Compare mortgage rates in Indiana.

Introduction to Mortgage Rates

Even small changes in interest rates can significantly impact a homeowner’s monthly mortgage payments and overall borrowing costs. Mortgage rates are calculated using a complex combination of factors that can be categorized into two buckets: the state of the economy and the borrower’s financial status.

Understanding mortgage rates and the factors that influence them is essential for making informed decisions about homeownership in Indiana. This comprehensive guide explains all you need to know about mortgage rates in California, including the factors that influence them, historical trends, and available home loan types.

Where Mortgage Rates Come From

The Federal Reserve, also known as the Fed, sets the short-term interest rates that banks use as a benchmark for lending. Although home loan rates are not directly tied to Fed rates, they generally follow the same economic trends. When the Fed’s interest rate is high, chances are mortgage rates will be too.

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 put homeownership out of reach for middle-income Americans. For instance, a one-percentage-point increase in interest rate on a $400,000 home — just a little less than the U.S. median sale price — can add over $200 to the monthly payment, making it harder to qualify for a loan or afford a home.

However, it’s over the long term that interest really has the opportunity to add up. Over the 30-year lifetime of the loan, you’ll pay approximately the following amount in total interest:

•   7.00%: $446,426

•   6.50%: $408,140

•   6.00%: $370,683

Should Homebuyers Wait for Interest Rates to Drop?

Many first-time homebuyers wonder if they should buy now or wait for interest rates to come down. But waiting for a drop in rates could mean missing out on the opportunity to build equity. After all, homeowners can always refinance their mortgage after rates come down.

Mortgage refinance allows homeowners to secure a lower interest rate on their existing loan, potentially saving tens of thousands in interest over the life of the loan. Therefore, buying a home now and refinancing later may be a more advantageous strategy than waiting for rates to drop.

Indiana Mortgage Rate Trends

Indiana mortgage rates have trended close to the national average over the last few decades, often a bit higher but occasionally lower. Indiana experienced its recent high rate of 8.13% in 2000. Rates fell steadily thereafter, hitting a low of 3.71% in 2012 and settling at 4.75% in 2018. (The FHFA stopped reporting the data after that year.) You can expect Indiana rates to follow the same pattern going forward.

Historical U.S. Mortgage Rates

To put Indiana’s current mortgage rates in perspective, it’s helpful to compare them to historical U.S. mortgage rates. Over the past 50 years, mortgage rates have ranged from a low of around 3.00% in the early 1970s to a high of over 18% in the early 1980s. The current rates are significantly lower than the historical highs, indicating a relatively favorable environment for homebuyers.

Factors Affecting Mortgage Rates in Indiana

Numerous factors influence mortgage rates in Indiana and nationwide. Some of these are economic, while others are entirely within the homebuyer’s control. Understanding these influences can help borrowers make informed decisions about their mortgage options.

Economic Factors

From one perspective, mortgage rates are totally beyond the control of the average homebuyer. Blame the economy, market conditions, and the government:

•   The Fed: As noted above, the federal funds rate serves as a benchmark for other interest rates, including mortgage rates. When the Fed raises the federal funds rate, it becomes more expensive for banks to borrow money, which can lead to higher mortgage rates. Conversely, when the Fed lowers the federal funds rate, it becomes cheaper for banks to borrow money, which can lead to lower mortgage rates.

•   Inflation: When inflation rises, the purchasing power of money decreases, making it more expensive for lenders to lend money. As a result, interest rates may be raised to compensate for the loss in purchasing power. When inflation stabilizes at acceptable levels (typically around 2%), rates will drop.

•   Unemployment rate: A lower unemployment rate can result in higher mortgage rates. A low unemployment rate indicates a strong economy, which typically leads to increased demand for housing. This increased demand puts upward pressure on home prices and, not surprisingly, mortgage interest rates.

Consumer Factors

On the other hand, there’s a lot that consumers can do to set themselves up to receive the most competitive mortgage rates available:

•   Credit score: A higher credit score generally results in a lower mortgage interest rate. Credit scores are a measure of a borrower’s creditworthiness and ability to repay debts. Borrowers with higher credit scores are considered less risky by lenders, who are willing to offer them lower interest rates. Conventional loans may require a credit score of 620 or above.

•   Down payment: Increasing the down payment can reduce the mortgage interest rate. A larger down payment means the borrower is taking on less debt, which reduces the risk for the lender. As a result, lenders may offer lower interest rates to borrowers who make larger down payments — 20% or more.

•   Income and assets: A steady income is important to lenders, who will check your employment history as well as your salary. Assets like investments and emergency savings also reassure lenders that you could still pay your mortgage in the case of a job loss or other financial setback. Somewhat ironically, borrowers with higher incomes and more assets are generally offered lower mortgage interest rates.

