Best Mortgage Rates (Updated for 2020)

Finding the best mortgage rates is important because your mortgage debt will likely be the largest form of debt you take on, and you’ll probably spend decades repaying that debt.

It can be tricky to find the best rates, though, because they change over time and different lenders offer different rates.

This guide will show you the current average mortgage rate, how to find the best rates, and the types of mortgage loans available.

In this guide:

Average Mortgage Rates
Compare the Best Mortgage Rates
Mortgage Rates Over Time
How Do I Find the Best Mortgage Rates?
How Do I Find the Best Mortgage Refinance Rates?
Types of Mortgage Rates
Why Is My Monthly Payment Higher Than My Mortgage Rate Requires?

Average Mortgage Rates

Here are the current mortgage rates, according to Freddie Mac:

Loan Type	Average Rate	As of
30-Year Fixed-Rate Mortgage	3.49%	9/5/2019
15-Year Fixed-Rate Mortgage	3.00%	9/5/2019
30-Year 5/1 Adjustable-Rate Mortgage	3.30%	9/5/2019

Mortgage Rates Over Time

Here’s how mortgage rates have changed over time.

How Do I Find the Best Mortgage Rates?

If you want to get the best possible rate on your mortgage, you will need to shop around to find the right lender for your unique situation. There’s a lot of variation in rates and terms from one lender to the next, so comparing multiple quotes is key.

You also need to work on your own financial situation. The more competitive of a borrower you are, the more lenders will want your business. And lenders will offer better terms if you appear to be a low-risk borrower that has the desired qualifications.

While there are many factors that affect your rate, the three best ways to improve the rates you’re offered on a home loan include the following:

Improve your credit score: Your credit score is a 3-digit number that serves as a metric of how responsible you’ve been with credit. Paying on time and paying down debt help improve your score, among other factors.
Increase your down payment: The more money you put down on your home, the more equity you have and the lower the risk to the lender—which leads to better rates. Try to save at least 20% down or ideally even more.
Shorten your loan term: Choosing a shorter repayment term also means your loan presents less risk to the lender because it is being repaid over a shorter timeline. This, too, can reduce your rates. A 15-year mortgage, for example, will usually have a lower rate than a 30-year mortgage.

To compare rates based on your personal financial situation, you should get pre-approved by several of the best mortgage lenders. You’ll need to provide some basic financial information to find out what you could qualify for from each loan provider.

If you’re a first-time homebuyer, you should look into federally backed loan programs, such as FHA loans, VA loans, or USDA loans. These loans are insured by the government, so lenders face less risk and can offer more relaxed terms and lower interest rates to borrowers.

It may also be helpful to apply for a mortgage from a bank or a credit union that you already do business with. The pre-existing relationship that you have with the financial institution and the fact the institution has a record of your payment history could help you to score better loan rates.

How Do I Find the Best Mortgage Refinance Rates?

If you already have a mortgage and you want to lower your existing interest rate, refinancing could make that possible.

Refinancing enables you to obtain a new mortgage loan in order to repay your existing one. If you can qualify for a lower rate, you can reduce the total cost of paying off your mortgage debt.

You may be able to qualify for a refinance loan at a better rate than you have on your current mortgage if:

You have improved your credit: If your FICO score has gone up since you initially borrowed your original mortgage loan, you could qualify for a more competitive interest rate this time around.
Your income has gone up: Income, and especially income relative to debt, is an important factor in determining if you’re eligible for a mortgage and the rate you’ll pay. If your income has increased since you took out your loan, you may be able to get a better rate by refinancing.
Your debt has gone down: If you owe less now, you may be a more competitive borrower. Alongside increasing your income, lowering your debt will improve your debt-to-income ratio and boost your credit score.

Just as when you’re applying for a mortgage for the first time, you should always compare quotes on a refinance loan from different lenders. Get a rate quote from the best mortgage refinance companies to see if you can qualify for a loan at competitive terms that will make repaying your mortgage cost less.

Once you have a few rates to compare, you can use a mortgage calculator to estimate how the different rates will impact your monthly payments.

Types of Mortgage Rates

Whether you’re taking out a conventional loan, jumbo loan, or a mortgage backed by a federal agency such as the Federal Housing Administration or the Veteran’s Administration, there are a few different loan types to choose from.

