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Best Mortgage Loan Rates 2023 – Everything you need to know

Best Guide For Mortgage Pre Approval in 2023

Are you tired of endlessly searching for the best mortgage loan rates and feeling overwhelmed by the process of mortgage pre-approval? Look no further, because our comprehensive guide has everything you need to know to navigate the world of mortgage loans and secure the best possible mortgage rates for your financial situation.

In a sea of competing resources, our guide to mortgage loan rates has been named the best guide of 2023. Our team of experts has poured countless hours into researching and compiling the most up-to-date and relevant information for anyone looking to secure the best mortgage rates and navigate the complex process of mortgage pre-approval. From breaking down the intricacies of interest rates to providing step-by-step guidance on the pre-approval process, our guide is a comprehensive resource that is not to be missed. Whether you’re a first-time homebuyer or a seasoned real estate investor, our guide is the ultimate tool to help you make informed decisions about your mortgage loan rates. So why settle for anything less than the best? Check out our guide to mortgage loan rates and see why it’s been recognized as the top resource of 2023.

Current mortgage and refinance rates

Product Interest rate APR
30-year fixed-rate 6.628% 6.705%
20-year fixed-rate 6.273% 6.440%
15-year fixed-rate 5.802% 5.968%
10-year fixed-rate 5.875% 6.113%
7-year ARM 6.354% 7.125%
5-year ARM 6.172% 7.158%
3-year ARM 6.125% 7.204%
30-year fixed-rate FHA 6.170% 7.058%
30-year fixed-rate VA 5.832% 6.244%

What is a mortgage?

Most people don’t have the cash to simply buy a house. Instead, they use a mortgage, which is a loan to buy a home. After making a down payment of anywhere from 3% to 25%, they get a mortgage to cover the remaining costs of purchasing the home.

mortgage is set up so you pay off the loan over a specified period called the term. The most popular term is 30 years. Each payment includes a combination of principal and interest, as well as property taxes, and, if needed, mortgage insurance. (Homeowners insurance may be included, or the homeowner may pay the insurer directly.) Principal is the original amount of money you borrowed while interest is what you’re being charged to borrow the money.

How to get a mortgage

A mortgage is a type of loan designed for buying a home. Mortgage loans allow buyers to break up their payments over a set number of years, paying an agreed amount of interest. From the time you’re approved until you receive the funds (and close on the home purchase), the process typically takes six or seven weeks.

Because a home is usually the biggest purchase a person makes, a mortgage is often a household’s largest debt. Getting the best possible terms on your loan can mean a difference of hundreds of extra dollars in or out of your budget each month, and tens of thousands of dollars in or out of your pocket over the life of the loan. It’s important to prepare for the mortgage application process to ensure you get the best rate and most affordable monthly payments.

Here are quick steps to prepare for a mortgage:

  1. Build your credit
  2. Determine your budget and how much house you can afford
  3. Set savings aside for both a down payment and monthly mortgage payments
  4. Research the best type of mortgage for you
  5. Compare current mortgage rates
  6. Choose the right lender
  7. Get preapproved
  8. See multiple houses within your budget
  9. Apply and get approved for a mortgage
  10. Close on your new house

How do mortgage rates work?

The mortgage rate a lender offers you is determined by a mix of factors that are specific to you and larger forces that are beyond your control.

Lenders will have a base rate that takes the big stuff into account and gives them some profit. They adjust that base rate up or down for individual borrowers depending on perceived risk. If you seem like a safe bet to a lender, you’re more likely to be offered a lower interest rate.

Factors you can change:

  • Your credit score. Mortgage lenders use credit scores to evaluate risk. Higher scores are seen as safer. In other words, the lender is more confident that you’ll successfully make your mortgage payments.

  • Your down payment. Paying a larger percentage of the home’s price upfront reduces the amount you’re borrowing and makes you seem less risky to lenders. You can calculate your loan-to-value ratio to check this out. A LTV of 80% or more is considered high.

  • Your loan type. The kind of loan you’re applying for can influence the mortgage rate you’re offered. For example, jumbo loans tend to have higher interest rates.

  • How you’re using the home. Mortgages for primary residences — a place you’re actually going to live — generally get lower interest rates than home loans for vacation properties, second homes or investment properties.

