Compare mortgage rates in North Carolina.

Introduction to Mortgage Rates

Securing a mortgage rate you feel good about is a significant step in the homebuying process. Your mortgage rate plays a vital role in determining monthly payments and overall affordability when you purchase a home. Mortgage rates in North Carolina, as in the U.S. generally, are influenced by economic factors and consumer characteristics. If you’re looking to buy, this guide to mortgage rates in North Carolina, including historical trends, influencing factors, and available mortgage types, is a must-read.

Where Mortgage Rates Come From

Mortgage interest rates are calculated using a complex combination of factors that can be broadly categorized into two buckets: the state of the economy and the state of the borrower’s finances. The Federal Reserve (“the Fed”) plays a pivotal role in setting short-term interest rates that banks use as a benchmark. While home loan rates are not directly tied to Fed rates, when the Fed lowers rates, mortgage rates usually decrease. The opposite is also true.

Lenders also consider various borrower characteristics when determining mortgage interest rates. These include credit scores, down payment amount, debt-to-income (DTI) ratio, loan amount, loan term, and property type.

How Interest Rates Affect Home Affordability

Mortgage rates have a significant impact on home affordability, often more than people realize. Even small changes in interest rates can make a big difference in monthly mortgage payments and the overall cost of purchasing a home. For example, a 1.00% increase in the interest rate on a $300,000 mortgage can result in an increase of almost $200 in the monthly payment. For middle-income Americans, even a slight increase in interest rates can put homeownership out of reach.

Should Homebuyers Wait for Interest Rates to Drop?

Many first-time homebuyers face the dilemma of whether to buy now or wait for interest rates to come down. While it’s tempting to wait for a more favorable rate, it’s important to consider that interest rates are unpredictable and can fluctuate rapidly. If you’re shopping in a market with rapidly rising home prices, any savings from waiting for a rate drop could be canceled out by a higher home cost.

Additionally, homeowners can always go through a mortgage refinance if rates come down (or if their financial profile, such as their credit score, becomes more favorable), potentially locking in a lower rate in the future.

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North Carolina Mortgage Rate Trends

Understanding historical mortgage rates can provide valuable insights. While rates rose in recent years, they remain below historical highs. For instance, in the early 1980s, mortgage rates reached double digits, peaking at over 18%. Here’s a look at North Carolina’s mortgage rate and the national average from 2000 to 2018 (the Federal Housing Finance Agency stopped tracking this in 2018).

Historical U.S. Mortgage Rates

To provide further context, here is a brief overview of historical U.S. mortgage rates:

•   1970s: Mortgage rates began to trend upward
reached record highs, peaking at over 18% in 1981.

•   1980s: Rates reached a record high of more than 18% in 1981 and stayed in the double digits for most of the decade.

•   1990s: Rates began to decline. The median mortgage rate in this decade was 7.88%.

•   2000s: Rates remained relatively stable, hovering around 6% for most of the decade.

•   2010s: Rates continued to drift incrementally downward.

•   2020s: After hitting the lowest-ever recorded rate of 2.65% in January 2021, the 30-year mortgage rate began to rise again in the early part of the decade.

Factors Affecting Mortgage Rates in Montana

Numerous factors influence mortgage rates in North Carolina and nationwide. Some of these factors are economic, while others, such as the type of mortgage loan, are entirely within the homebuyer’s control.

Economic Factors

Here are some key economic factors that influence mortgage rates:

•   The Fed’s benchmark rate has an impact on other interest rates, including those charged by mortgage providers. When the federal funds rate increases, mortgage rates tend to follow suit.

•   Inflation, which can make it more expensive for lenders to lend money and devalue the money they do lend. To make up for this, lenders may increase interest rates.

•   The unemployment rate may indirectly affect mortgage rates. When unemployment is high, the Fed often reduces its benchmark rate to encourage job creation. Mortgage rates often fall in response.

Consumer Factors

In addition to economic factors, several consumer-specific factors also influence mortgage rates. These include:

•   Credit score: A higher credit score indicates a lower risk of default, so lenders are more likely to offer lower interest rates to borrowers with good credit.

•   Down payment: A larger down payment reduces the amount of money that needs to be borrowed, which lowers the risk for the lender who may then offer the borrower a lower interest rate.