•   Type of mortgage loan: Certain types of mortgage loans tend to have lower rates. For instance, adjustable-rate mortgages (ARMs) 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 longer terms.

Types of Mortgages Available in Indiana

Various mortgage types — including fixed-rate, adjustable-rate, and several government-backed loans — are available to meet the needs of different homebuyers in Indiana. Conventional loans can be fixed-rate or adjustable.

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 available in terms of 10, 15, 20, or 30 years.

Adjustable Rate Mortgage (ARM)

Adjustable-rate mortgages (ARMs) initially offer a lower rate than fixed-rate loans. However, after an initial fixed-rate period, typically 5, 7, or 10 years, the interest rate can adjust periodically based on a specified index. ARMs can be beneficial for borrowers who plan to sell their home before the fixed-rate period ends or who expect interest rates to remain low.

FHA Loan

FHA loans are backed by the Federal Housing Administration and typically have more lenient eligibility requirements than conventional loans. Also, FHA loans often have lower down payment requirements and may be a good option for first-time homebuyers or borrowers with less-than-perfect credit.

VA Loan

VA loans are available to veterans, active-duty military members, and some Reserve and National Guard members. These loans are backed by the Department of Veterans Affairs and offer competitive interest rates and flexible terms. One of the primary benefits of VA loans is that they do not require a down payment.

USDA Loans

USDA loans are designed for low-income borrowers looking to purchase a home in a rural area. These loans are backed by the U.S. Department of Agriculture (USDA) and offer competitive interest rates and flexible terms. USDA loans have income and property location restrictions, but they can be a good option for eligible borrowers who are struggling to afford a home.

Jumbo Loans

Jumbo loans are conventional mortgage loans that exceed the conforming loan limit set by the Federal Housing Finance Agency (FHFA). In Indiana, the conforming loan limit for a single-family home is $832,750. Jumbo loans are typically used to finance more expensive homes and may have different interest rates and terms than conforming loans.

Popular Places to Get a Mortgage in Indiana

Securing a mortgage often depends on choosing the right location, where home prices are affordable and mortgage terms are favorable. Some popular places to get a mortgage in Indiana, along with the average home value there, include:

•   Indianapolis: $228,378

•   Fort Wayne: $232,179

•   South Bend: $181,965

•   Evansville: $190,649

•   Bloomington: $309,461

Besides looking at the average home value, homebuyers should research the cost of living in the U.S. and how their target neighborhoods compare. Cost of living, which refers to the average monthly expenses for one person, varies widely across and within states.

For more information, check out our guide to the Cost of Living in Indiana.

Least Expensive Locations

For homebuyers looking for more affordable options, some of the least expensive places to get a mortgage in Indiana include:

•   Anderson: $130,662

•   Muncie: $143,030

•   Kokomo: $166,408

•   Terre Haute: $152,615

These cities offer lower home prices and cost of living, and may be a good option for first-time homebuyers or those on a tight budget.

Most Expensive Locations

On the other hand, some of the most expensive places to get a mortgage in Indiana include:

•   Carmel: $530,820

•   Zionsville: $606,978

•   Fishers: $422,662

•   Westfield: $445,836

These cities are known for their affluent neighborhoods and higher home prices.

Recommended: Best Affordable Place in the United States

Tips for Securing a Competitive Mortgage Rate in Indiana

Getting a competitive mortgage rate can save you tens of thousands of dollars over the life of your loan. When you think of it that way, taking extra time to improve your credit score or go through the mortgage preapproval process is well worth it. Here are some tips to help you secure the best possible rate:

Compare Interest Rates and Fees

Take the time to compare interest rates and fees from multiple lenders. Be sure to ask about any upfront costs or closing fees associated with the loan.

Get Preapproved

Getting preapproved for a mortgage strengthens your position as a buyer and allows you to move quickly when you find the right property.

Consider a Shorter Loan term

Shorter loan terms typically come with lower interest rates than longer terms. If you can afford the higher monthly payments, a shorter loan term can save you money in interest over the life of the loan.

Improve Your Credit Score

A higher credit score — say, 740 or above — can lead to a lower mortgage interest rate. Take steps to improve your credit score, such as paying bills on time, reducing debt, and disputing any errors on your credit report.

Make a Larger Down Payment

Increasing your down payment can reduce your mortgage interest rate. A larger down payment reduces the loan amount, which lowers the lender’s risk and may result in a lower interest rate. In 2024, borrowers’ median down payment is 15%. With a down payment of 20% or more, though, you’ll also save money by avoiding private mortgage insurance.

