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• Mortgage rates are influenced by both the broader economic climate and your personal financial situation.
• Fixed-rate mortgages offer stable payments, while adjustable-rate mortgages have lower initial rates but potential future rate adjustments.
• By boosting your credit score and increasing your down payment, you can secure better mortgage rates.
• Assistance programs are available for those who qualify.
• Online mortgage calculators help buyers compare different mortgage rates and understand potential costs.
Introduction to Mortgage Refinance Rates
For those embarking on their homebuying journey in Phoenix, comprehending mortgage rates is a crucial first step. This comprehensive guide is here to walk you through the intricate process of how mortgage rates are determined. We’ll equip you with the insight to secure the most favorable rate. The first thing to understand? What determines the rates lenders offer to borrowers.
Mortgage interest rates are the fees charged by lenders for borrowing money to purchase a home. These mortgage rates are determined by a complex combination of factors that can be separated into two buckets: the state of the economy and the borrower’s financial status.
Where Mortgage Rates Come From
Mortgage rates are the result of a complex interplay between various economic factors and your personal financial situation. Let’s look at these closely:
Economic Factors Influencing Mortgage Rates
• The bond market, particularly the 10-year U.S. Treasury Note, is usually an indicator of where mortgage rates are headed. When its rates rise, mortgage interest tends to head in the same direction.
• The health of the housing market also plays a role. When more homes are available than there are buyers, lenders may lower rates.
• Inflation and unemployment are important too. When the economy is strong, mortgage rates rise; a recession is usually accompanied by lower rates.
Borrower Factors Influencing Mortgage Rates
• Your credit score is critically important. Lenders typically look for a credit score of 620 or above for favorable terms, but the higher, the better.
• The amount of your down payment is also a factor. A larger down payment can result in a lower interest rate because you’ll be perceived as a lower default risk by lenders.
• Your debt-to-income (DTI) ratio will be examined. In general, mortgage lenders like to see a DTI ratio of no more than 36%, though that is not necessarily the maximum.
Discover how your debt level may impact your mortgage.
Try SoFi’s debt-to-income calculator to calculate your DTI number.
Discover how your debt level may impact your mortgage.
Try SoFi’s debt-to-income calculator to calculate your DTI number.
Phoenix Mortgage Rate Trends
Historical U.S. Mortgage Rates
Understanding the historical trends of mortgage rates in the Phoenix area can provide some insight into current market conditions. While rates are higher now than in 2021, when they hit historic lows, they remain well below the all-time highs seen in the 1980s. Let’s take a closer look at the past. The graphic shows more than a half-century of rates, while the chart shows how Phoenix’s average rate has compared to these national averages (it is often just below the national level).
To secure the best mortgage rates in Phoenix that you can get, you may want to take these steps.
• Review your credit score, and if necessary, work to strengthen it.
• Lower your debt-to-income (DTI) ratio by paying down as much debt as you can.
• Increase your down payment though savings or gifts from friends and family.
• Compare rates from different lenders so you can see the full range of rates available to you.
• Consider going through the mortgage preapproval process. This will give you a better idea of what you can afford.
Types of Mortgages Available in Phoenix
In the sunny city of Phoenix, you have many types of mortgage loans available to you — it’s all about finding the right fit for your financial landscape. These are the most common types.
Fixed-Rate Mortgage
Fixed-rate mortgages provide a solid foundation for your financial planning because they lock in an interest rate for the entire term of your loan, which could be anywhere from 10 to 40 years. Monthly payments remain constant over the life of the loan. For those in Phoenix, a fixed-rate mortgage can offer peace of mind and protection against potential increases in mortgage rates in a rapidly changing market.
Adjustable-Rate Mortgage (ARM)
Adjustable-rate mortgages (ARMs) often offer lower initial interest rates than fixed-rate mortgages, making them an attractive option for buyers who plan to sell or refinance before the end of the introductory fixed-rate period. With an ARM, the interest rate is fixed for an initial period (typically 3, 5, 7, or 10 years) and then adjusts annually based on market conditions. ARMs can be a good choice, but it’s important to understand when the rate could rise and make sure you are prepared for possible monthly payment increases.
FHA Loan
FHA loans are backed by the Federal Housing Administration, and they’re often a bit more forgiving than your standard loan. With a minimum down payment of just 3.5% for those with credit scores of 580 or higher, they’re a great option for first-time buyers who might not have a hefty down payment saved up. And those with a credit score of 500-579 can often access these loans too, as long as they put down 10%. For many first-time buyers, an FHA loan is the ticket to homeownership.
VA Loan
VA loans are a great option for those who have served our country, including eligible active-duty military members, veterans, reservists, National Guard members, and surviving spouses. One of the primary benefits of VA loans is that they do not require a down payment, making them an attractive option for those with limited savings. Additionally, VA loans often come with competitive interest rates.
Jumbo Loan
In Arizona, as in most of the U.S., a conventional mortgage loan is capped at $806,500 for a single-family home. A jumbo loan is the answer for buyers whose mortgage needs exceed this limit. These loans often come with more stringent qualification criteria. While they may require higher credit scores and more substantial down payments, they’re often a good fit for those seeking to purchase in areas with soaring home values.
