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Mortgage Rates Trended Up This Week | May 1 & 2, 2021

- Money; Getty Images
Money; Getty Images

Mortgage rates trended up throughout the week. Most experts expect rates to slowly rise over the next few months. Despite the increase, mortgage rates are still very low historically speaking. Many people interested in buying homes or refinancing should be able to lock in a low monthly payment.

30-year fixed mortgage rates today

The most common home loan on the market is the 30-year fixed-rate mortgage. With this loan, your interest rate and monthly payments will remain unchanged for as long as you keep the loan. You'll pay it off in 360 months unless you make extra payments, refinance the loan or sell the home.

A 30-year loan will have a higher interest rate than a shorter-term loan like a 15-year. However, because you'll be making payments for a longer time, your monthly payments will be lower. Even though you'll pay less each month, you will pay more in total interest compared to a 15-year loan. This is because you'll be paying a higher rate for a longer time.

The lower monthly payments make a 30-year loan the most popular choice among home loan borrowers.

15-year fixed mortgage rates today

Another option is a 15-year fixed-rate mortgage. With this type of loan, your interest rate and monthly payments will be constant for as long as you have the loan. You'll pay it off in 180 months unless you make extra payments, refinance the loan or sell the house.

Compared to a 30-year loan, the interest rate on a 15-year loan will be lower but the monthly payments will be higher. This is because you're paying the loan off in half the time. You will, however, pay less interest with a 15-year loan since you'll be paying a lower rate for less time.

If you can afford the higher payments, a 15-year loan could be a good choice.

5/1 jumbo adjustable-rate mortgage rates today

An adjustable-rate loan is another mortgage option. The interest rate and monthly payments on an ARM will be fixed for the first few years of the loan. After the fixed-rate period, the interest rate can change in response to market conditions, usually once a year. If the rate changes, the monthly payment will change as well.

A 5/1 adjustable-rate loan, for example, will have a fixed rate for the first five years. The rate will then reset every year afterward. Other common terms include a 7/1 ARM and a 10/1 ARM. Most ARMs will be paid off in 360 months unless you pay extra, refinance or sell.

The interest rate on a 5/1 ARM is among the lowest available. If you don't plan on keeping the home longer than five years, this type of loan could be a good option. Remember, however, that if you do stay beyond the fixed-rate period, the interest rate could go up.

Today's VA, FHA and jumbo loan rates

The average rates for FHA, VA and jumbo loans are:

Today's mortgage refinance rates

The average rates for 30-year loans, 15- year loans and 5/1 jumbo ARMs are:

Where are mortgage rates heading this year?

Mortgage rates sunk through 2020. Millions of homeowners responded to low mortgage rates by refinancing existing loans and taking out new ones. Many people bought homes they may not have been able to afford if rates were higher.

In January 2021, rates briefly dropped to the lowest levels on record, but trended higher through the month and into February.

Looking ahead, experts believe interest rates will rise more in 2021, but modestly. Factors that could influence rates include how quickly the COVID-19 vaccines are distributed and when lawmakers can agree on another economic relief package. More vaccinations and stimulus from the government could lead to improved economic conditions, which would boost rates.

While mortgage rates are likely to rise this year, experts say the increase won’t happen overnight and it won’t be a dramatic jump. Rates should stay near historically low levels through the first half of the year, rising slightly later in the year. Even with rising rates, it will still be a favorable time to finance a new home or refinance.

Factors that influence mortgage rates include:

Tips for getting the lowest mortgage rate possible

There is no universal mortgage rate that all borrowers receive. Qualifying for the lowest mortgage rates takes a little bit of work and will depend on both personal financial factors and market conditions.

Check your credit score and credit report. Errors or other red flags that may be dragging your credit score down. Borrowers with the highest credit scores are the ones who will get the best rates, so checking your credit report before you start the house-hunting process is key. Taking steps to fix errors will help you raise your score. If you have high credit card balances, paying them down can also provide a quick boost.

Save up money for a sizeable down payment. This will lower your loan-to-value ratio, which means how much of the home’s price the lender has to finance. A lower LTV usually translates to a lower mortgage rate. Lenders also like to see money that has been saved in an account for at least 60 days. It tells the lender you have the money to finance the home purchase.

Shop around for the best rate. Don’t settle for the first interest rate that a lender offers you. Check with at least three different lenders to see who offers the lowest interest. Also consider different types of lenders, such as credit unions and online lenders in addition to traditional banks.

Also take time to find out about different loan types. While the 30-year fixed-rate mortgage is the most common type of mortgage, consider a shorter-term loan like a 15-year loan or an adjustable-rate mortgage. These types of loans often come with a lower rate than a conventional 30-year mortgage. Compare the costs of all to see which one best fits your needs and financial situation. Government loans — such as those backed by the Federal Housing Authority, the Department of Veterans Affairs and the Department of Agriculture — can be more affordable options for those who qualify.

Finally, lock in your rate. Locking your rate once you’ve found the right rate, loan product and lender will help guarantee your mortgage rate won’t increase before you close on the loan.

Our mortgage rate methodology

Money’s daily mortgage rates show the average rate offered by over 8,000 lenders across the United States the most recent business day rates are available for. Today, we are showing rates for Thursday, April 29. Our rates reflect what a typical borrower with a 700 credit score might expect to pay for a home loan right now. These rates were offered to people putting 20% down and include discount points.

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