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Compare mortgage rates in Rhode Island.
Key Points
• Mortgage rates in Rhode Island tend to be slightly below the national average.
• Mortgage rates are influenced by inflation and the federal funds rate, among other economic factors.
• Higher interest rates mean higher monthly mortgage payments, making it more challenging for potential homebuyers to afford a home.
• Rhode Island offers a full selection of mortgage types, including fixed-rate, adjustable-rate, FHA, VA, and USDA loans.
• Rhode Island is one of the country’s smallest states by area and also one of its most expensive states.
Introduction to Mortgage Rates
Mortgage rates play a crucial role in determining the affordability of homeownership. Understanding the factors that influence mortgage rates in Rhode Island can empower homebuyers to make informed decisions, especially considering that this is the country’s 10th most-expensive state as ranked by cost of living. Mortgage interest rates are calculated based on a complex combination of factors that can be broadly categorized into two buckets: the state of the economy and the borrower’s financial status. We’ll look at this in more detail.
Where Do Mortgage Rates Come From?
The Federal Reserve, also known as the Fed, plays a pivotal role in determining mortgage rates. The Fed sets short-term interest rates that banks use as a benchmark for setting their own interest rates, including mortgage rates. Although mortgage rates are not directly tied to Fed rates, they tend to follow the same economic trends.
When the Fed’s interest rate is high, chances are home loan rates will be too. Homebuyers can stay informed about the Fed’s monetary policy decisions to anticipate potential changes in mortgage rates.
How Interest Rates Affect Home Affordability
Mortgage rates have a more significant impact on home affordability than many people realize. Even small changes in interest rates can significantly affect the monthly mortgage payments and the overall cost of homeownership.
For instance, if you borrow $380,000 at 5.50% interest for a 30-year term, you’ll pay $2,157 per month. But if your interest rate is 6.50%, your monthly payment will be $2,401. And you’ll pay almost $88,000 more for the higher-interest-rate loan over the life of the mortgage.
Recommended: Average Monthly Expenses for One Person
Should Homebuyers Wait for Interest Rates to Drop?
Many homebuyers. especially those buying a first home, grapple with the dilemma of whether to purchase a home immediately or wait for interest rates to drop. While it is impossible to predict future interest rate movements with certainty, there are a few factors to consider.
First, it is important to recognize that while mortgage rates are cyclical and have historically fluctuated over time, waiting for an ideal interest rate may mean missing out on the opportunity to purchase a home at a favorable price.
Homeowners also have the option of a mortgage refinance in the future if interest rates decrease. Refinancing may allow homeowners to secure a lower interest rate on their existing mortgage, potentially reducing their monthly payments and saving money over the long term.
Rhode Island Mortgage Rate Trends
By examining past data, homebuyers can make informed decisions about the best time to purchase a home based on their financial situation and market conditions. With a few exceptions, mortgage rates in Rhode Island have trended nicely below the national average over the last couple decades (the Federal Housing Finance Agency stopped tracking state averages in 2018).
| Year | Utah Rate | U.S. Rate |
|---|---|---|
| 2000 | 8.08 | 8.14 |
| 2001 | 6.91 | 7.03 |
| 2002 | 6.49 | 6.62 |
| 2003 | 5.81 | 5.83 |
| 2004 | 5.56 | 5.95 |
| 2005 | 5.70 | 6.00 |
| 2006 | 6.31 | 6.60 |
| 2007 | 6.33 | 6.44 |
| 2008 | 6.06 | 6.09 |
| 2009 | 4.94 | 5.06 |
| 2010 | 4.62 | 4.84 |
| 2011 | 4.41 | 4.66 |
| 2012 | 3.76 | 3.74 |
| 2013 | 3.79 | 3.92 |
| 2014 | 4.03 | 4.24 |
| 2015 | 3.78 | 3.91 |
| 2016 | 3.60 | 3.72 |
| 2017 | 3.92 | 4.03 |
| 2018 | 4.32 | 4.57 |
Historical U.S. Mortgage Rates
Looking at the national trend over several decades can also provide context. Although rates in, say, 2023 might seem “high,” they are still far below the peak rates of the 1980s.
Factors Affecting Mortgage Rates in Rhode Island
Numerous factors influence mortgage rates in Rhode Island and nationwide. Understanding them can help homebuyers navigate the mortgage process effectively. As noted above, they divide into two categories: economic and personal.
Economic Factors
• The Federal Reserve: The Fed sets the federal funds rate, which serves as a benchmark for other interest rates, including mortgage rates. When the Fed lowers the federal funds rate, mortgage rates tend to follow suit.
• Inflation: The general increase in prices of goods and services affects mortgage rates. When inflation rises, the purchasing power of money decreases. Lenders may increase mortgage rates to compensate.
• Unemployment: A low unemployment rate indicates a strong economy, which typically leads to increased demand for housing — which may in turn put upward pressure on prices. The Fed also looks at employment stats when setting its rate. As unemployment rises, so does the Fed’s rate.
Consumer Factors
• Credit score: A higher credit score generally makes a borrower more attractive to lenders, which may result in the would-be homeowner being offered a lower mortgage interest rate.
