Understanding Mortgage Rates

Your mortgage rate is one of the biggest factors in your monthly payment and the total cost of homeownership. Understanding how rates work can save you thousands.

What determines your rate

• ▸Credit score — higher scores get lower rates. 760+ unlocks the best pricing.
• ▸Down payment — larger down payments often mean better rates (lower loan-to-value = lower risk).
• ▸Loan type — conventional, FHA, VA, and jumbo loans carry different rates.
• ▸Loan term — 15-year loans typically have lower rates than 30-year.
• ▸Market conditions — the broader economy and Federal Reserve policy move rates for everyone.

Fixed vs. adjustable

• ▸Fixed-rate mortgages keep the same rate for the life of the loan — predictable, and powerful if rates rise.
• ▸Adjustable-rate mortgages (ARMs) start lower and adjust after a fixed period (e.g., 5/1 ARM = fixed 5 years, then annual). They win if you sell or refinance before the first adjustment, but carry risk if rates climb.

The rate is only part of the cost

A lower rate with high fees can cost more than a slightly higher rate with no fees. Compare the APR (which bundles in fees), not just the advertised rate. A 6.75% rate with 1 point can have a higher APR than a 6.85% rate with no points. On page 3 of your Loan Estimate, the "In 5 Years" total is the honest comparison.

Why a small change matters so much

On a $400,000 loan:

• ▸5.5% → $2,271/mo, $417K total interest over 30 years.
• ▸6.5% → $2,528/mo, $510K total interest.
• ▸7.5% → $2,797/mo, $607K total interest.

A 2% rate increase is $526/month and $190,000 more interest. That's why timing your lock and shopping lenders matters.

Get the live rate

Use the live FRED market rate in the Amortization Calculator to see your exact payment at today's rate — not a stale estimate.