Fixed-rate loans

Fixed-rate loans are loans that have a set interest rate that never changes during the entire repayment period. You will know upfront exactly what your mortgage costs and what your monthly payments will be.

30-Year Fixed-rate mortgages

A 30-year fixed-rate mortgage is the most common and popular type of mortgage loan. Repayment is amortized over a 30-year period. This means your monthly payments are set so the amount of interest and principal you pay allows you to pay back the entire amount you borrowed over 30 years.

A 30-year fixed-rate mortgage has a more affordable monthly payment than a shorter-term mortgage. While the interest rate starts out higher than the rate on an adjustable-rate mortgage, you don’t ever have to worry about rates rising.

>> Read More: 30-Year Mortgage Rates

15-Year Fixed-Rate Mortgage

A 15-year mortgage is similar to a 30-year mortgage except it’s paid off in half the time—your payments are amortized over 15 years. Your monthly payment will be much higher but total loan costs will be much lower.

A 15-year mortgage usually has a lower rate than a 30-year mortgage. But these loans can be harder to qualify for because you are paying so much more per month.

10-Year Fixed-Rate Mortgages

A 10-year mortgage is also similar to its 15- and 30-year counterparts, only it is repaid over even less time.

Ten-year mortgages aren’t very common because the monthly payments are so high. But if you want to get the lowest rate and pay the least amount of interest possible, then this type of mortgage may be ideal for you.

Adjustable-rate mortgages

Adjustable-rate mortgages, or ARMs, are an alternative to the fixed-rate mortgage. Your rate can fluctuate periodically as the financial index it is tied to moves up and down—even though your repayment term never changes once you agree to the loan.

ARMs carry some risks because your payments could become unaffordable. But many people like them because the rate starts out lower than what you’d get with a fixed-rate mortgage. This can make it easier to qualify for a mortgage, and it also makes your mortgage more affordable initially.

There are different kinds of adjustable-rate mortgages, including the following.

3/1 ARM

A 3/1 ARM is an adjustable-rate mortgage. As explained above, your rate is tied to a financial index and can change over time. Your loan is still amortized to be repaid over a fixed loan term—usually 15 or 30 years—so your monthly payment simply rises if your interest costs go up.

The “3” in 3/1 ARM stands for the number of years your rate is fixed when you initially take out this type of mortgage loan. The “1” stands for the number of times per year your rate can adjust after the fixed period ends.

A 3/1 is ideal if you want the lowest possible rate to start out with. But you take on the risk of rates rising in the near future. If you plan to sell or refinance your home within a year or two of purchasing it, a 3/1 ARM may be the ideal choice.

5/1 ARM

A 5/1 ARM is very similar to a 3/1 ARM, but your initial interest rate stays the same for five years instead of three. Then it can change once annually. A 5/1 ARM will usually have a slightly higher starting rate than a 3/1 ARM, but you’ll get the added benefit of your rate staying steady for two more years.

7/1 ARM

A 7/1 ARM is an adjustable-rate mortgage similar to both three-and five-year ARMs. But this time, the initial interest rate is locked in place for seven years. This gives you a much longer time to refinance or sell your home without worrying about interest rates changing.

Other types of mortgage rates:

VA mortgage rates

Why Is My Monthly Payment Higher Than My Mortgage Rate Requires?

When you start looking at mortgages, you’ll probably notice that your monthly payment is higher than it would be if it just included the mortgage principal and interest alone. That’s because there are other costs you may have to pay.

Some of the other monthly costs that could be included in your mortgage payment include:

Private mortgage insurance (PMI): PMI is owed if you put down less than 20% on your home. It’s usually around 1% of the cost of your mortgage each year, but you pay the premiums monthly. PMI protects your lender in case it has to foreclose on your home.
Property taxes: If you choose to escrow your property taxes (or if your lender requires you to do so) then you pay a portion of your property taxes to your lender each month. The money is kept in an escrow account and property taxes are paid automatically when they’re due.
Homeowner’s insurance: You’re required by mortgage lenders to get insurance on your home. Often, payments for insurance are also escrowed. This means you pay a portion of the costs to your lender each month, and your lender pays the insurer.
Homeowner’s association fees (HOA fees): These are fees paid if your neighborhood has an association. You usually pay these fees directly to your association, but mortgage lenders still consider them when figuring what your total monthly housing payment will be.

These additional costs can significantly increase your monthly housing expenses, so make sure you take them into account when determining how much house you can afford.