• Down payment: A larger down payment may reduce the mortgage interest rate a borrower is offered, because there is less risk for the lender when the borrower has more equity in the home.
• Income and assets: A steady income and assets that could provide a cushion in a downturn are also important to lenders, who will check your employment history as well as your salary.
• Type of mortgage loan: The type of mortgage loan selected can also impact the interest rate. For instance, adjustable-rate mortgages typically offer lower initial rates than fixed-rate mortgages. Some government-backed loans, like VA mortgages, can also have lower rates. And a shorter loan term usually comes with a lower rate than a longer term.
Types of Mortgages Available in Rhode Island
Homebuyers in Rhode Island have access to various mortgage types, each with its own characteristics and benefits. Understanding these options can help borrowers choose the most suitable mortgage for their financial situation and homeownership goals.
Fixed-Rate Mortgage
Fixed-rate mortgages offer stability and predictability, as the interest rate remains constant throughout the life of the loan, which might be anywhere from 10 to 30 years. This type of mortgage is ideal for borrowers who prefer consistent monthly payments and want to lock in a favorable interest rate.
Adjustable-Rate Mortgage
Adjustable-rate mortgages (ARMs) offer lower initial interest rates compared to fixed-rate mortgages, making them attractive to borrowers who plan to sell their home before the fixed-rate period ends. However, it is important to note that the interest rate on an ARM fluctuates over time based on market conditions, potentially leading to higher monthly payments in the future.
FHA Loans
Loans insured by the Federal Housing Administration are designed to make homeownership more accessible to borrowers with limited financial resources. FHA loans typically have more lenient credit and income requirements compared to conventional loans, making them a good option for first-time homebuyers or those with less-than-perfect credit.
FHA loans require a smaller down payment compared to conventional loans — as little as 3% down for first-time homebuyers — making it easier for borrowers to enter the housing market. However, FHA loans come with mortgage insurance premiums, which add to the overall cost of the loan.
VA Loans
VA loans, backed by the Department of Veterans Affairs, are available to eligible veterans, active-duty military members, reservists, and surviving spouses. VA loans provide several benefits, including no down payment requirement, competitive interest rates, and flexible credit requirements. If a VA loan sounds interesting to you, after researching this option you’ll want to obtain a Certificate of Eligibility (COE) from the VA.
USDA Loans
USDA loans, backed by the U.S. Department of Agriculture, are designed to assist borrowers whose income falls below a certain threshold in purchasing homes in rural areas. USDA loans offer competitive interest rates and do not require a down payment, making them an attractive option for eligible borrowers.
To qualify for a USDA loan, borrowers must meet certain income and property location requirements. USDA loans can provide affordable financing options for individuals seeking to purchase homes in rural communities.
Jumbo Loans
Jumbo loans are conventional mortgage loans that exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA). Conventional mortgage loans have a cap of $806,500 for a single-family home mortgage in Rhode Island. Jumbo loans are available for borrowers who need to finance homes above this amount. A jumbo loan typically comes with higher interest rates and stricter credit and income requirements compared to a conforming loan.
Popular Places to Get a Mortgage in Rhode Island
Securing a mortgage often depends on choosing the right location, where home prices are affordable and the cost of living is within your means. Larger cities in this small state, such as Providence, Warwick, and Cranston, are popular places to get a mortgage in Rhode Island. Homebuyers might be especially interested in less-expensive locations if the budget is tight.
Least Expensive Locations
Rhode Island is ranked 10th for the most expensive cost of living in the U.S. and the average home value in the state is $469,927. For homebuyers seeking the most affordable housing options in Rhode Island, the following locations offer relatively lower home prices:
• Central Falls: Central Falls is a small city with a diverse population. The cost of living is below-average for Rhode Island, and the average home value is $343,604.
• West Warwick: Near Warwick, West Warwick is a town with a mix of residential and commercial areas with an average home value of $373,421.
• Woonsocker: At $367,083, average home value here is below the state average.
Most Expensive Locations
For homebuyers seeking luxury properties or homes in highly desirable areas, the following locations offer some of the most expensive housing options in Rhode Island:
• Newport: Known for its beautiful coastline, historic mansions, and yachting culture, Newport is a popular destination for affluent homebuyers and has an average home value of $837,990.
• Narragansett: Situated along the Atlantic Ocean, Narragansett is a popular summer destination known for its beautiful beaches and charming seaside villages. The average home value here is $762,673.
• East Greenwich: There is an average home value of $749,243 in this area in the center of the state, which has a quaint main street and many historic homes.
Recommended: Best Affordable Places in the U.S.
Tips for Securing a Competitive Mortgage Rate in Rhode Island
Obtaining a competitive mortgage rate is crucial for saving money over the life of a loan. Even a small difference in the interest rate can translate to thousands of dollars in savings. Here are some tips for securing a competitive mortgage rate in Rhode Island:
Compare Interest Rates and Fees
Shopping around for the best mortgage rate can save you thousands of dollars over the life of your loan. Don’t be afraid to negotiate with lenders and compare offers from multiple banks and credit unions. Make sure you include the lender’s fees in your calculations.
