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By Samantha Sharf
November 25, 2020
Money

Thanks to rising home prices, it will be possible to get a conforming loan on a $1 million home in some parts of the country for the first time next year.

Meanwhile, mortgage rates dropped from yesterday.

Today’s Mortgage Rates

The average rate for a 30-year fixed-rate purchase mortgage was 3.25% on Tuesday. A day earlier the average rate was 3.412%.

Money’s mortgage rates include data from over 8,000 lenders across the United States and are updated daily. These rates include discount points and represent what a borrower with a 20% down payment and 700 credit scores — roughly the national average FICO score — would have been quoted.

Mortgage Rates for November 25, 2020
Loan type Average Rate
30-Year Fixed Loan 3.25%
15-Year Fixed Loan 2.449%
30-Year FHA Loan 3.178%
30-Year VA Loan 3.249%
30-Year Jumbo Loan 3.628%
Source: Money | Date: Nov. 24, 2020 | Rates assume a credit score of 700
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View Rates for January 23, 2021

How does someone qualify for the best mortgage rates?

Mortgage rates vary from state to state. On Tuesday, borrowers in Hawaii were quoted the lowest mortgage rates — at 3.181%. People looking for mortgages in West Virginia saw the highest average rate at 3.216%.

Nationwide, borrowers with the highest credit scores, 740 and above, were quoted rates averaging 2.883%, while those with credit of 620 or below were shown rates of 4.66%.

You may be able to negotiate a lower rate if you shop around or if you have other accounts with the lender. (Money’s picks for the best mortgage lenders are here.) Currently, some lenders are hiking up advertised rates to keep demand in check, so you may be offered a lower rate if you reach out directly.

Freddie Mac’s widely quoted Primary Mortgage Market Survey put rates at 2.72% with 0.7 points paid for the week ending November 25. That’s steady with a week earlier when rates hit 13th record low of the year. The mortgage purchaser’s weekly survey reflects borrowers who put 20% down on conforming loans and have excellent credit.

Today’s Best Mortgage Refinance Rates

Money’s survey also shows that the offered rate for a 30-year refinance for someone with a 740 credit score was 3.451% on Tuesday. Last November, the average mortgage rate (including fees) was 3.874%.

Refinance Rates for November 25, 2020
Loan type Average Rate
30-Year Fixed Loan 3.451%
15-Year Fixed Loan 2.786%
30-Year FHA Loan 3.532%
30-Year VA Loan 3.621%
30-Year Jumbo Loan 3.56%
Source: Money | Date: Nov. 24, 2020 | Rates assume a credit score of 740

A homeowner with a $200,000 mortgage balance currently paying 3.874% on a 30-year could potentially cut their monthly payment from $940 to $893 by financing at the current lower rates. To determine if it’s worth it to refinance your mortgage, also consider the closing fees you paid on your current mortgage, how much your new lender is charging and how long you have left on your loan term. (Our picks for the best lenders for refinancing are here).

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What else is happening in the housing market today?

On Tuesday, the Federal Housing Finance Agency announced new conforming loan limits for 2021. Next year, Fannie Mae and Freddie Mac will buy loans as large as $548,250 across most of the United States. That’s up from $510,400 in 2020.

For a homebuyer, that will mean being able to buy a more valuable home before needing to take out a jumbo mortgage.

Since these larger loans cannot be purchased by Fannie and Freddie (which operate under congressional charters and are overseen by FHFA) jumbo lenders tend to charge higher interest rates and to hold borrowers to stricter qualifications standards.

In areas with high median home values the conforming loan limit is higher. In 2021, the highest limit will be $822,375 up from $765,600.

That means in expensive markets in and around New York City, Washington D.C., San Francisco and Los Angeles — as well as a few vacation home towns — it will be possible to buy a home for just over $1 million with a conforming loan (assuming a 20% down payment).

With a 20% down payment, borrowers elsewhere will be able to take advantage of conforming loans on homes worth up to $685,000. At today’s mortgage rates, a borrower with a $548,250 loan and 700 credit would pay $3,046 per month with a conforming loan and $3,161 with a jumbo.

FHFA adjusts loan limits annually based on changes in the average U.S. home price. According to FHFA’s seasonally adjusted index, home prices increased 7.42% between the third quarters of 2019 and 2020. The baseline conforming loan limit for next year was increased by the same amount. The limit will be higher in all but 18 counties next year.

Quote of the Week

Adrienne Allen, head of real estate homebuying platform Homie, on how to find a home in a tight housing market:

From: Finding a Home Is So Hard Right Now That Buyers Are Scouring Obituaries and Divorce Notices.

Bottom line:

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