Indiana Mortgage Resources

Indiana offers various resources and programs to assist homebuyers, particularly first-time buyers and those with limited financial resources. Two of these resources are:

•   Indiana Housing and Community Development Authority (IHCDA): The IHCDA
offers a variety of programs to help Hoosiers afford homes, including down payment assistance, closing cost assistance, and mortgage credit certificates.

•   Community Action Program (CAP) Homeownership Education and Counseling: Available in Benton, Fountain, Montgomery, Parke, Vermillion, and Warren counties, the CAP program provides free homebuyer education and counseling services to help Hoosiers make informed decisions about homeownership.

First-Time Homebuyer Programs

Indiana offers programs to help first-time homebuyers get into a home. (To qualify as a first-time homebuyer usually means you haven’t owned a primary residence within the last three years.) These programs are worth a look:

•   First-Step: This IHCDA program offers down payment and closing cost assistance of up to 6% in the form of a non-forgivable second mortgage.

•   Mortgage Certificate: The IHCDA provides an annual federal income tax credit for up to $2,000 of mortgage interest paid per year. Homebuyers can apply for the certificate through a participating lender when they apply for their mortgage. There’s an $800 fee, but the lifetime savings usually outweigh the fees.

Down Payment Assistance

Down payment assistance programs help homebuyers afford a down payment on a home. The Next Home program in Indiana offers 3.5% of a home’s value for a down payment to homebuyers using a 30-year FHA loan.

Find out more on the IHCDA website, or visit our Indiana First-Time Home Buying Assistance Programs guide.

Tools & Calculators

There are many online tools and calculators available to help users calculate their mortgage payments and determine how much they can afford to borrow. Here are SoFi’s top three calculators:

Refinancing Options in Indiana

Refinancing your mortgage can be a good way to lower your monthly payments, get a lower interest rate, or cash out some of your home equity. Some of the refinancing options available in Indiana include:

FHA Streamline Refinance

The FHA Streamline Refinance allows FHA-insured homeowners to refinance into current mortgage rates with minimal hassle.

VA Interest-Rate Reduction Refinance Loan

The VA Interest-Rate Reduction Refinance Loan can reduce the monthly payments on VA loans by adjusting the APR.

Conventional Refinance

Conventional refinance loans are available to homeowners who do not have FHA or VA loans. Conventional refinance loans may offer lower interest rates than FHA or VA loans, but they may also have higher fees.

Closing Costs, Taxes, and Fees in Indiana

Buyers in Indiana can expect to pay between 2% and 5% of the home’s purchase price in closing costs. These costs include:

•   Loan origination fee: Charged by the lender for processing the loan application.

•   Appraisal fee: Paid to an appraiser to determine the value of the home.

•   Credit report fee: Paid to a credit bureau for obtaining your credit report.

•   Title insurance: Protects the lender against losses if there is a problem with the title to the home.

•   Recording fee: Paid to the county recorder to record the mortgage.

The Takeaway

Indiana offers a range of affordable homes and mortgage options for homebuyers. By staying informed about current mortgage rates, exploring assistance programs, and carefully considering refinancing options, individuals can make strategic decisions that align with their financial goals and achieve successful homeownership in Indiana.

FAQ

Will mortgage rates drop in Indiana?

Predicting the direction of mortgage rates is challenging, and there is no guarantee that rates will drop in the future.

Will mortgage rates ever go back to normal?

The definition of “normal” mortgage rates can vary over time. Mortgage rates have fluctuated throughout history and are influenced by various economic factors.

Will Indiana home prices ever drop?

Home prices are influenced by supply and demand dynamics, economic conditions, and local market factors. Predicting future price trends with certainty is difficult.

Is it a good time to buy a house in Indiana?

The decision of whether to buy a house depends on individual circumstances, financial readiness, and long-term goals. There is no one-size-fits-all answer, and market conditions can change rapidly.

How does mortgage interest rates work?

Mortgage interest rates represent the cost of borrowing money from a lender to finance a home purchase. They are influenced by various economic factors and impact the monthly mortgage payments made by borrowers.

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.

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.

SOHL-Q324-069

Compare mortgage rates in Texas.

Introduction to Mortgage Rates

The Lone Star State presents a range of mortgage options for homebuyers. Mortgage rates are determined by a complex combination of economic factors and the borrower’s financial status. These factors can be broadly categorized into two buckets: the state of the economy and the borrower’s financial health.

On the borrower’s side, credit score, down payment, income, assets, and the type of home loan all play a role in determining the interest rate offered. A higher credit score, larger down payment, steady income, and valuable assets can lead to lower mortgage rates. This deep dive into mortgage rates explores how they’re set, how borrowers can reduce the rate they’re offered, and state resources for first-time borrowers and repeat homebuyers.

Where Mortgage Rates Come From

The Federal Reserve, also known as the Fed, sets the short-term interest rates that banks use as a benchmark. Although home loan rates aren’t directly tied to Fed rates, they generally follow the same economic trends.

