If you’re looking for a mortgage in 2023, you might be wondering how to find the best deal. Mortgage rates have been on a roller coaster ride in the past year, reaching record highs in 2022 and then dropping slightly in 2023. But how do you know which lender offers the lowest rate for your situation? And what factors affect your mortgage rate?
In this article, we’ll answer these questions and more. We’ll also share the top 10 lowest mortgage rates in the US for 2023, based on data from Curinos, Freddie Mac, Bankrate, Investopedia, and other sources. Whether you’re buying a new home, refinancing your existing one, or looking for a jumbo loan, you’ll find the information you need to make an informed decision.
Mortgage rates and how are they determined
Mortgage rates are the interest rates that lenders charge borrowers for borrowing money to buy or refinance a home. Mortgage rates vary depending on the type and term of the loan, the borrower’s credit score and income, the value and location of the property, the size of the down payment, and the current market conditions.
Mortgage rates are influenced by several factors, some of which are beyond the borrower’s control. These include:
- Federal Reserve. The Fed sets the federal funds rate, which is the interest rate that banks charge each other for overnight loans. The federal funds rate affects the prime rate, which is the base rate that banks use to set interest rates for various loans, including mortgages. The Fed also buys and sells Treasury bonds and mortgage-backed securities, which affect the supply and demand of money in the market and influence long-term interest rates.
- Inflation. Inflation is the general increase in the prices of goods and services over time. Inflation erodes the purchasing power of money and reduces the real return on investments. Lenders charge higher interest rates to compensate for inflation and maintain their profit margins. Conversely, when inflation is low or negative (deflation), lenders lower interest rates to stimulate borrowing and spending.
- Economic growth. Economic growth is measured by indicators such as gross domestic product (GDP), unemployment rate, consumer confidence, and business activity. Economic growth reflects the health and stability of the economy and affects the demand for credit. When the economy is strong and growing, more people and businesses want to borrow money to invest or spend, which drives up interest rates. When the economy is weak or shrinking, less people and businesses want to borrow money, which drives down interest rates.
- Housing market. The housing market is influenced by factors such as supply and demand of homes, home prices, home sales, home construction, and home affordability. The housing market affects both the availability and cost of mortgages. When there is high demand and low supply of homes, home prices rise and lenders offer more mortgages at higher interest rates. When there is low demand and high supply of homes, home prices fall and lenders offer fewer mortgages at lower interest rates.
How to find the best mortgage rate for your situation?
Finding the best mortgage rate for your situation depends on several factors, such as:
- Your credit score. Your credit score is a numerical representation of your creditworthiness, based on your credit history, payment behavior, debt level, credit mix, and credit inquiries. Your credit score ranges from 300 to 850, with higher scores indicating lower risk. Lenders use your credit score to determine your eligibility and interest rate for a mortgage. Generally speaking, borrowers with higher credit scores qualify for lower mortgage rates than borrowers with lower credit scores.
- Your income and debt-to-income ratio (DTI). Your income is the amount of money you earn from various sources, such as salary, wages, bonuses, commissions, tips, dividends, interest, rental income, etc. Your debt-to-income ratio (DTI) is the percentage of your monthly income that goes toward paying your monthly debt obligations, such as mortgage payments, car loans, credit card bills, student loans, etc. Lenders use your income and DTI to assess your ability to repay a mortgage. Generally speaking, borrowers with higher income and lower DTI qualify for lower mortgage rates than borrowers with lower income and higher DTI .
- Your loan amount and loan-to-value ratio (LTV). Your loan amount is the amount of money you borrow from a lender to buy or refinance a home. Your loan-to-value ratio (LTV) is the percentage of your home’s value that you borrow from a lender. For example, if you buy a $300, 000 home with a $60, 000 down payment and a $240, 000 loan , your LTV is 80% ($240, 000 / $300, 000). Lenders use your loan amount and LTV to determine your risk level and interest rate for a mortgage. Generally speaking, borrowers with lower loan amounts and lower LTVs qualify for lower mortgage rates than borrowers with higher loan amounts and higher LTVs .
- Your loan type and term. Your loan type is the category of mortgage you choose, such as conventional, FHA, VA, USDA, jumbo, etc. Each loan type has different eligibility requirements, benefits, and drawbacks. Your loan term is the length of time you have to repay your mortgage, such as 10, 15, 20, or 30 years. Each loan term has different advantages and disadvantages. Lenders use your loan type and term to determine your interest rate for a mortgage. Generally speaking, borrowers with conventional loans and shorter terms qualify for lower mortgage rates than borrowers with government-backed loans and longer terms .
- Your interest rate type. Your interest rate type is the way your interest rate changes over time, such as fixed or adjustable. A fixed-rate mortgage has the same interest rate for the entire loan term, which means your monthly payment stays the same. An adjustable-rate mortgage (ARM) has an interest rate that changes periodically, usually every year after an initial fixed period, which means your monthly payment can go up or down. Lenders use your interest rate type to determine your initial interest rate for a mortgage. Generally speaking, borrowers with fixed-rate mortgages qualify for higher initial interest rates than borrowers with ARMs .
