Mortgage rates determine how much you’ll actually pay for your home — a 1% rate difference on a $350,000 loan costs over $70,000 in extra interest over 30 years. Understanding how rates work, what type of mortgage to choose, and how to qualify for the best rate can save you more money than almost any other financial decision you’ll make.
For full affordability planning and scenario frameworks, start with the Mortgage Affordability hub.
Current Mortgage Rates Overview
Average rates as of early 2026 (rates change daily):
| Loan Type | Average Rate | Monthly Payment ($350K Loan) | Total Interest Paid |
|---|---|---|---|
| 30-Year Fixed | ~6.50% | $2,213 | ~$446,000 |
| 15-Year Fixed | ~5.80% | $2,915 | ~$175,000 |
| 5/1 ARM | ~6.00% | $2,098 (initial) | Varies |
| FHA 30-Year | ~6.25% | $2,155 | ~$426,000 |
| VA 30-Year | ~6.00% | $2,098 | ~$405,000 |
| Jumbo 30-Year | ~6.75% | $2,270 | ~$467,000 |
For current rate details: 30-Year Mortgage Rates | 15-Year Mortgage Rates | ARM Loan Rates | FHA Loan Rates | Jumbo Loan Rates | Mortgage Rates (Overview)
How Mortgage Rates Are Set
Your mortgage rate is influenced by factors you can control and factors you can’t:
Factors you can’t control
| Factor | How It Affects Rates |
|---|---|
| Federal Reserve policy | Fed rate hikes push mortgage rates up; cuts push them down |
| 10-year Treasury yield | 30-year mortgage rates closely track Treasuries (usually 1.5-2% above) |
| Inflation | Higher inflation → higher rates (lenders demand more to offset purchasing power loss) |
| Economic conditions | Strong economy → higher rates; recession → lower rates |
| Housing market | Strong demand can push rates up; weak demand can lower them |
Factors you can control
| Factor | Rate Impact | How to Optimize |
|---|---|---|
| Credit score | 0.5-1.5% range | 740+ gets the best rates; see our Credit Score Guide |
| Down payment | 0.125-0.25% | 20%+ avoids PMI and gets better rates |
| Loan type | 0.5-1.0% | 15-year rates are ~0.5-0.75% lower than 30-year |
| Loan amount | Varies | Conforming limits get best rates; jumbo loans cost more |
| Property type | 0.125-0.50% | Primary residence gets lowest rate; investment property highest |
| Points purchased | ~0.25% per point | Pay upfront to lower your rate |
See Mortgage Rate History for how today’s rates compare to historical averages.
30-Year vs. 15-Year Mortgage
The two most common mortgage types, compared on a $350,000 loan:
| 30-Year Fixed | 15-Year Fixed | Difference | |
|---|---|---|---|
| Rate | 6.50% | 5.80% | 0.70% lower |
| Monthly payment | $2,213 | $2,915 | +$702/mo |
| Total interest paid | $446,000 | $175,000 | Save $271,000 |
| Total cost | $796,000 | $525,000 | Save $271,000 |
| Equity at year 5 | $33,000 | $87,000 | 2.6× more equity |
The 15-year saves a massive amount but requires $702 more per month. If the higher payment would prevent you from investing in your 401(k) or building an emergency fund, the 30-year may be the better choice.
Middle ground: Take a 30-year mortgage but make extra payments when cash flow allows. This gives flexibility without the commitment of a 15-year.
Full comparison: 15-Year vs 30-Year Mortgage
Fixed vs. Adjustable Rate Mortgages
| Feature | Fixed Rate | 5/1 ARM | 7/1 ARM |
|---|---|---|---|
| Initial rate | 6.50% | 6.00% | 6.15% |
| Rate changes? | Never | After year 5, then annually | After year 7, then annually |
| Monthly payment ($350K) | $2,213 | $2,098 (years 1-5) | $2,131 (years 1-7) |
| Initial savings vs fixed | — | $115/mo / $6,900 over 5 years | $82/mo / $6,888 over 7 years |
| Risk | None | Rate can increase significantly | Rate can increase significantly |
| Best for | Staying 10+ years | Moving/refinancing within 5 years | Moving/refinancing within 7 years |
When an ARM makes sense
- You’re confident you’ll sell or refinance within the fixed period
- The ARM saves enough to justify the risk (at least 0.5% lower)
- You can afford higher payments if rates rise
- You’re buying in a high-rate environment and expect rates to fall
See: Fixed vs Variable Rate Mortgage | ARM Loan Rates
Mortgage Types by Loan Program
| Loan Type | Down Payment | Credit Score | Rate Premium | Best For |
|---|---|---|---|---|
| Conventional | 3-20%+ | 620+ (740+ for best rate) | Baseline | Most buyers with good credit |
| FHA | 3.5% | 580+ | Similar + MIP (0.55%/yr) | Lower credit, first-time buyers |
| VA | 0% | No minimum (620+ recommended) | Often lowest | Veterans and active military |
| USDA | 0% | 640+ | Competitive + guarantee fee | Rural areas |
| Jumbo | 10-20%+ | 700+ | +0.25-0.50% | Loans above conforming limit ($766,550) |
FHA loans have lower entry requirements but charge mortgage insurance premium (MIP) for the life of the loan — unlike conventional PMI which drops at 20% equity.
