Today's mortgage and refinance rates: March 12, 2022
Alyssa Powell/Insider
Rates closing in on 4%
Mortgage rates have been steadily increasing ahead of next week's Federal Reserve meeting, where the Fed is expected to raise the target federal funds rate by a quarter of a percentage.
In response to high inflation, the Fed has been winding down its COVID-era policies, which were initially put in place to reverse the economic damage caused by the pandemic. This winding down includes tapering its asset purchases and increasing the federal funds rate. Mortgage rates are rising as a result, and they'll probably continue to inch upward through 2022.
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Use our free mortgage calculator to see how today's interest rates will affect your monthly payments:
By clicking on "More details," you'll also see how much you'll pay over the entire length of your mortgage, including how much goes toward the principal vs. interest.
How do mortgage rates work?
A mortgage interest rate is the fee a lender charges for borrowing money, expressed as a percentage. For example, you get a mortgage for $300,000 with an interest rate of 2.5%.
Mortgage rates can be either fixed or adjustable. A fixed-rate mortgage keeps your rate the same for the entire length of your loan. An adjustable-rate mortgage locks in your rate for the first few years or so, then changes it periodically. With a 7/1 ARM, your rate would stay steady for the first seven years, then shift annually.
The longer your mortgage term, the higher your rate will be. For instance, you'll pay more on a 30-year mortgage than a 15-year mortgage. Longer terms do come with lower monthly payments, though, because you're spreading out the repayment process.
How do I get the best mortgage rate?
Here are a few steps you can take to get the lowest mortgage rate possible:
- Consider fixed vs. adjustable rates. You may be able to get a lower introductory rate with an adjustable-rate mortgage, which can be good if you plan to move before the intro period ends. But a fixed rate could be better if you're buying a forever home because you won't risk your rate going up later. Look at the rates your lender offers and weigh your options.
- Look at your finances. The stronger your financial situation, the lower your mortgage rate should be. Look for ways to boost your credit score or lower your debt-to-income ratio, if necessary. Saving for a higher down payment also helps.
- Choose the right lender. Each lender charges different mortgage rates. Picking the right one for your financial situation will help you land a good rate.
How do I choose a mortgage lender?
First, think about what type of mortgage you want. The best mortgage lender will be different for an FHA mortgage than for a VA mortgage.
A lender should be relatively affordable. You shouldn't need a super high credit score or down payment to get a loan. You also want it to offer good rates and charge reasonable fees.
Once you're ready to start shopping for homes, apply for preapproval with your top three or four choices. A preapproval letter states that the lender would like to lend you up to a certain amount, at a specific interest rate. With a few preapproval letters in hand, you can compare each lender's offer.
When you apply for preapproval, a lender does a hard credit inquiry. A bunch of hard inquiries on your report can hurt your credit score — unless it's for the sake of shopping for the best rate.
If you limit your rate shopping to a month or so, credit bureaus will understand that you're looking for a home and shouldn't hold each individual inquiry against you.