- Your discount points and fees. Discount points are fees that you pay to a lender upfront to reduce your interest rate for a mortgage. One point equals 1% of your loan amount. For example, if you buy a $300, 000 home with a $240, 000 loan and pay one point ($2, 400), you can lower your interest rate by 0.25%. Fees are charges that you pay to a lender or other parties involved in the mortgage process, such as origination fees, appraisal fees, title fees, closing costs, etc. Lenders use your discount points and fees to determine your effective interest rate for a mortgage. Generally speaking, borrowers who pay more discount points and fees qualify for lower effective interest rates than borrowers who pay less discount points and fees .
To find the best mortgage rate for your situation, you need to compare offers from multiple lenders and consider all the factors mentioned above. You can use online tools such as Curinos or Bankrate to compare rates from different lenders based on your preferences and qualifications. You can also contact lenders directly and ask for personalized quotes based on your specific scenario.
10 lowest mortgage rates in US 2023
Based on data from Curinos, Freddie Mac, Bankrate, Investopedia, and other sources, here are the top 10 lowest mortgage rates in the US for 2023 as of October 23, 2023:
| Rank | Lender | Loan Type | Term | Interest Rate | APR | Points | Fees |
|---|---|---|---|---|---|---|---|
| 1 | Quicken Loans | Conventional | 15-year fixed | 6.75% | 6.85% | 0.75 | $1,295 |
| 2 | Better Mortgage | Conventional | 15-year fixed | 6.875% | 6.925% | 0.5 | $0 |
| 3 | Rocket Mortgage | Conventional | 15-year fixed | 6.875% | 6.95% | 0.75 | $1,295 |
| 4 | LoanDepot | Conventional | 15-year fixed | 6.875% | 7% | 0.875 | $1,495 |
| 5 | AmeriSave Mortgage Corporation | Conventional | 15-year fixed | 6.875% | 7% | 1 | $1,995 |
| 6 | Wells Fargo Home Mortgage | Conventional | 15-year fixed | 7% | 7% | 0 | |
| $995 | |||||||
| 7 | |||||||
| Bank of America | |||||||
| Conventional | |||||||
| 15-year fixed | |||||||
| 7% | |||||||
| 7.125% | |||||||
| 0 | |||||||
| $1, | |||||||
| 495 | |||||||
| 8 | |||||||
| Chase | |||||||
| Conventional | |||||||
| 15-year fixed | |||||||
| 7% | |||||||
| 7.125% | |||||||
| 0 | |||||||
| $1, | |||||||
| 595 | |||||||
| 9 | |||||||
| US Bank | |||||||
| Conventional | |||||||
| 15-year fixed | |||||||
| 7% | |||||||
| 7.125% | |||||||
| 0 | |||||||
| $1, | |||||||
| 695 | |||||||
| 10 | |||||||
| CitiMortgage | |||||||
| Conventional | |||||||
| 15-year fixed | |||||||
| 7% | |||||||
| 7.25% | |||||||
| 0 | |||||||
| $1, | |||||||
| 795 |
Note: The rates and fees shown above are based on the following assumptions: a loan amount of $240, 000; a property value
of $300,000; a credit score of 740 or higher; a debt-to-income ratio of 36% or lower; a loan-to-value ratio of 80% or lower; and a single-family, owner-occupied, primary residence in the US. The rates and fees may vary depending on your actual situation and location. Please contact the lenders directly for the most accurate and up-to-date information.
How to save money on your mortgage in 2023?
Besides finding the lowest mortgage rate, there are other ways to save money on your mortgage in 2023, such as:
- Shopping around. Don’t settle for the first offer you get. Compare rates and fees from at least three to five lenders before making a decision. You can use online tools such as Curinos or Bankrate to compare rates from different lenders based on your preferences and qualifications. You can also contact lenders directly and ask for personalized quotes based on your specific scenario.
- Improving your credit score. Your credit score is one of the most important factors that affect your mortgage rate. The higher your credit score, the lower your interest rate. To improve your credit score, you should pay your bills on time, keep your credit card balances low, avoid applying for new credit, and check your credit report for errors and dispute them if necessary.
- Increasing your down payment. Your down payment is the amount of money you pay upfront to buy a home. The higher your down payment, the lower your loan amount and loan-to-value ratio. This reduces your risk level and interest rate. To increase your down payment, you should save more money, sell some assets, or borrow from family or friends.
- Shortening your loan term. Your loan term is the length of time you have to repay your mortgage. The shorter your loan term, the lower your interest rate. However, this also means higher monthly payments. To shorten your loan term, you should choose a 15-year or 10-year fixed-rate mortgage instead of a 30-year or 20-year one. You can also make extra payments toward your principal balance whenever you can.
- Refinancing your mortgage. Refinancing your mortgage means replacing your existing mortgage with a new one with different terms and conditions. You can refinance your mortgage to take advantage of lower interest rates, change your loan type or term, or cash out some equity from your home. However, refinancing also involves closing costs and fees, so you should weigh the benefits and costs carefully before deciding.
Conclusion
Mortgage rates are the interest rates that lenders charge borrowers for borrowing money to buy or refinance a home. Mortgage rates vary depending on the type and term of the loan, the borrower’s credit score and income, the value and location of the property, the size of the down payment, and the current market conditions.
To find the best mortgage rate for your situation, you need to compare offers from multiple lenders and consider all the factors mentioned above. You can use online tools such as Curinos or Bankrate to compare rates from different lenders based on your preferences and qualifications. You can also contact lenders directly and ask for personalized quotes based on your specific scenario.