Forces you can’t control:

  • The U.S. economy. Sure, this means Wall Street, but non-market forces (for example, elections) can also influence mortgage rates. Changes in inflation and unemployment rates tend to put pressure on interest rates.

  • The global economy. What’s happening around the world will influence U.S. markets. Global political worries can move mortgage rates lower. Good news may push rates higher.

  • The Federal Reserve. The nation’s central bank attempts to guide the economy with the twin goals of encouraging job growth while keeping inflation under control. Decisions made by the Federal Open Market Committee to raise or cut short-term interest rates can sometimes cause lenders to raise or cut mortgage rates.

How to compare mortgage interest rates today

Shopping around for quotes from multiple lenders is one of Bankrate’s most crucial pieces of advice for every mortgage applicant. When you shop, it’s important to think about not just the interest rate you’re being quoted, but also all the other terms of the loan. Be sure to compare APRs, which include many additional costs of the mortgage not shown in the interest rate. Keep in mind that some institutions may have lower closing costs than others, or your current bank may extend you a special offer. There’s always some variability between lenders on both rates and terms, so make sure you understand the full picture of each offer, and think about what will suit your situation best. Comparison-shopping on Bankrate is especially smart, because our relationships with lenders can help you get special low rates.

Step 1: Determine what mortgage is right for you

When finding current mortgage rates, the first step is to decide what type of mortgage loan best suits your goals and budget. Consider your credit score and down payment, how long you plan to stay in the home, how much you can afford in monthly payments and whether you have the risk tolerance for a variable-rate loan versus a fixed-rate loan.

Step 2: Compare mortgage rates

Once you decide which mortgage type fits your needs, you can begin comparing current mortgage options. There’s only one way to be sure you’re getting the best available rate, and that’s to shop at least three lenders, including large banks, credit unions and online lenders, or by using a mortgage broker. Bankrate offers a mortgage rates comparison tool to help you find the right rate from a variety of lenders.

Keep in mind that mortgage rates change daily, even hourly, based on market conditions, and can vary by loan type and term. To ensure you’re getting accurate rate quotes, compare loan estimates based on the same term and product, and aim to get your quotes all on the same day.

Step 3: Choose the best mortgage offer for you

Bankrate’s mortgage calculator can help you estimate your monthly mortgage payment, which can be useful as you consider your budget. Look at the APR, not just the interest rate. The APR is the total cost of the loan, including the interest rate and other fees.

Mortgages are endlessly complicated, and finding the best deal requires you to look at more than just the rate. Here are other things to consider when comparing offers:

  • APR. As we just laid out, this gives a more accurate sense of the interest you’ll pay.
  • Lender fees. They can vary widely from one lender to the next.
  • Closing costs. You might be able to negotiate on some of these items, which include appraiser fees and credit check fees.

How (and why) to compare mortgage rates

Mortgage rates like the ones you see on this page are sample rates. In this case, they’re the averages of rates from multiple lenders, which are provided to NerdWallet by Zillow. They let you know about where mortgage rates stand today, but they might not reflect the rate you’ll be offered.

When you look at an individual lender’s website and see mortgage rates, those are also sample rates. To generate those rates, the lender will use a bunch of assumptions about their “sample” borrower, including credit score, location and down payment amount. Sample rates also sometimes include discount points, which are optional fees borrowers can pay to lower the interest rate. Including discount points will make a lender’s rates appear lower.

To see more personalized rates, you’ll need to provide some information about you and about the home you want to buy. For example, at the top of this page, you can enter your ZIP code to start comparing rates. On the next page, you can adjust your approximate credit score, the amount you’re looking to spend, your down payment amount and the loan term to see rate quotes that better reflect your individual situation.

Whether you’re looking at sample rates on lenders’ websites or comparing personalized rates here, you’ll notice that interest rates vary. This is one reason why it’s important to shop around when you’re looking for a mortgage lender. Fractions of a percentage might not seem like they’d make a big difference, but you aren’t just shaving a few bucks off your monthly mortgage payment, you’re also lowering the total amount of interest you’ll pay over the life of the loan.