Get Preapproved
Going through the mortgage preapproval process strengthens your position as a buyer and allows you to move quickly when you find the right property. It also gives you a better idea of how much you can afford to borrow, which can help you narrow down your search.Rhode Island Mortgage Resources
Rhode Island offers resources and programs to assist homebuyers, particularly first-time buyers and those with limited financial resources.
• Rhode Island Housing This agency provides a range of services to support homebuyers, including down payment assistance programs, closing cost assistance, mortgage loans, and financial counseling. They also offer educational workshops and resources to help individuals understand the home-buying process.
• NeighborWorks Blackstone River Valley: This nonprofit organization provides homebuyer education and financial counseling, to help low- and moderate-income individuals prepare for homeownership.
• Rhode Island Community Lending Program: This fund features waived lender fees and low or discounted rates on fixed rate mortgages. Borrowers may qualify because of their lower income, or because of the location where they are purchasing.
First-Time Homebuyer Programs
Rhode Island residents who qualify as a first-time homebuyer can take advantage of FHA, VA, and USDA loans. Rhode Island Housing also has a state-specific program for new purchasers whose incomes fall below $134,320 (for a family of two). It offers 100% financing (meaning no down payment is needed).
Down Payment Assistance
For homebuyers who may not have the funds for a substantial down payment, Rhode Island Housing’s Down Payment Assistance Program offers down payment assistance to eligible first-time homebuyers in the form of a second mortgage, with a maximum of $20,000. Borrowers need a credit score of at least 620.
Tools & Calculators
Rhode Island Housing offers a mortgage calculator to help homebuyers estimate their monthly mortgage payments. Or use the tools below for a full picture of your financial readiness as a homebuyer.
Run the numbers on your home loan.
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Mortgage calculator
Punch in your home loan amount and a new interest rate, and we’ll estimate your payoff date.
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Down payment calculator
Enter a few details about your home loan and we’ll provide your monthly mortgage payment.
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Home affordability calculator
Provide us with a few details and see how much you can afford to spend on a home purchase.
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.
Refinancing Options in Rhode Island: Exploring Your Possibilities
Homeowners in Rhode Island may consider refinancing their mortgage to secure a lower interest rate, reduce their monthly payments, or access cash for other financial needs. Most mortgage lenders offer basic mortgage refinance loans. Or consider one of the options below.
• FHA Streamline Refinance: This refinancing option is available to homeowners with an FHA mortgage who are current on their mortgage payments. It allows homeowners to refinance into current mortgage rates with minimal hassle and paperwork.
• Interest-Rate Reduction Refinance Loan: This type of refinance loan is available to VA loan borrowers who are up to date on their mortgage payments. It allows borrowers to reduce the monthly payments on their VA loans by obtaining an adjusted interest rate.
• Cash-Out Refinance: A cash-out refinance, obtained through a conventional mortgage lender, allows homeowners to borrow against the equity in their home and receive the difference in cash. This can be a good option for homeowners who need to access cash for major expenses, such as home renovations, education, or debt consolidation.
Closing Costs and Fees in Rhode Island: What to Expect
Closing costs are fees that are paid at the closing of a real estate transaction. These costs can include lender fees, title fees, and other miscellaneous expenses. Buyers in Rhode Island can expect to pay between 3% and 6% of the home’s purchase price in closing costs.
The Takeaway
Mortgage rates in Rhode Island are influenced by both economic factors and your personal financial profile, including the type of mortgage you choose. Potential homebuyers in Rhode Island should carefully consider their financial situation and goals when choosing a mortgage and will want to compare interest rates and fees from multiple lenders.
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.FAQ
What is a mortgage rate?
A mortgage rate is the interest rate charged on a mortgage loan. It is expressed as a percentage and is used to calculate the monthly mortgage payment.
Will mortgage rates drop in Rhode Island?
Predicting future interest rate movements is challenging, and there is no guarantee that rates will drop.
Will mortgage rates ever go back to normal?
The definition of “normal” interest rates can vary over time. Mortgage rates have fluctuated throughout history and are influenced by various economic factors.
Will Rhode Island home prices ever drop?
Real estate market conditions can change, and home prices can fluctuate. Predicting future home price movements is challenging and depends on various factors.
Is it a good time to buy a house in Rhode Island?
Whether it is a good time to buy a house in Rhode Island depends on individual circumstances, financial goals, and the current real estate market conditions. Consult a real estate agent in the local market to get a sense of whether prices are on the way up or down.
How do I lock in a mortgage rate?
Borrowers can lock in their interest rate for a certain period by getting a rate lock from a lender. This can protect them from rising rates.There may be a fee involved.
How do mortgage interest rates work?
Mortgage interest rates are influenced by various economic factors, including inflation, the federal funds rate, and the supply and demand for mortgages. But a potential borrower’s personal financial situation, including their credit score, will also influence the rate they are offered.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*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.
†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.
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.
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article. 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.External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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More home loan resources.
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First-Time Homebuyer Guide
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First-Time Homebuyer Programs and Loans
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Mortgage Preapproval Process