When the Fed’s interest rate is high, chances are mortgage rates will be too. This is because banks borrow money from the Fed at the federal funds rate and then lend it to consumers at a higher rate, which includes a profit margin for the bank.

How Interest Rates Affect Home Affordability

If you’re buying your first home, pay close attention: Mortgage rates have a more significant impact on home affordability than many people realize. Even small changes in interest rates can make a big difference in the amount of money a borrower needs to qualify for a mortgage and the size of their monthly payments.

For example, a $300,000 mortgage with a 4.5% fixed interest rate for 30 years would result in a monthly payment of $1,520. If the interest rate increases by just 1 percentage point to 5.5%, the monthly payment jumps to $1,703 — a difference of $183 per month.

Over the life of the loan, the higher interest rate would add up to a total of $65,992 in additional interest paid. This illustrates how even a small increase in interest rates can make a significant difference in the overall cost of a mortgage.

Should Homebuyers Wait for Interest Rates to Drop?

Many first-time homebuyers wonder if they should buy now or wait for interest rates to come down. While it’s impossible to predict the future, there are a few factors to consider when making this decision.

First, it’s important to remember that mortgage rates are cyclical and have historically fluctuated over time. While rates may be higher at the moment, there’s no guarantee that they will drop in the near future. Waiting too long could mean missing out on the opportunity to purchase a home at a favorable price.

Second, homeowners can always refinance their mortgage after rates come down. A mortgage refinance involves taking out a new loan with a lower interest rate to replace the existing mortgage. This can help borrowers save money on their monthly payments and reduce the overall cost of their loan.

Texas Mortgage Rate Trends

Understanding historical mortgage rates can provide valuable insights into where rates are headed. Over the 20-year period covered by the chart below, mortgage rates in Texas ranged from a low of 3.59% in 2012 to a high of 8.03% in 2000. While rates have risen in recent years, they remain below historical highs. Indeed, they are currently around the 50-year average.

Historical U.S. Mortgage Rates

For a broader perspective, it’s helpful to consider historical U.S. mortgage rates. The average 30-year fixed mortgage rate in the United States has followed a similar trend to Texas, with rates rising in recent years but remaining below historical highs.

According to Freddie Mac, the average 30-year fixed mortgage rate in the U.S. was 6.09% in September 2024. This is higher than the record low of 2.65% reached in January 2021 but much lower than the peak of 18.63% reached in 1981.

Factors Affecting Mortgage Rates in Texas

Many factors influence mortgage rates in Texas and nationwide. Some of these factors are economic, but others are entirely within the homebuyer’s control.

Economic Factors

Economic factors that affect mortgage rates include the Federal Reserve’s interest rate decisions, inflation, and the unemployment rate.

•   The Feds sets the short-term interest rates that banks use as a benchmark for setting mortgage rates. When the Fed’s interest rate is high, mortgage rates tend to be higher as well.

•   Inflation, or the rate at which prices increase over time, can also impact mortgage rates. When inflation is high, the purchasing power of money decreases, making it more expensive for lenders to lend money. As a result, they may increase interest rates to compensate for the loss of purchasing power.

•   The unemployment ratealso plays a role in mortgage rates. Lower unemployment can result in higher mortgage rates. A low unemployment rate indicates a strong economy, which typically leads to increased demand for housing. This increased demand puts upward pressure on home prices and, not surprisingly, mortgage interest rates.

Consumer Factors

On the consumer side, factors such as credit score, down payment, income, assets, and the type of mortgage loan can all influence the interest rate offered by lenders.

•   Credit score: A higher credit score indicates a lower risk of default, making borrowers more attractive to lenders. As a result, lenders are more likely to offer lower interest rates to borrowers with high credit scores.

•   Down payment: A larger down payment reduces the amount of money that the borrower needs, which lowers the risk for the lender. As a result, lenders may offer lower interest rates to borrowers who make larger down payments.

•   Income and assets: A steady income and valuable assets indicate a borrower’s ability to repay the loan, making them more attractive to lenders. As a result, lenders may offer lower interest rates to borrowers with stable income and assets.

•   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, but the interest rate can adjust over time. Government-backed loans, such as VA loans and FHA loans, may also have lower interest rates than conventional loans.

Types of Mortgages Available in Texas

Various types of mortgage loans — including fixed-rate, adjustable-rate, FHA, VA, and USDA loans — are available to meet the needs of different homebuyers in Texas.

Conventional loans, which are not backed by the government, can be fixed-rate or adjustable-rate. Fixed-rate loans offer a stable interest rate throughout the life of the loan, while adjustable-rate loans have an initial fixed rate that adjusts after a certain period. Government-backed loans, such as FHA, VA, and USDA loans, are available to specific groups of borrowers and may have more favorable terms and lower interest rates than conventional loans.