It’s a good idea to apply for mortgage preapproval from at least three lenders. With a preapproval, the lenders verify some of the details of your finances, so both the rates offered and the amount you’re able to borrow will be real numbers. Each lender will provide you with a Loan Estimate. These standardized forms make it easy to compare interest rates as well as lender fees.

When you’re comparing rates, you’ll usually see two numbers — the interest rate and the APR. The APR, or annual percentage rate, is usually the higher of the two because it takes into account both the interest rate and the other costs associated with the loan (like those lender fees). Because of this, APR is usually considered a more accurate measure of the cost of borrowing.

Top rated national lenders

  • Offers full online mortgage application, rate quotes, document upload and loan tracking.
  • Uses manual underwriting to evaluate creditworthiness, in some cases.

Read full review
  • Caters to self-service users who want to apply for a home loan online and talk to a human only as necessary.
  • Estimates the loan amount you’ll qualify for within minutes.
  • Streamlines the online process with document and asset retrieval capabilities, including the ability to edit your preapproval letter.

Read full review
  • Offers low rates compared with other lenders, according to the latest data.
  • Extends full online capabilities, from application to loan tracking.
  • Displays customized rates, with fee estimates, without requiring contact information.

Read full review
  • A good variety of loan types and products.
  • A mobile-friendly application process.

Read full review
  • Offers the ability to securely upload and digitally sign loan documents.
  • Displays detailed sample rates for many of its loan products.

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Factors that determine your mortgage rate

Lenders consider these factors when pricing your interest rate:

  • Credit score
  • Down payment
  • Property location
  • Loan amount/closing costs
  • Loan type
  • Loan term
  • Interest rate type
  • Your debt-to-income ratio (DTI)
  • The price of the property

Your credit score is the most important driver of your mortgage rate. Lenders have settled on this three-digit score as the most reliable predictor of whether you’ll make prompt payments. The higher your score, the less risk you pose in the lender’s view — and the lower rate you’ll pay. So to secure the best rate, take steps to improve your credit score before you apply for a mortgage.

Lenders also consider how much you’re putting down. The greater share of the home’s total value you pay upfront, the more favorably they view your application. The kind of mortgage you choose can affect your rate, too, with shorter-term loans like 15-year mortgages typically having lower rates compared to 30-year ones.

Mortgage Preapproval: Everything You Need to Know

If you don’t have a pile of cash to buy a home, you’ll need a mortgage, and the first step to getting a home loan is a mortgage preapproval. A mortgage preapproval shows sellers you can afford to buy a home, and gives you an idea of how much you’ll pay monthly and at the closing table. It’s important to understand how to get preapproved for a mortgage, so you’ll know what to expect along the way and avoid mistakes that could derail your closing plans.

What is a mortgage preapproval?

A mortgage preapproval is written verification from a mortgage lender that you qualify for the mortgage amount you’ve applied for, based on a review of your credit history, credit scores, income and assets. The “pre” in front of “approval” is short for preliminary, which means the lender still has to validate all of your information to issue a final approval before you close.

A preapproval provides an initial green light for a home loan based on a review of your finances, and isn’t a guarantee that you’ll receive a final approval. You’ll still need to find a home, negotiate a purchase price, get a home appraisal to confirm the home value supports the sales price and vet the title history to make sure you can safely take ownership of the home.

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The difference between mortgage preapproval and prequalification

Mortgage preapproval and mortgage prequalification may be used interchangeably, but there are important differences between the two.

  • Getting prequalified for a mortgage is based on a casual conversation about your credit scores, earnings, monthly debt payments and the funds you have available for a down payment and closing costs. The lender relies on what you tell them without financial documents to back it up and, in some cases, without pulling a credit report.
  • Getting preapproved for a mortgage involves a deeper dive into all the information you disclosed on your loan application verified by documents like paystubs, W-2s and bank statements. The lender also pulls a credit report from the three major credit bureaus — Equifax, Experian and TransUnion — to see how you’ve managed your credit over time.
The bottom line: A mortgage preapproval is usually for consumers committed to buying a home. A prequalification is for homeownership tire-kickers who want a rough idea of how much they qualify for, but aren’t quite ready to start their homebuying search.

