Mortgage Rates July 2024: What Homebuyers Need to Know

As of July 2024, mortgage rates have been trending upward, with the average 30-year fixed mortgage rate reaching 6.5%. This increase is largely due to the rising inflation and economic uncertainty.

Homebuyers need to be aware of these rising rates, as it can impact their monthly mortgage payments. For example, a $300,000 home with a 30-year mortgage at 6.5% interest would have a monthly payment of around $1,900.

The good news is that mortgage rates are still relatively low compared to historical averages. In the 1980s, mortgage rates peaked at over 18%, so 6.5% is a significant improvement.

Homebuyers can take advantage of these relatively low rates by shopping around for the best deals and considering longer loan terms.

Mortgage rates change daily and can vary widely depending on a variety of factors, including the borrower's personal situation.

Your credit score may affect the mortgage rate that the lender offers you, with generally lower interest rates available for those with higher credit scores.

The difference in mortgage rates can mean spending tens of thousands of dollars more (or less) in interest over the life of the loan.

Here are some key factors that determine your mortgage rate:

A good credit score can mean a lower rate, but even with a less-than-perfect credit report, you may still qualify for a low rate due to the VA Guaranty.

Mortgage rates are influenced by a range of factors, and understanding what determines your rate can help you navigate the home loan process with confidence.

Credit score plays a significant role in determining your mortgage rate, with a good credit score often resulting in a lower rate. Your debt-to-income (DTI) ratio, loan amount and duration, loan type, and global economic and market conditions also impact your rate.

A good credit score can make a big difference in securing a lower mortgage rate. In fact, a good credit score can lead to a lower rate, regardless of the loan type.

Your loan amount and duration can also affect your rate. For example, a 15-year fixed-rate mortgage may offer a lower interest rate, but it requires a higher monthly payment compared to a 30-year fixed-rate mortgage.

Here are the key factors that determine your mortgage rate:

In some cases, even if your credit report isn't in perfect shape, you may still qualify for a low rate due to the VA Guaranty.

APR is a broader reflection of borrowing costs that takes into account the interest rate and fees associated with getting a mortgage.

The APR on a VA loan, for example, can be higher than the base interest rate due to additional costs like origination fees and closing agent fees.

APR is a tool that can help you compare mortgage offers from different lenders.

Here are some of the items that APR can consider:

Lenders may calculate APR differently, so it's essential to understand how they're calculating it to make accurate comparisons.

The Federal Reserve's decisions can significantly impact mortgage rates, but it's not a straightforward relationship. The Fed's target range is currently 4.25%–4.50%.

The Federal Reserve's interest rate cut in the article was widely anticipated, and it reflects their effort to balance economic growth and inflation. This cut doesn't guarantee that mortgage rates will immediately decrease, as other factors like global economic conditions and housing market trends also play a role.

Mortgage rates tend to follow the 10-year Treasury yield, with mortgage rates trending a bit higher. The 10-year Treasury yield is a good indicator of where mortgage rates will go on a daily basis.

A strong economy can lead to higher mortgage rates, as investors become less interested in lower-return investments like mortgage-backed securities. This is exactly what happened during times of economic growth, causing the 10-year Treasury yield and mortgage rates to go up.

VA loan rates are typically lower than both FHA and conventional mortgage rates due to the VA backing a portion of each loan. This can result in significant savings for eligible veterans.

The VA loan rates are generally lower, but it's essential to note that Jumbo loan rates have different lock periods depending on the type of loan. A 45-day lock period is assumed for Jumbo purchase loans, while Jumbo IRRRLs and Jumbo Cashouts assume a 60-day lock period.

Current advertised rates for Jumbo loans assume a loan amount in excess of the conforming loan limit, which varies depending on where you live. Alaska, California, and Hawaii loans have special considerations for what qualifies as jumbo and may be priced separately.

Here's a brief overview of current VA refinance rates:

The Streamline (IRRRL) loan assumptions include a 60-day lock period, and points can vary depending on the loan type.

You can buy down your interest rate by purchasing discount points, which is essentially paying interest upfront to receive a lower rate over the life of the loan. Borrowers who plan to own the home for a longer period of time often find this option more advantageous.

A rate lock guarantees a set interest rate for a specific amount of time, typically ranging from 30 to 60 days. This is an essential part of the mortgage process, as mortgage rates often fluctuate daily.

Purchasing discount points can be a smart move for homeowners who plan to stay in their home for a long time, as it can result in significant savings over the life of the loan.

Discount points are essentially paying interest upfront to receive a lower rate over the life of the loan.

Your loan officer can help you determine the break-even point of purchasing discount points, which is crucial in deciding if points make sense for your specific situation.

Borrowers who plan to own their home for more than 5-7 years may find it beneficial to purchase discount points.

Here are some key factors to consider when deciding if discount points are right for you:

Mortgage rates change daily, so it's essential to shop around for the best rate and compare fees and closing costs from multiple lenders.

Each lender has its own fees and closing costs that factor into the overall cost of the home loan, so be sure to compare official Loan Estimates from at least three different lenders.

Increasing your down payment can also lower your mortgage interest rate, with lower rates typically available for those with a down payment of 20% or more.

A good credit score can also get you a lower interest rate, so make sure to review your credit score and get it in the best shape possible before applying for a mortgage.

A rate lock is a guarantee of a set interest rate for a specific amount of time, typically ranging from 30 to 60 days.

This is an essential part of the mortgage process, as mortgage rates often fluctuate daily, making a rate lock a crucial tool for borrowers.