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. This type of mortgage provides stability and predictability in monthly payments, making it a good option for borrowers who prefer certainty and want to lock in a low interest rate.

Fixed-rate mortgages are available with repayment terms of 10, 15, 20, or 30 years. The longer the loan term, the lower the monthly payments will be, but the more interest the borrower will pay over the life of the loan.

For example, a $300,000 fixed-rate mortgage with a 30-year term and an interest rate of 6.92% would result in a monthly payment of $1,979. If the same loan had a 15-year term, the monthly payment would be $2,353, but the total interest paid over the life of the loan would be significantly lower: $198,387 less!

Adjustable-Rate Mortgage (ARM)

Adjustable-rate mortgages (ARMs) initially offer a lower interest rate than fixed-rate loans. This can be beneficial for borrowers who plan to sell their home or refinance before the fixed-rate period ends.

However, ARMs come with the risk that the interest rate can increase after the initial fixed-rate period, which can lead to higher monthly payments. The interest rate on an ARM is typically adjusted every 6 months or a year.

For example, a $300,000 ARM with a 5-year fixed-rate period and an initial interest rate of 4.5% could have a monthly payment of $1,520 during the fixed-rate period. However, after the fixed-rate period ends, the interest rate could adjust to a higher rate, such as 6.5%, resulting in a monthly payment of $1,896.

FHA Loan

FHA loans are backed by the Federal Housing Administration and are designed to make homeownership more accessible for borrowers with lower credit scores and smaller down payments.

FHA loans require a minimum credit score of 580 for a 3.5% down payment or 500 for a 10% down payment. The maximum loan amount for FHA loans in Texas is $524,225 for a single-family home.

FHA loans have less stringent credit and income requirements compared to conventional loans, making them a good option for first-time homebuyers or borrowers with less-than-perfect credit.

VA Loans

VA loans are available to veterans, active-duty military members, and some Reserve and National Guard members, and surviving spouses. VA loans offer competitive interest rates and do not require a down payment.

VA loans are backed by the U.S. Department of Veterans Affairs (VA) and are available to eligible borrowers with a valid Certificate of Eligibility (COE). The VA does not set a maximum loan amount, but lenders may have their own limits.

VA loans also have competitive interest rates and do not charge mortgage insurance, which can save borrowers money over the life of the loan. However, there is a one-time funding fee that is paid either at closing or rolled into your mortgage balance. A first-time VA loan borrower with a 0% down payment would pay a 2.15% funding fee.

USDA Loans

USDA loans are designed for low-income borrowers looking to purchase a home in a rural area. USDA loans offer competitive interest rates and do not require a down payment.

USDA loans are backed by the U.S. Department of Agriculture (USDA) and are available to eligible borrowers in designated rural areas. The USDA does not set a maximum loan amount, but lenders may have their own limits.

USDA loans also have competitive interest rates and do not charge mortgage insurance, which can save borrowers money over the life of the loan. USDA loans do require a 1% upfront guarantee fee and a 0.35% annual guarantee fee, based on the remaining principal balance each year.

Jumbo Loans

Jumbo loans are conventional loans that exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA). In Texas, the conforming loan limit for a single-family home is $832,750. Anything above that requires a jumbo mortgage.

Jumbo loans are not backed by the government and may have higher interest rates and stricter credit requirements than conforming loans. However, jumbo loans can be an option for borrowers who need to borrow more than the conforming loan limit.

Recommended: Cost of Living in the U.S.

Popular Places to Get a Mortgage in Texas

Securing a mortgage often depends on choosing the right location, where the home prices, cost of living, and mortgage terms are affordable.

The cost of living refers to the average monthly expenses for one person, which varies wildly from urban and suburban neighborhoods to rural areas, and from state to state. Texas offers a variety of cities and towns that cater to different home buyers’ needs and budgets. Some popular places to get a mortgage in Texas include:

•   Austin: Austin is a vibrant city known for its tech industry, music scene, and outdoor activities. The average home value in Austin is $527,213.

•   Dallas: Dallas is a major business and cultural center in Texas. The average home value in Dallas is $313,158.

•   Houston: Houston is a diverse city with a strong economy and a large job market. The average home value in Houston is $266,515.

•   San Antonio: San Antonio is a historic city with a rich culture and a growing economy. The average home value in San Antonio is $255,778.

These cities offer a range of housing options, from affordable starter homes to luxury properties, and have a variety of lenders and mortgage brokers to help homebuyers secure financing.

Least Expensive Locations

For homebuyers looking for more affordable housing options, there are several cities in Texas with lower median home prices.

•   El Paso: The average home value in El Paso is $223,427, making it one of the most affordable cities in Texas.

