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Originally Published: Dec 07, 2020
Originally Published: Dec 07, 2020 Last Updated: Dec 07, 2020 7 min read
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The hottest housing markets next year will offer a combination of affordability, space, thriving economies, and a healthy percentage of young buyers.

Mortgage increased slightly from the end of last week.

Today's Mortgage Rates

The average rate for a 30-year fixed-rate purchase mortgage was 3.231% on Friday. On Thursday, the average rate was 3.217%.

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 December 7, 2020
Loan type Average Rate
30-Year Fixed Loan 3.231%
15-Year Fixed Loan 2.437%
30-Year FHA Loan 3.266%
30-Year VA Loan 3.324%
30-Year Jumbo Loan 3.623%
Source: Money | Date: Dec. 4, 2020 | Rates assume a credit score of 700
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How do I get the best mortgage rates?

Mortgage rates vary from state to state. On Friday, borrowers in Illinois were quoted the lowest mortgage rates — at 3.069%. People looking for mortgages in Nevada saw the highest average rate at 3.448%.

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 4.709%.

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 2.71% with 0.7 points paid for the week ending December 3. This is the 14th record low set so far this year and .01 percentage point below the previous low of 2.72%. The mortgage purchaser's weekly survey reflects borrowers who put 20% down on conforming loans and have excellent credit.

Today's 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 3.432% on Friday. Last December, the average mortgage rate (including fees) was 3.88%.

Refinance Rates for December 7, 2020
Loan type Average Rate
30-Year Fixed Loan 3.432%
15-Year Fixed Loan 2.741%
30-Year FHA Loan 3.663%
30-Year VA Loan 3.737%
30-Year Jumbo Loan 3.568%
Source: Money | Date: Dec. 4, 2020 | Rates assume a credit score of 740

A homeowner with a $200,000 mortgage balance currently paying 3.88% on a 30-year could potentially cut their monthly payment from about $940 to about $891 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?

The housing markets likely to shine in the upcoming year combine strong local economies with relative affordability and a larger percentage of Millennial buyers, predicts Realtor.com in a new Top Markets of 2021 list. The home listing site forecasts that prices will increase by 6.9% in the top ten markets, compared to 5.7% nationwide. Home sales are projected to increase by 13.1% in these cities, compared to just 7% elsewhere.

“This past year, we've all become more reliant on technology to work, learn, and maintain personal connections. The technology hubs that make this possible are thriving, as are their housing markets,” said Danielle Hale, chief economist for Realtor.com. “Additionally, the relative stability of government jobs in the past year has driven home prices and sales in several state capitals to the top."

Leading the list is Sacramento, Calif. where prices are forecast to rise by 7.4% and the number of sales by 17.2%. The city has become a magnet for San Francisco Bay Area buyers looking for more affordable options without having to leave Northern California. An added attraction is the city's strong school system and proximity to attractions like the wine country and Lake Tahoe.

Rounding out the top five markets are San Jose, Calif. followed by Charlotte, N.C., Boise, Idaho, and Seattle. As with Sacramento, all these cities offer families with not only affordable housing but plenty of space, access to outdoor activities, and thriving city centers, according to Realtor.com.

Thanks to increased buyer interest, many of these cities are experiencing a construction boom in order to satisfy demand. While these cities remain affordable in comparison to larger cities nearby, finding the right home still won't be easy.

"Home buyers, particularly younger first-time buyers, looking in one of these markets should expect rising prices and heavy competition. Meanwhile, sellers will remain in a position of power, but will find themselves on the other side of the bargaining table when buying their next home," said Hale.

Mortgage Term of the Week

Understanding the lingo can be key to avoiding mistakes when you are buying a home or refinancing your mortgage. For more read: Everything You Need to Know About Mortgage Rates in 2020.

Equity: The value of a home minus any debt. If you put 20% down to purchase a home and finance 80%, you have a 20% equity in your home. As you pay down the mortgage your equity in the home increases.

Bottom line:

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