A rate lock can give you peace of mind, knowing that your interest rate is secure for a certain period, allowing you to plan your finances accordingly.

Mortgage rates can change rapidly, so a rate lock helps to protect you from potential rate increases.

Mortgage rates have a significant impact on the housing market, and understanding their fluctuations can help you make informed buying decisions. Low mortgage rates typically boost homebuying demand, but high rates can have the opposite effect, causing many buyers to drop out of the market.

High mortgage rates have led to a phenomenon called the "lock-in effect", where homeowners choose to stay in their homes rather than sell and give up their historically low mortgage rates. This has constrained housing supply and pushed prices up.

Buying a house now and refinancing later can be a good strategy for avoiding a competitive market and higher home prices. Mortgage refinance can help you lower your housing costs when rates fall, but be sure to shop around for the best rate.

Mortgage rates have a significant impact on homebuying demand. Low mortgage rates typically boost buying power and increase demand, but can also put upward pressure on home prices.

Homebuyers are more likely to drop out of the market if mortgage rates rise. This is because getting a mortgage becomes more expensive, making it harder for buyers to afford a home purchase.

The "lock-in effect" occurs when would-be home sellers choose to stay in their homes rather than sell and give up their historically low mortgage rates. This phenomenon constrained housing supply and pushed prices up in 2022 and 2023.

Waiting to buy a house might seem like a good idea, especially if you're hoping for lower mortgage rates. However, there's no guarantee that rates will drop enough to improve affordability.

Mortgage rates are expected to drop, but buying now and refinancing later is a good strategy for buyers who want to avoid competition and higher home prices. Afifa Saburi, a capital markets analyst, suggests locking in a purchase now and taking advantage of a refinance in the future.

Low mortgage rates boost buying power, but an increase in demand can put upward pressure on home prices, erasing some of that benefit. This can lead to a competitive housing market, which is exactly what you want to avoid.

If you can afford to buy a house now, you could avoid a competitive housing market later on and have the opportunity to lower your housing costs with a refinance once rates fall. Just be sure to shop around and get quotes from multiple mortgage refinance lenders to be sure you're getting the best rate.

High mortgage rates have kept many homeowners from selling, since they don't want to give up their current, lower rates. This has severely limited inventory, but the lack of additional buyers on the market has also kept prices somewhat moderate.

A larger down payment can also help you get a better rate. The minimum down payment for a conventional mortgage is 3%, but if you can put down more, you'll likely get a better rate.

Getting the best mortgage rate is crucial to saving thousands of dollars in interest over the life of the loan. To start, don't assume your real estate agent's lender is the best option for you - ask around or use an online tool to find a lender that suits your situation.

Compare loan estimates from at least three different lenders to get a clear picture of the costs involved. Look for the lowest rate and APR (Annual Percentage Rate) among the options.

A 20% down payment can make a big difference in your mortgage rate - it's often tiered, with lower rates available for those who put down more upfront. Check with your lender to see if increasing your down payment will lower your interest rate.

Your credit score plays a significant role in determining your mortgage rate - the higher your score, the lower the interest rate. Review your credit score and work on improving it before applying for a mortgage.

Consider your loan options carefully, as the 30-year fixed rate mortgage isn't always the best choice. For example, an adjustable-rate mortgage (ARM) may offer a lower interest rate initially, but it can adjust after a set period of time, potentially increasing your rate.

Ultimately, the key to getting the best mortgage rate is to shop around, compare options carefully, and consider your individual situation.

To get a clear picture of the mortgage landscape, I recommend checking out some reliable resources. You can quickly estimate your monthly mortgage payments for a new home by using the mortgage calculator provided by Zillow.

For those looking to finance a new home purchase, finding a lender to get pre-qualified for a mortgage is a crucial step. Zillow Group Marketplace, Inc. NMLS #1303160 can connect you with a lender to help you get started.

To make an informed decision, it's essential to compare mortgage rates from multiple lenders. Zillow Group Marketplace, Inc. NMLS #1303160 allows you to see current mortgage rates and get a customized quote.

Here are some key resources to keep in mind:

Conforming loans are a great option for many homebuyers, with a maximum loan limit of $726,200 in most areas. This is a significant increase from previous years, allowing more people to qualify for these loans.

One key benefit of conforming loans is that they often offer more competitive interest rates compared to non-conforming loans. This can save homeowners thousands of dollars in interest payments over the life of the loan.

In July 2024, conforming loan rates are expected to remain relatively stable, with some lenders offering rates as low as 4.25% for a 30-year fixed mortgage.

The Rate Index Methodology is a key concept in understanding how conforming loan interest rates are determined.

Fannie Mae and Freddie Mac use the Average Cost of Funds Index (ACOFI) to calculate interest rates for conforming loans.

The ACOFI is a weighted average of the costs of funds for Fannie Mae and Freddie Mac, based on their borrowing costs for the previous month.

Conforming loan interest rates are typically tied to the 10-year Treasury yield, which is a benchmark for government bond yields.

The 10-year Treasury yield is used as a reference point to determine the interest rate for conforming loans.

The Rate Index Methodology is designed to ensure that conforming loan interest rates are competitive with the broader mortgage market.

This helps to maintain liquidity in the mortgage market and supports the availability of conforming loans.

Conforming Loans are a type of mortgage loan that meets Fannie Mae and Freddie Mac's guidelines, which typically include a maximum loan amount of $510,400 for a single-family home in most areas.

These loans are popular among homebuyers because they often have better interest rates and terms than non-conforming loans.

Conforming Loans can be either fixed-rate or adjustable-rate, and the interest rate may be fixed for a certain period before adjusting.