•   Brownsville: Brownsville is another affordable city in Texas, with an average home value of $186,700.

•   McAllen: McAllen is located in the Rio Grande Valley and has an average home value of $223,755.

•   Laredo: Laredo is another city in the Rio Grande Valley with an average home value of $209,111.

These cities offer lower housing costs and may be a good option for first-time homebuyers or those on a tight budget.

Tips for Securing a Competitive Mortgage Rate in Texas

A competitive mortgage rate can save you thousands of dollars over the life of your loan. Here are a few tips for securing a competitive mortgage rate in Texas:

Compare Interest Rates and Fees

Take the time to compare interest rates and fees from multiple lenders. Be sure to ask about any upfront costs and closing fees associated with the loan.

Get Preapproved

Getting preapproved for a mortgage strengthens your position as a buyer and allows you to move quickly when you find the right property. If you’re worried about interest rates rising, you can pay a fee to the lender to lock in your rate for up to 90 days. Just be aware that the mortgage preapproval process can take up to ten days.

Improve Your Credit Score

A higher credit score can lead to a lower mortgage interest rate. Pay your bills on time, reduce your debt, and avoid opening new credit accounts before applying for a mortgage.

Make a Larger Down Payment

A larger down payment can lower your mortgage interest rate. If you can afford it, try to make a down payment of at least 20% of the purchase price.

Consider a Shorter Loan term

Shorter loan terms typically have lower interest rates than longer loan terms. If you can afford it, opt for a 15-year mortgage instead of a 30-year mortgage.

By following these tips, you can increase your chances of securing a competitive mortgage rate in Texas and saving money on your home purchase.

Texas Mortgage Resources

Texas offers various resources and programs to assist homebuyers, particularly first-time buyers and those with limited financial resources.

•   Texas Department of Housing and Community Affairs (TDHCA): The TDHCA offers a variety of programs to help Texans buy homes, including down payment assistance, closing cost assistance, and mortgage credit certificates.

•   Texas Veterans Land Board (VLB): The VLB offers low-interest loans to eligible veterans, active-duty military members, and their families.

•   USDA Rural Development: USDA Rural Development offers a variety of programs to help rural Texans buy homes, including direct loans, guaranteed loans, and home improvement loans.

These resources can provide valuable assistance to homebuyers in Texas, making it easier to achieve their dream of homeownership.

First-Time Homebuyer Programs

Texas offers several programs to help those who qualify as a first-time homebuyer to overcome the challenges of buying a home.

•  My First Texas Home
My First Texas Home

•  Homes for Texas Heroes
Homes for Texas Heroes

Down Payment Assistance

Down payment assistance can help homebuyers overcome one of the biggest challenges of buying a home.

•  My Choice Texas Home

•  Home Sweet Texas Home
Home Sweet Texas Home

Tools & Calculators

There are a variety of tools and calculators available to help homebuyers estimate their monthly mortgage payments, compare interest rates, and make other important decisions.

Refinancing Options in Texas

Refinancing a mortgage can be a smart way to lower your monthly payments, get a lower interest rate, or cash out some of your home equity.

•   FHA Streamline Refinance: The FHA Streamline Refinance allows FHA-insured homeowners to refinance into current mortgage rates with minimal hassle.

•  VA Interest-Rate Reduction Refinance Loan: The VA IRRRL can reduce the monthly payments on VA loans by adjusting the APR.

•  Conventional refinance: Conventional refinance loans are available to homeowners who do not have FHA or VA loans. Conventional refinance loans can offer lower interest rates than FHA or VA loans.

Refinancing can be a complex process, so it’s important to talk to a mortgage lender to see if it’s right for you.

Closing Costs, Taxes, and Fees in Texas

Buyers in Texas can expect to pay between 2% and 5% of the home’s purchase price in closing costs. That includes the following required costs:

•  Title insurance: Title insurance protects the lender against any claims against the title to the property.

•  Recording fees: Recording fees are paid to the county to record the deed and mortgage.

•  Transfer taxes: Transfer taxes are paid to the state when the property is transferred from the seller to the buyer.

•  Loan origination fee: The loan origination fee is a fee charged by the lender for processing the loan application.

•  Appraisal fee: The appraisal fee is paid to an appraiser to determine the value of the property.

Closing costs can vary depending on the lender and the purchase price of the home. It’s important to factor closing costs into your budget when buying a home.

The Takeaway

Texas’s mortgage landscape offers a range of options for homebuyers. By staying informed about current mortgage rates, exploring assistance programs, and carefully considering refinancing options, individuals can make strategic decisions that align with their financial goals and achieve successful homeownership.

FAQ

What is a mortgage rate?

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

Will mortgage rates drop in Texas?