•   Income and assets: A steady income and sufficient assets assures lenders that the borrower can meet their monthly mortgage payments. This may make the borrower eligible for lower interest rates.

•   Type of mortgage loan: Different types of mortgage loans have different interest rate structures. For example, adjustable-rate mortgages (ARMs) typically offer lower initial rates than fixed-rate mortgages. Government-backed loans, such as VA loans and FHA loans, may also have lower interest rates compared to conventional loans.

Types of Mortgages Available in Montana

Various mortgage types — including fixed-rate, adjustable-rate, FHA, VA, and USDA loans — are available to meet the needs of different homebuyers. Loans are either government-backed or conventional (not backed by the government). Here’s a rundown of the types of mortgage loans in North Carolina:

Fixed Rate Mortgage

Fixed-rate mortgages maintain the same interest rate throughout the life of the loan, ensuring that the principal and interest payments remain constant.

Fixed-rate mortgages are typically available in terms of 10, 15, 20, or 30 years. The loan term affects the monthly payment amount and the total interest paid over the life of the loan. Shorter loan terms generally have higher monthly payments but lower total interest, while longer loan terms have lower monthly payments but higher total interest.

Adjustable Rate Mortgage (ARM)

Adjustable-rate mortgages (ARMs) typically start with a lower interest rate compared to fixed-rate mortgages, which can be attractive to homebuyers who are planning to sell before the initial fixed-rate period ends (typically after three to 10 years). However, it’s important to understand that the interest rate can adjust periodically after the initial fixed-rate period, potentially leading to higher monthly payments in the future.

FHA Loans

Backed by the Federal Housing Administration, FHA loans usually have more lenient eligibility requirements than conventional loans, which makes them more accessible to borrowers with lower credit scores and smaller down payments. This makes FHA loans a good option for first-time homebuyers or those with less-than-perfect credit.

VA Loans

VA loans are available to qualifying veterans, active-duty military members, Reserve and National Guard members, and surviving spouses. Backed by the U.S. Department of Veterans Affairs (VA), these loans have competitive interest rates and do not require a down payment. VA loans also have more flexible credit requirements compared to conventional loans. Borrowers obtain these loans from private lenders after first obtaining a certificate of eligibility from the VA.

USDA Loans

USDA loans are designed for borrowers looking to purchase a home in a rural area. They are offered by the U.S. Department of Agriculture (USDA) and have no down payment requirement and typically have competitive interest rates, making them a good option for eligible borrowers. (To qualify for a USDA loan, you may have to earn below a specific income limit, in addition to buying in a specific area.)

Jumbo Loans

Conventional mortgage loans have a cap of $806,500 for a single-family home. A jumbo loan is a loan that exceeds this limit — it will come in handy if you are financing a luxury home or are buying in a high-cost area.

The Federal Housing Finance Agency (FHFA) sets this cap, which changes annually. In very high-cost areas the cap is higher, but even the costliest areas of North Carolina still fall within the $806,500 max. If you need a loan larger than that in the Tar Heel State, you’ll need a jumbo loan.

Popular Places to Get a Mortgage in Montana

When looking for a mortgage, it’s important to consider not only the interest rate but also the overall cost of living and housing prices in the area. Some locations in North Carolina offer more affordable housing and more favorable mortgage terms, making them attractive options for homebuyers. Here are some popular places to get a mortgage in North Carolina:

The Cost of Living Index (COLI) ranks all 50 states against the overall average cost of living in the U.S. The state of Montana ranks 23 in affordability — right in the middle. Here are so

Least Expensive Locations

The Cost of Living Index (COLI) compares the cost of living in different areas to the national average. A COLI below 100 indicates that the cost of living is lower than the national average, while a COLI above 100 indicates that the cost of living is higher than the national average.

Some of the least expensive locations to get a mortgage in North Carolina include these picks from SoFi’s list of best affordable places in the U.S.

•   Greensboro: The COLI is 84.2% of the U.S. average.

•   Southern Pines: The COLI is 93.9% of the U.S. average.

•   Cary: Although the COLI here is 105.8% of the U.S. average, this is one of the more affordable areas near Raleigh-Durham’s bustling job market.

