pay this interest, a borrower makes a monthly payment for the loan in place of a lump sum. Mortgage rates can vary depending on whether your loan is a fixed-rate mortgage or an adjustable-rate mortgage.


A fixed-rate mortgage has the same interest rate for the entire loan term. On the other hand, an adjustable-rate mortgage has a fixed introductory interest rate for a period of time but may fluctuate after the initial period ends.


The interest rate for a fixed-rate mortgage is generally higher than the initial rate on an adjustable-rate mortgage.


In addition to the type of mortgage loan, mortgage rates can also vary depending on the lender.

Each mortgage lender determines their interest rates, which is why you should compare mortgage rates among lenders to find the best loan.


Today's Mortgage Rates

Mortgage rates are highly unpredictable. They can remain the same for some time or they can change.


As of January 2023, here are the current 30 year mortgage rates and 15 year mortgage rates:

The latest 30-year fixed-rate mortgage interest rate is 6.76%.

The latest 15-year fixed-rate mortgage interest rate is 6.05%.


The above rates are national averages and may be lower than what the banks or mortgage lenders will quote you. The reason for this discrepancy is that a wide range of factors can influence mortgage rates, including your financial situation.


How Mortgage Rates Are Determined

Mortgage lenders use several factors to determine their mortgage interest rates. While every lender has different formulas and criteria, most will consider economic indicators and the borrower's financial qualifications.


As a borrower, you have no control over external economic factors. Nevertheless, these factors have a significant impact on mortgage rates:


State of the overall economy: A strong economy leads to more people wanting to buy homes. When demand for mortgages increases, interest rates will also rise. Conversely, a weak economy leads to less demand and lower rates.


Unemployment rate: Mortgage rates generally fall as the unemployment rate rises, and vice versa.


Housing market: When more homes are built, mortgage rates increase to match mortgage demand. An increase or decrease in renters can also affect rates.


Stock and bond markets: Mortgage interest rates typically follow the 10-year U.S. Treasury bond. A decline in the stock or bond markets often leads to lower rates.


Federal Reserve monetary policy: The central bank controls the federal funds (or prime) rate. As the prime rate rises or falls, so do mortgage rates.


Inflation: Mortgage rates rise as inflation rises to ensure lenders receive a return on investment.

Your financial situation also affects the mortgage rate you will receive. Controlling these factors can help you get the best rate possible:


Debt-to-income (DTI) ratio: The more debt you already have, the less income you will have available to service a mortgage. Borrowers with high DTI ratios will likely have higher mortgage rates to mitigate the additional risk for the lender.


Credit score: A good credit score makes you more appealing to lenders, and you will likely receive a lower interest rate.


Down payment: The larger the down payment, the less money you will have to borrow from the lender.


Tips for Landing an Attractive Mortgage Rate


A mortgage rate will have a significant impact on your home loan.

Comparing rates among lenders will improve the likelihood of receiving a lower rate. In addition to talking with individual lenders about how you can get an attractive mortgage rate, consider the following options:


Improve Your Credit Score

A strong credit score demonstrates that you use debt responsibly and make prudent financial decisions. Most mortgages have minimum requirements for credit scores, and borrowers with high scores are usually given lower interest rates.


There are many steps you can take to improve your credit score. Some options include paying down long-term debt, keeping your accounts open, and monitoring your credit reports.


Lower Your Debt-to-Income Ratio

Your DTI ratio expresses how much of your gross monthly income goes toward servicing debts like credit cards, auto loans, and student loans. If you have a high DTI ratio, you present more repayment risk for lenders and will not qualify for a low mortgage interest rate.


To lower your DTI ratio, you can:

  • Repay your debts

  • Refinance your loans

  • Raise your income or create additional income streams

Save Up a Large Down Payment

By making a large down payment, you are financing a smaller percentage of the property's value.


Lenders are more likely to offer a better interest rate in these situations because the loan is less risky for them.


Another benefit of providing a larger down payment is avoiding the need for private mortgage insurance (PMI).


Other Factors That Influence a Monthly Mortgage Payment

Mortgage rates are not the only associated cost of a mortgage. Your monthly payment will also depend on the following factors:


Loan Term: A 15-year mortgage will have a higher monthly payment than a 30-year mortgage.


Loan Type: A fixed-rate loan always has the same interest payment, while they can change regularly for an adjustable-rate mortgage.


Property Taxes, HOA Fees, and Homeowner's Insurance: These costs are often included in your monthly payment.


Mortgage Insurance: PMI can cost up to 1% per annum of a loan's value (avoided by making a 20%+ down payment). Closing Costs: Buyers can finance closing costs (typically 2%-5% of the purchase price) as part of their mortgage, which increases monthly payments.

Mortgage calculators are tools you can use to help determine your total monthly mortgage payment.


Can Self-Employed Workers Get Mortgage Loans?

To qualify for a mortgage, borrowers routinely must provide proof of income. This requirement can be challenging for freelancers and other self-employed workers who may not have a W-2.


Fortunately, with the necessary documentation, self-employed borrowers can still obtain a mortgage.


Most lenders require at least two years of personal tax returns to qualify for a mortgage, preferably with a stable or increasing income. You may also need to provide profit and loss or bank statements.


Freelancers with less than two years of self-employment history still have a chance to get a mortgage. Some self-employed borrowers only need to show one year (12 consecutive months) of self-employment if they also demonstrate proof of prior employment.


Noumena has joined forces with Equinox Home Financing. They can tailor a mortgage program to fit a freelancers’ financial situation. In most cases, they don’t require a tax return to qualify. Find out more about Noumena’s mortgage program to start the mortgage process.


From Capital to Mortgage Lending, Get Financial Solutions With Noumena

As a freelancer or solopreneur, growing your business can be a challenge. You have specific financing needs that are not met by traditional business loans.


Noumena can help you get the financing you need for your freelance business. You'll have access to flexible finance options that can take your business to the next level.