See: FHA Loan Guide | FHA Loan Rates
How Credit Score Affects Your Mortgage Rate
Your FICO score alone can swing your rate by over 1%:
| Credit Score | Approximate Rate | Monthly Payment ($350K) | Extra Interest vs. 760+ |
|---|---|---|---|
| 760+ | 6.25% | $2,155 | — |
| 720-739 | 6.44% | $2,199 | +$16,000 |
| 700-719 | 6.56% | $2,227 | +$26,000 |
| 680-699 | 6.75% | $2,270 | +$41,000 |
| 660-679 | 7.00% | $2,329 | +$63,000 |
| 620-659 | 7.50% | $2,447 | +$106,000 |
A borrower with a 620 score pays $106,000 more in interest over 30 years compared to someone with a 760+ score — on the same house. Improving your credit before buying is one of the highest-return financial moves you can make.
See: Credit Score Guide | How to Improve Your Credit Score
Mortgage Points: Should You Buy Them?
Mortgage points (discount points) let you pay upfront to lower your rate. One point costs 1% of the loan amount and typically reduces your rate by ~0.25%.
| Points | Upfront Cost ($350K Loan) | Rate Reduction | Monthly Savings | Break-Even |
|---|---|---|---|---|
| 0 | $0 | — | — | — |
| 1 | $3,500 | -0.25% | ~$56 | ~5.2 years |
| 2 | $7,000 | -0.50% | ~$112 | ~5.2 years |
| 3 | $10,500 | -0.75% | ~$165 | ~5.3 years |
Rule of thumb: Buy points if you’ll keep the loan longer than the break-even period. If you might sell or refinance within 5 years, skip points and keep cash.
See: Mortgage Points Explained
Refinancing: When It Makes Sense
| Scenario | Refinance Worth It? | Why |
|---|---|---|
| Rate drops 0.75%+ and you’ll stay 3+ years | ✅ | Monthly savings exceed closing costs |
| Rate drops 0.50% and you’ll stay 5+ years | ✅ | Longer timeline to recoup costs |
| Rate drops 0.25% | ❌ Usually | Savings rarely justify 2-5% closing costs |
| Switch ARM to fixed before adjustment | ✅ | Locks in predictable payment |
| Cash-out for high-interest debt | ⚠️ Maybe | Lower rate, but extending debt term |
| Cash-out for home improvements | ⚠️ Maybe | Can increase home value |
Refinancing costs
Typical refinancing costs run 2-5% of the loan amount ($7,000-$17,500 on a $350,000 loan).
See: Refinance Calculator | Refinance Rates | Cost to Refinance | Cash-Out Refinance Guide | Before You Refinance | Can You Refinance With Bad Credit?
Rate Locks: How They Work
| Lock Period | Typical Cost | Best For |
|---|---|---|
| 30 days | Free or minimal | Quick closings |
| 45 days | Free to +0.125% | Standard purchase timeline |
| 60 days | +0.125-0.25% | Complex transactions |
| Float-down option | +0.125% | Expecting rates to drop before closing |
When to lock: Once you have an accepted offer and loan approval, lock immediately if rates are favorable or trending up. If you believe rates will drop in the next 30-60 days, ask about a float-down option.
See: Mortgage Rate Lock: How It Works
Other Mortgage Rate Products
| Product | Current Rate Range | Best For | Learn More |
|---|---|---|---|
| Home equity loan | 6.5-9.0% | Fixed-rate second mortgage | Home Equity Loan Rates |
| HELOC | 7.0-9.5% | Flexible credit line against equity | HELOC Rates |
| Investment property | 7.0-8.0% | Rental/investment purchases | Investment Property Rates |
| 10-year fixed | 5.5-6.0% | Aggressive payoff, lowest total cost | 10-Year Mortgage Rates |
Quick Reference Table
| Topic | Key Number | Learn More |
|---|---|---|
| 30-year fixed rate | ~6.50% | 30-year rates |
| 15-year fixed rate | ~5.80% | 15-year rates |
| Best score for rates | 740+ | Credit score guide |
| Cost per point | 1% of loan | Points explained |
| PMI avoidance threshold | 20% down | How much house guide |
| Refinance break-even | Rate drop of 0.75%+ | Refinance calculator |
| Historical average (30-yr) | ~7.7% (since 1971) | Rate history |
The Bottom Line
Your mortgage rate has more impact on your total housing cost than the home price itself. A 1% rate difference on a $350,000 loan costs $70,000+ over 30 years. Get your credit score to 740+ before you apply, put 20% down if possible, compare quotes from at least 3-4 lenders, and consider a 15-year mortgage if you can handle the payments. The extra effort to secure the best rate pays for itself many times over.
Sources
- Board of Governors of the Federal Reserve System. “Selected Interest Rates.” federalreserve.gov/releases/h15
- U.S. Department of Housing and Urban Development. “FHA Mortgage Insurance Programs.” hud.gov/federal_housing_administration
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