•   Kinston: The COLI is 75.4% of the U.S. average

•   Henderson: The COLI here is 72.1% of the U.S. average, making it one of the lowest-cost markets in North Carolina.

Most Expensive Locations

Some of the more expensive locations for homebuyers in North Carolina include:

•   Charlotte: This bustling city has the highest COLI in the state at 22% above average.

•   Chapel Hill: The COLI in this university town is 17% above average.

•   Nags Head: A beach town, Nags Head has a COLI that is 11% above average.

•   Boone: The COLI here is 11% above average.

•   Raleigh: The COLI here is 10% above average.

•   Wilmington: The COLI here is 5% above average.

Tips for Securing a Competitive Mortgage Rate in Montana

A competitive mortgage rate is crucial for saving money over the life of a loan. Even half a percentage point can translate to many thousands of dollars. Here are some tips for securing a competitive mortgage rate in North Carolina:

Compare Interest Rates and Fees

Take the time to compare interest rates and fees from multiple lenders. Be sure to factor in upfront costs and closing fees associated with the loan. These fees can vary from lender to lender and can include application fees, appraisal fees, title insurance, and recording fees.

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. Getting preapproved for a mortgage involves providing the lender with information about your income, assets, and debts to determine how much you can borrow. Preapproval gives you a stronger negotiating position when making an offer on a home and allows you to move quickly if you find the right property.

Utilize North Carolina Mortgage Resources

North Carolina offers various resources and programs to assist homebuyers, particularly those who qualify as a first-time homebuyer and those with limited financial resources. These resources can include down payment assistance programs, affordable housing options, and counseling services.

First-Time Homebuyer Programs

North Carolina programs for first-time homebuyers include the North Carolina Home Advantage Mortgage, which pairs a 30-year fixed-rate mortgage (conventional, FHA, VA, or USDA) with down payment assistance.

Down Payment Assistance

A first-time homebuyer or military veteran purchasing a home with an NC Home Advantage Mortgage may be eligible for down payment assistance through the NC 1st Home Advantage Down Payment program. The $15,000 is a 0% interest-deferred second mortgage that doesn’t have to be repaid unless the home is sold, or the first mortgage is paid off or refinanced, within the first 15 years of the loan term.

Tools & Calculators

The North Carolina Housing Finance Agency offers a mortgage calculator for those interested in buying a home in the state. Or use one of these handy calculators to look at your homebuying budget from every angle:

Recommended: The Cost of Living in the U.S.

The Takeaway

Mortgage rates in North Carolina are influenced by the Fed’s overall U.S. economic policy as well as by the behavior of individual consumers. Potential homebuyers should carefully consider their financial situation, credit history, and long-term goals when choosing a type of mortgage. By researching different mortgage options, comparing interest rates, and seeking assistance from reputable lenders, homebuyers in North Carolina can secure affordable financing and achieve their homeownership dreams.

FAQ

What is a mortgage rate?

A mortgage rate is the interest rate charged on a mortgage loan. It determines the amount of interest a borrower will pay over the life of the loan.

Will mortgage rates drop in North Carolina?

Predicting future mortgage rate movements is challenging, as factors such as economic conditions and Federal Reserve policy can influence mortgage rates.

Will mortgage rates ever go back to normal?

The definition of “normal” mortgage rates can vary over time. Mortgage rates have fluctuated throughout history so there is no real “normal” level.

Will North Carolina home prices ever drop?

Home prices in North Carolina are influenced by several factors, including supply and demand, economic conditions, and population growth. Predicting future home price trends is complex and uncertain but a local real estate agent could be a good source for assessing market conditions.

Is it a good time to buy a house in North Carolina?

The decision of whether to purchase a home depends on individual circumstances, financial readiness, and market conditions. Factors such as affordability, job stability, and long-term plans should be considered.

How to lock in a mortgage rate?

Borrowers can lock in a mortgage rate by requesting a lock from a lender. Often a fee is also required. This secures the current interest rate for a specified period, protecting against potential rate increases during the loan application process.

How do mortgage interest rates work?

Mortgage interest rates are determined by various factors, including the overall economy, inflation, and Federal Reserve policies. Lenders use these factors, as well as the individual mortgage applicant’s personal financial situation, to assess the risk associated with lending money and set interest rates accordingly.

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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.

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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