When it comes to figuring out what a “good” interest rate is, it really depends on the market at the time. Mortgage rates are a bit like gas prices—what seemed outrageous a few years ago might feel like a steal today.Take a look at this FRED graph for some context. Before 2015, mortgage rates rarely crossed the 5% mark. In fact, they often chilled below 4%. Fast forward a decade, and now if you see a 5% interest rate that you don’t have to buy down with points, you’re practically dancing in the streets. Back then, 5% would’ve felt like you were getting ripped off—today, it’s more like a unicorn.
What’s a good interest rate right now?
You might be asking the wrong question: the real question is what is a good interest rate for me right now? Because there’s actually a huge difference in rates and pricing between lenders at the exact same time for the exact same person. Here at Tomo Mortgage, we compared real interest rate locks across thousands of different lenders and found that there was a huge difference between what different lenders would charge the same person.
We looked at the rates different lenders were charging on a single family homes with a fixed-rate conventional loan (i.e., the majority of home buyers in the U.S.), and using the exact same financial scenario (same credit, location, debt-to-income, home price, etc.), calculated whether someone would have had to pay more or less to get the same rate from us (note that any lender can charge you more or less for a specific rate, in a practice called “buying points”). Based on this analysis we found that 9 in 10 people could have saved $4,700, on average, with Tomo Mortgage compared to whatever other lender they went to. And, more concerning, some people really got a bad deal—their rates were so much higher, we would have paid the buyer upwards of $20,000 to give them the same loan at that rate.
What are current mortgage interest rates like?
Let’s talk about the rollercoaster ride that is mortgage interest rates. As of February 2024, the average rate on a 30-year fixed mortgage was sitting at 6.90%. That’s higher than the past few years but still decent by historical standards. Now, jump to September 2024, and looking at 6.125%. That’s a full point drop from the 7.2% we saw in September 2023. For buyers, this shift is great news—it’s like going from “ugh” to “okay, I can work with this.”
| Factor | Explanation | Example |
|---|---|---|
| Market Conditions | Economic factors like inflation or unemployment can significantly impact mortgage rates. | When COVID-19 hit, rates dropped to near-zero to prevent a recession. |
| Federal Reserve Policy | The market often anticipates Fed decisions, so rates may change before the Fed officially acts. | In September 2024, the Fed cut rates by 0.50%, but rates dropped earlier due to anticipation. |
| Loan Type | Different loan types have varying rates. | A physician loan might have a higher rate than a standard 30-year fixed mortgage. |
| Credit Score | Credit scores influence rates, though the impact may not be as large as expected. | A 750 score might get a 6.59% rate, while a 630 score might get 6.2%. |
| Down Payment | A higher down payment can help secure better rates. | Putting down 5% might mean higher rates than 20%, but real estate often pays off faster. |
| Lender Competition | Shopping around between lenders can help you find better rates. | Tomo Mortgage often offers rates 0.48 points lower than average lenders. |
| Property Type | Rates can differ based on the type of property (e.g., single-family homes vs. condos). | A condo might have a 6.8% rate, while a single-family home with similar terms might have 6.5%. |
| Home Price & Loan Size | The price of the home and the loan size may influence the rate. | A $500,000 loan might have a rate of 6.4%, while a $1.2M jumbo loan could have 6.7%. |
| Debt-to-Income Ratio | A lower debt-to-income ratio can improve your chances of getting a better rate. | A borrower with a 20% DTI might get a 6.2% rate, while someone with a 45% DTI might get 6.5%. |
How can I find the best mortgage interest rate?
You’re going to want to shop around. Lenders have different operating models, cost structures, and risk profiles, which means rates can vary a lot. We ran a comparison between Tomo Mortgage and Rocket Mortgage for three ZIP codes over two weeks on NerdWallet, using the median home price and a 5% down payment. Tomo’s APR came in at 6.26%, while Rocket’s APR was 7.64%. That’s more than a full percentage point difference! So don’t just go with the first lender your friend suggests—do some digging, it’s worth it.
Should I lock in my interest rate?
Locking in your rate is like freezing the price tag on your mortgage. Most rate locks last 30 to 60 days, though some lenders offer different time frames. The benefit? If rates spike while you’re in the middle of the loan process, your rate stays safe. This gives you peace of mind, and your monthly payments stay predictable—no sudden surprises.
But there’s a flip side. If rates are high now and expected to drop soon, locking too early could sting, because you might miss out on a lower rate later. Locking your rate is like playing poker—you’re making a bet without knowing how the market will turn. If you want to hedge your bets, check out our Mortgage Rate Forecast for upcoming trends.
What else should I consider besides the interest rate?
It’s not all about the interest rate. You should also think about:
- Lender reputation (good customer service can save you headaches)
- Fees and closing costs (these can sneak up on you, on average we save buyers over $5,000 on their loan at closing here at Tomo Mortgage).
Why is it important to get a good interest rate?
Your interest rate directly affects how much you’ll pay for your mortgage over time. The lower the rate, the less you pay. That said, there’s a saying: “You date the rate, but you marry the home.” Translation? The rate is temporary—you can always refinance later when rates drop. But if you pass on the house you love, you might not get a second chance. Sure, you want a good rate, but make sure you’re also comfortable with the payments for the short term.
Should I wait until rates drop to buy a home?
In most cases, waiting it out might not be worth it. While a slight drop in rates might sound tempting, home prices are rising fast. If you wait a year and prices jump even by 5%, the extra cash you’ll pay on the higher home price will likely outpace any savings from a lower interest rate.
In short, today’s market is unpredictable, but if you can get a rate around 6% or lower, you’re in a pretty good spot. Just remember, your interest rate is only part of the equation—buying the right home for your long-term goals is what really matters.
Give us at Tomo Mortgage a call to get started today: 737-510-2523
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