Predicting future interest rate movements is challenging, and there is no guarantee that rates will drop. Homebuyers should make decisions based on their current financial situation and housing needs rather than speculating on future interest rate changes.

Will mortgage rates ever go back to normal?

“Normal” depends a lot on how far your memory goes back. Mortgage rates have fluctuated throughout history and are influenced by various economic factors. It is difficult to predict when or if rates will return to a specific level. But by some measures, rates are normal now.

Will Texas home prices ever drop?

Real estate market conditions, including home prices, are influenced by supply and demand, economic factors, and local market dynamics. Texas is a big state, and there is no guarantee that prices will drop in a particular area.

Is it a good time to buy a house in Texas?

The decision of whether to buy a house depends on individual circumstances and preferences. Factors such as financial readiness, housing needs, and market conditions should be carefully considered when making this decision.

How to lock in a mortgage rate?

Borrowers can lock in their mortgage rate by getting preapproved for a mortgage. This process involves providing the lender with information about their financial situation and credit history. Once preapproved, the lender will provide a commitment letter that locks in the interest rate for a specified period.

How do mortgage interest rates work?

Mortgage interest rates are determined by various factors, including the overall economy, the Federal Reserve’s monetary policy, and the supply and demand for mortgage loans. Lenders consider these factors when setting the interest rates they offer to borrowers.

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.

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.

SOHL-Q324-098

Compare home equity loan rates in Florida.

Introduction to Home Equity Loan Rates

Home equity is the amount of ownership you have in your home compared to what you owe on your mortgage. If you’re reading this, you’re probably aware that your home equity can be a powerful tool for helping you meet your financial goals. But what’s your next step?

This guide will cover how to get equity out of your home, with a focus on home equity loans. We’ll explain the ins and outs (and ups and downs) of interest rates, and show you how to secure the best possible rates in Florida, which can save you thousands of dollars over the long term. Soon, you’ll not only understand your next step but feel confident in which one is right for you.

How Do Home Equity Loans Work?

Like any home loan, a home equity loan uses your home as collateral. Because of that, home equity loan typically have lower interest rates than personal loans. Usually that rate is fixed, giving you consistent payments over the life of the loan.

To qualify for a home equity loan in Florida, you’ll need to have at least 20% equity in your primary residence. Your lender will then calculate your combined loan-to-value ratio (CLTV), or your mortgage balance plus the amount you want to borrow, divided by the appraised value of your home. Most lenders require your CLTV to be 85% or less for a home equity loan or home equity line of credit (HELOC).

Let’s say your home is appraised at $400,000 and your mortgage owed is $250,000.

•  $400,000 X 85% = $340,000

•  $340,000 – $250,000 = $90,000 Max loan amount

Your maximum loan amount is $90,000, a generous sum that can be used for just about anything: home improvements, education, medical bills, or debt consolidation.

What Determines Home Equity Loan Interest Rates?

Now that you know what a home equity loan is, let’s talk rates. In Florida and throughout the country, home equity loan interest rates are based on the prime rate, the baseline interest rate that banks extend to their most creditworthy clients. Federal Reserve policy decisions on interest rates also have a ripple effect on home equity loan rates. By understanding these influences, you’re better equipped to anticipate rate shifts and make well-informed decisions about your Florida home equity loan.

How Interest Rates Impact Affordability

The interest rate you lock in can make a world of difference in how comfortably you manage your monthly payments. Consider this: Over a standard 20-year term for a home equity loan, a mere 1% variance in the interest rate could add up to an extra $11,000 in interest payments over the entire loan period.

Here are the payment figures for a $75,000 home equity loan:

Recommended: What Is a Home Equity Line of Credit?

Home Equity Loan Rate Trends

The prime interest rate acts as a crystal ball for what’s to come in home equity loan rates. By keeping an eye on the prime rate’s movements, you’re arming yourself with the knowledge to make the smartest financial moves.

Historical Prime Interest Rates

Since 2018, the U.S. prime rate has moved dramatically. It hit a low of 3.25% in 2020 and a high of 8.50% in 2023. This wide range reflects the many economic changes that have occurred over the past five years, and how those changes have affected the decisions of businesses and consumers in Florida and nationwide.

Source: TradingView.com

Factors Influencing Home Equity Loan Rates in Florida

Now for the final piece of the puzzle that is home equity loan interest rates: The Florida housing market and the borrower’s financial profile also come into play. Your credit score, loan-to-value ratio, home value, property location, and lender policies all exert their push and pull on rates. Here’s what to expect when applying for a home equity loan in Florida:

Credit Score

If you’re someone who’s on top of your financial game, paying your bills on time, you’re likely to snag a more attractive interest rate. Lenders usually look for a credit score of 680 or higher for a home equity loan, but they save the best rates for borrowers with scores of 700 or above.