Mortgage preapproval vs. final loan approval

A mortgage preapproval is like getting a hit in baseball that takes you to second base: You’re about halfway to homeownership, but you’ll need someone else to help you make it to home base, which is final loan approval. With a final loan approval:

  • You’ll provide a purchase contract with details about the home you’re buying
  • You’ll generally get a home inspection to make sure the home’s components are in good working order
  • Your lender hires a home appraiser to verify the home’s value
  • Your lender orders a title report to make sure your title is clear of liens or issues with past owners
  • Your loan application is completely vetted for accuracy
  • Your loan is cleared for closing, if all of the above check out

How to get a mortgage preapproval

Most mortgage lenders offer an online mortgage preapproval process, but there are some steps you should take ahead of time to get the most accurate approval possible. Leaving out or providing incorrect information could cause delays later in the mortgage process, and in some cases, result in a loan denial.

Follow these steps to get the best mortgage preapproval results:

1. Check your credit history

How you’ve managed other credit carries the most weight when you’re applying for a mortgage. A mortgage loan is often the largest debt you’ll take on, and your credit score is like a report card for your credit payment history.

 On May 1, 2023, changes will take effect to the Fannie Mae and Freddie Mac credit score “grading” scale for getting the best rates on conventional loans. Getting an “A” (along with the lowest rate possible) will require a credit score of at least 780. The previous benchmark was 740.

2. Pick the right preapproval mortgage program

There are four standard loan programs offered by most lenders: conventional, FHA, VA and USDA. Here’s a brief overview of each of them:

Conventional loans. With requirements set by Fannie Mae and Freddie Mac, conventional loans are the most popular of the four options discussed here, but they also have the most stringent qualifying requirements. Some perks of conventional mortgages include:

  • No mortgage insurance with a 20% down payment
  • The ability to buy a second home or investment property
  • Higher loan limits than FHA loans

THINGS YOU SHOULD KNOWConventional lenders require private mortgage insurance (PMI) if you make less than a 20% down payment. PMI protects them if you’re unable to make your payments and they have to foreclose on your home.

FHA loans. Loans backed by the Federal Housing Administration (FHA) are a good choice for borrowers with low down payment savings and low credit scores. Borrowers may qualify with scores as low as 500 with a 10% down payment — much lower than the 620 minimum requirement set by conventional lenders.

Despite the extra credit flexibility, FHA loans have some drawbacks, including:

  • Expensive FHA mortgage insurance paid regardless of your down payment amount
  • Lower loan limits than conventional loans

THINGS YOU SHOULD KNOWFHA mortgages require two types of mortgage insurance. The first is an upfront mortgage insurance premium (UFMIP) of 1.75% that is added to your loan amount. The other is an annual mortgage insurance premium (MIP) ranging from 0.15% to 0.75% of your loan amount, divided by 12 and added to the monthly payment. One big advantage over PMI: FHA mortgage insurance premiums are the same regardless of your credit scores, while PMI premiums increase the lower your scores are.

VA loans. If you’ve served or are currently serving in the military, you may be eligible for a VA loan, which is backed by the U.S. Department of Veterans Affairs (VA). No down payment or mortgage insurance is required. You may need to pay a funding fee, however, if you’re not exempt due to a service-related disability.

THINGS YOU SHOULD KNOWOne unique feature of VA loans is they aren’t subject to loan limits like conventional and FHA loans are. That gives VA borrowers more borrowing power — potentially with no down payment — in expensive parts of the country. VA lenders may set their own loan limits, so check with your loan officer if you’re getting preapproved for a large VA loan amount.

USDA loans. Borrowers with low to moderate incomes searching for homes in rural parts of the country may be eligible for a mortgage backed by the U.S. Department of Agriculture (USDA). No down payment is usually required, but income limits apply.

THINGS YOU SHOULD KNOWGetting a mortgage preapproval for a USDA loan requires a look at more than just your personal finances — the home you buy must be located in a rural area approved by the USDA. You can check the home address on the USDA website to see if it’s located in a USDA-designated rural area.