Compare current home interest rates by state and find a mortgage rate that suits your financial goals.
Select a state to view current rates:
Should You Wait for Interest Rates to Drop?
If you’re buying your first home in Phoenix, you might be pondering this question. Fannie Mae’s forecast for interest rates through the end of 2025 hovers around 6.30%. So, what does that mean for you? The decision to buy a home will depend on a variety of factors, including your budget and the current market conditions in your area. Are home prices expected to increase? If so, this might be time to buy. Did you recently relocate to the area, or is your family growing? If so, mortgage rates may not be the primary driver of your decision. (Remember, you can always undertake a mortgage refinance down the line if rates take a dip.)
The Cost of Living in Phoenix
The appeal of Phoenix is undeniable. With an average of 286 sunny days each year, it’s a city that offers a lot. No surprise, then, that its population has been on a steady uptick. Its cost of living is above average for the U.S. as a whole but looks like a bargain when compared to other popular Arizona cities. The median home sale price here is just under $400,000.
Here’s how Phoenix compares to other Arizona cities on a cost-of-living index where 100 equals the average cost of living in the U.S.
City
Cost of Living
Bullhead City
92.8
Flagstaff
121.6
Lake Havasu City
125.2
Phoenix
106.3
Prescott-Prescott Valley
120.2
Surprise
102.9
Get Your Best Possible Rate in Phoenix
To secure the best available mortgage rates in Phoenix, your task is to focus on improving your credit score and actively lowering your debt-to-income (DTI) ratio. Check your credit report and look for inaccuracies. And pay your bills on time. Avoid taking on new debts that would tip your DTI in the wrong direction. And consider making a larger down payment to the extent you are able. Seek out quotes from multiple lenders and carefully explore government-backed loan options if you are eligible. Going through the mortgage preapproval process can help you fully understand your budget and negotiate the most suitable terms with a lender in Phoenix.
Helpful Tools & Calculators
Online tools can be a huge help during the mortgage process, from aiding you in understanding your home budget to enabling you to see how different mortgage rates in Phoenix might affect your monthly costs. These are our favorite calculators:
Using the free calculators is for informational purposes only, does not constitute an offer to receive a loan, and will not solicit a loan offer. Any payments shown depend on the accuracy of the information provided.
How to Evaluate Loan Offers in Phoenix
Once you’ve secured quotes for a home loan from a variety of lenders, it’s time to compare them side by side. Don’t just look at the interest rate — be sure to look at the annual percentage rate (APR), which gives you a comprehensive view of the costs involved. Once you’ve found an offer that suits you, consider requesting to lock in the rate for up to 90 days, especially if you’re concerned about rates increasing. This can provide peace of mind in a fluctuating market.
Arizona offers programs to aid homebuyers who are stepping into the market for the first time and those with limited financial means. Note that you could still qualify as a first-time homebuyer if you haven’t owned a primary residence in the past three years. Home+Plus is a down payment assistance program that offers a 30-year fixed-rate mortgage and up to 4% down payment assistance. The Pathway to Purchase Homebuyer Assistance Program offers up to $20,000 in down payment assistance, even for those who aren’t first-time buyers.
Closing Costs in Phoenix
If you’re buying a home in Phoenix, plan to set aside between 2% and 5% of your loan amount to cover closing costs. The total you’ll pay can vary based on the property’s value and location. These costs often include loan origination fees, appraisal fees, and title insurance. Remember, too, that some homebuyer assistance programs can help you pay for closing costs.
The Takeaway
By keeping an eye on the Phoenix mortgage market and exploring the various assistance programs available, you can make the right decisions to achieve your dream of homeownership. Whether you’re a first-time buyer or a seasoned homeowner, understanding the different types of mortgages and using online calculators can help you find the best fit for your needs.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
While it’s a bit like gazing into a crystal ball, keeping tabs on economic indicators and maintaining open lines of communication with lenders can help you answer this question. Watch economic factors like inflation and Treasury bond prices. When rates on the 10-year U.S. Treasury Note rise, rates may be headed up as well.
Will Phoenix home prices ever drop?
The Phoenix housing landscape is influenced by many factors, including the overall state of the economy, both locally and nationally, and the balance of supply and demand. While it is difficult to predict the exact direction of home prices due to the inherent volatility of the market, a real estate agent with local knowledge may be able to help you assess where prices are headed.
Is it a good time to buy a house in Phoenix?
Deciding whether to buy a house in Phoenix depends more on your personal financial readiness than on the prevailing market conditions. Mortgage rates in Phoenix play a role in overall affordability. If you are financially ready to purchase property and you find a competitive interest rate, it could be a good time to enter the market and buy a home. However, it’s important to carefully consider your overall financial goals before making such a significant decision about homeownership.
How do mortgage interest rates function?
Mortgage interest is the fee you pay to a lender for the privilege of borrowing money, typically expressed as a percentage of the total loan. It’s a significant portion of your home expenses, especially in the early years of homeownership. The rate you secure is influenced by a variety of factors, including your financial profile, the state of the economy, and even the local inflation rate in Phoenix.
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*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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