Today’s Mortgage and Refinance Rates – Feb 27, 2021


See the mortgage rates for Sunday, February 28 »

Mortgage and refinance rates have fluctuated since last week, although rates are still at significant lows.

If you are ready to buy a home or refinance, you may prefer a fixed rate mortgage over an adjustable rate mortgage.

Darrin English, a senior community development loan officer at Quontic Bank, told Insider that ARMs were sometimes better bargains than fixed-rate mortgages in the past.

Now, English said he could get a lower rate with a fixed-rate mortgage for 15 or 30 years without risking an ARM rate increase down the road. You might consider locking in a low rate for as long as possible.

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Mortgage refinance rates have increased slightly since last week.

Refinancing rates are still at record lows overall. Low rates are often an indicator of a reeling economy. Refinancing rates are likely to remain low as the US continues to handle the economic fallout of the COVID-19 pandemic.

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Since last week, rates on fixed mortgages have gone up and all rates have gone up since last month. However, rates on the 7/1 ARM rates have dropped, decreasing by 17 basis points. Rates remain at record lows overall.

We are showing the national average rates for conventional mortgages, which may be what you consider “normal mortgages.” Government-backed mortgages through the FHA, VA, or USDA may offer lower rates, as long as you are eligible.

Fixed and adjustable mortgage rates have fluctuated since last Saturday, although they are still at surprising lows. It can be a great day to lock in a low mortgage rate.

At the same time, you shouldn’t worry too much about a rate hike in the short term, as rates are likely to stay low well into 2021, if not longer. There is no need to rush to get a mortgage or refinance. You have the opportunity to improve your financial situation and obtain a better rate.

If you’re looking to get the lowest possible rate, take a look at these tips:

  • Increase your credit score. You can start by making payments on time, paying off your debts, or allowing your credit to age. You’ll get a more favorable interest rate with a higher score, and many lenders will lower your rate with a score of at least 700.
  • Save more for a down payment. The minimum amount you need for your down payment will depend on the type of mortgage you are trying to obtain. The higher your down payment, the more likely your lender will give you a better interest rate.
  • Reduce your debt-to-income ratio. Your DTI index is the amount you pay in debt each month, divided by your monthly gross income. Many lenders want to see a DTI ratio of 36% or less. To improve your ratio, pay off debt or find ways to increase your income.
  • Choose a federally backed mortgage. You may want to consider a USDA loan (designed for low to moderate income borrowers shopping in a rural area), a VA loan (intended for military members and veterans), or an FHA loan (not designated for any particular group) . These loans usually have lower interest rates than conventional mortgages. As an added benefit, no down payment is required for USDA or VA loans.

If you’re financially ready, you can get a great rate, but there’s no need to rush.

With a 15-year fixed mortgage, you will pay off your loan for 15 years and your interest rate will remain constant throughout the period.

You will pay higher monthly payments with a 15-year term than with a 30-year term because you are paying the same home equity in half the time.

On the positive side, a 15-year fixed mortgage is less expensive than a 30-year fixed mortgage. It will take you half the time to pay off your mortgage and you will also get a lower interest rate.

If you get a 30-year fixed mortgage, you pay off your mortgage for three decades at the same interest rate all the time.

You will pay a higher total amount of interest with a 30-year term than with a 15-year term because you are paying a higher interest rate over an extended period.

However, you will spend less per month with a 30-year fixed mortgage than with a shorter term because you are spreading your payments over more years.

An adjustable rate mortgage, commonly known as an ARM, will lock in your rate for a set period. So your rate will fluctuate periodically. A 7/1 ARM keeps your rate the same for seven years, then your rate will change once a year.

Although ARM rates are quite low now, you may want to get a fixed rate mortgage. 30-year fixed rates are equivalent to or lower than ARM rates, so it could be the right opportunity to lock in a low rate with a fixed mortgage. This way, you won’t have to worry about your rate going up in the future with an ARM.

If you’re considering getting an ARM, ask your lender what your rates would be if you chose a fixed-rate mortgage over an adjustable-rate one.

While you can get a low rate now, you need to be financially prepared before doing so.

Ryan Wangman is a researcher at Personal Finance Insider who reports on mortgages, refinances, bank accounts, and bank reviews. In her past experience writing on personal finance, she has written on credit scores, financial education, and home ownership.

Laura Grace Tarpley is the Associate Editor for Banking and Mortgages at Personal Finance Insider, covering mortgages, refinancing, bank accounts, and bank reviews. She is also a Certified Personal Finance Educator (CEPF). During her four years of covering personal finances, she has written extensively on ways to save, invest, and navigate loans.

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