3. Know the factors lenders use to preapprove you for a mortgage

Lenders scrutinize all of your financial decision-making, from how you’ve managed credit to how stable your income is. Here’s a brief overview of the most important mortgage preapproval factors:

  • Credit score. Your credit score will make or break a mortgage preapproval. Although FHA loans permit scores as low as 500, the road to preapproval will be very bumpy, and you’ll pay a higher rate. The gold standard is 780 for the lowest rate; taking these simple steps can help give you a boost before you apply:
    • Pay everything on time. Recent late payments will knock your score down faster than any other credit action.
    • Keep your credit balances low. Although it’s best to pay balances off to zero, try to keep your credit charges at or below 30% of the total amount you can borrow. For example, if you have $10,000 worth of credit, don’t charge more than $3,000 in any given time period.
  • Debt-to-income ratio. Your debt-to-income (DTI) ratio is as important as your credit score. Lenders divide your total debt by your pretax income and prefer that the result is no more than 43%. Some government programs may allow a DTI ratio up to 50% with high credit scores or extra mortgage reserves. The bottom line: You won’t be approved if your DTI ratio is too high, even if you have a perfect credit score.
  DTI RATE ALERT. A DTI ratio higher than 40% may cost you extra after August 1, if Fannie Mae and Freddie Mac changes take effect.
  • Down payment and closing costs funds. Most loan programs require a down payment of at least 3%. You’ll also need to budget 2% to 6% of your loan amount to pay closing costs. The lender will verify where the funds come from, which may include:
    • Money you’ve had in your checking or savings account the last 60 days
    • Gift funds received from a relative, nonprofit or employer
    • Funds received from a 401(k) loan or the sale of an asset like a car
  • Income and employment. Lenders prefer a two-year employment history of receiving full-time salary or hourly earnings. Commission, bonus, overtime or self-employment income has to be averaged over two years in most cases.
  • Reserve funds. Known as mortgage reserves in the lending world, lenders may approve a low credit score or high-DTI-ratio applicant with several months’ worth of mortgage payments in the bank.

4. Gather your documents

Although you can get a mortgage preapproval online, it’s best to gather these documents to give the lender an accurate picture of your finances. We’ve divided them up into three categories.

  • Standard documents to validate your income, assets, employment history and address history
  • Special documents related to any legal agreements, major credit events or rental property income you may receive
  • Self-employed documents if you run your own business and don’t receive a W-2

Mortgage preapproval documents

Standard documents Special documents Self-employed documents
  • Current pay stubs
  • W-2s from the past two years
  • Bank statements from the last two months
  • Employer contact information from the last two years
  • Addresses for the past two years
  • Divorce decree
  • Child support agreement
  • Bankruptcy paperwork
  • Federal debt or tax payment plans
  • Proof someone else pays cosigned debt
  • Rental leases on investment properties
  • Two years of personal tax returns
  • Two years of business tax returns
  • Current profit and loss statements

5. Compare lenders

Before you apply for a loan, compare rates from at least three to five different mortgage companies to make sure you’re getting the best deal. LendingTree research shows borrowers who shop save thousands of dollars in interest. Rates change daily, so gather your loan estimates on the same day to compare apples-to-apples prices and costs.

6. Fill out a loan application

Once you’ve selected a lender, you’ll fill out a loan application and provide the paperwork they request. The lender will review your application, pull a credit report and, if all goes well, you’ll receive a written mortgage preapproval letter you can submit with offers you make to purchase a home.

What if I’m denied for a mortgage preapproval?

The most common reasons for a home loan denial are low credit scores or high DTI ratios. Once you’ve learned the reason for the loan denial, there are three things you can do:

  1. Reduce your DTI ratio. Refinance your car, pay off credit cards or ask a relative to cosign on the loan with you.
  2. Improve your credit score. Many mortgage lenders offer credit repair options.
  1. Try an alternative mortgage approval option. Mortgage brokers or mortgage lenders may offer non-qualified mortgage (non-QM) or even a hard money loan if your credit history is too challenging for standard loan programs, or your income can’t be verified with tax returns.

Steve Brown

I'm a data analytics graduate from the University of Warwick, UK, passionate about using my skills to help you win big on the UK49s. My team of experts and I analyze data daily to identify the Hot & Cold numbers, increasing your chances of success. We publish the latest UK49s predictions, Lunchtime bonus numbers, and 49s results daily, keeping you informed and ahead of UK49s. Visit my website for in-depth analysis, insightful strategies, and a community of UK49s enthusiasts like you.

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