Loan-to-Value (LTV) Ratio

As we noted above, your loan-to-value (LTV) ratio determines the maximum loan amount you can receive. The LTV ratio is calculated by dividing the loan amount by the appraised value of the property. The LTV ratio also helps lenders determine the appropriate interest rate and terms for each borrower’s financial situation.

Home Value

Lenders often use independent appraisals to determine a home’s market value and the homeowner’s equity position. Remember, the value of your home minus what you owe on it is your equity.

Home Value Stability

When the market is up, lenders are more willing to work with you on larger loan amounts, seeing the reduced risk in your property’s increased value. But if the market takes a dip, lenders could tighten their criteria and offer smaller loans.

Property Location

Where you live makes a difference, too. Florida homeowners might see home equity loan rates that are higher than the national average due to the increased risk of hurricanes. Elsewhere, rates may reflect a heightened risk of earthquakes, wildfires, or extreme weather.

Lender Policies

Because lenders have some say in the rates they offer, it’s important to shop around and compare rates, fees, and closing costs from multiple lenders in Florida. By doing your homework and comparing your options, you might be able to secure more favorable terms and save money in the long run.

Recommended: Cash Refinance vs Home Equity Line of Credit

How to Qualify for the Lowest Rates

So, what can you do to secure the best home equity loan rates? You need to have a good credit score, manage your debt-to-income ratio, have adequate property insurance, and maintain a good amount of equity in your home. Let’s take a closer look.

Build a Strong Credit Score

A robust credit score can be your ticket to snagging more attractive interest rates on home equity loans. The higher your credit score, the lower the risk you pose to lenders, and the more appealing you become to them. This desirability can translate to significant savings over the life of your loan. And if you’re eyeing a Florida home equity loan, where the market is bustling and interest rates are on the move, this is especially pertinent. So, take the time to fortify your credit score — it’s a smart move that could pay off handsomely.

Manage Debt-to-Income Ratio

Your debt-to-income (DTI) ratio is a significant factor when applying for a home equity loan. This ratio, which compares your monthly income to your monthly debt obligations, is a key indicator of your financial health. Lenders typically look for a DTI ratio between 36% and 50% for home equity loans. This range allows them to assess your ability to handle your current debt and manage the additional loan payments.

Obtain Adequate Property Insurance

Property insurance is often a prerequisite for securing home equity loans. This requirement holds particular significance in Florida and other regions susceptible to flooding. If you haven’t reviewed your coverage in a while, make it a priority to reevaluate and potentially upgrade your insurance before shopping around for the home equity loan.

Maintain Sufficient Home Equity

If you’re mulling over a home equity loan, make sure you have at least 20% equity in your primary residence. Not sure what your equity position is? A real estate agent or lender can help you figure it out.

Fixed vs. Variable Interest Rates

Home equity loans in Florida usually come with fixed interest rates. This means you’ll have the same predictable monthly payment for the life of the loan.

Be aware that while fixed rates offer peace of mind, they can also start off higher than variable rates. Variable rates adjust up or down over time; that can mean a lower initial payment, but potentially much higher payments in the future. Understanding the benefits and drawbacks of each type of interest rate can help you make the best financial decision for your situation.

Tools & Calculators

Take advantage of the many online tools and calculators that can help you generate accurate estimates of your home equity loan payments, and understand the potential impact of different loan terms on your financial situation. Here, in addition to the home equity loan calculator, you’ll find a HELOC repayment calculator and a HELOC interest only calculator.

Closing Costs and Fees

Home equity loan closing costs can typically range from 2% to 5% of the loan amount. These may include fees for an appraisal, credit report, document preparation, origination, notary, title search, and insurance. Title insurance alone can cost you 0.5 to 1% of the loan balance, with title search fees ranging from $100 to $250. Appraisals generally fall in the $300 to $500 range. Shopping around with multiple lenders can allow you to compare fees as well as interest rates.

Tax Deductibility of Home Equity Loan Interest

The interest on a home equity loan may be tax-deductible if the funds are used for home improvements. The deduction is capped at $750,000 for joint filers and $375,000 for single filers. To claim this benefit, you’ll need to itemize your deductions. It’s always a good idea to chat with a tax advisor to ensure you’re making the most of your tax benefits.

Alternatives to Home Equity Loans

You may have heard that there are different types of home equity loans. The key terms to research are home equity lines of credit (HELOCs), home equity conversion mortgages (HECMs), and cash-out refinances. Each of these options has its own set of features and requirements, and some may be more appropriate for your situation than others. Read on for details.

Home Equity Line of Credit (HELOC)

A HELOC, or home equity line of credit, is a bit like a credit card, but with a much lower interest rate. It allows you to borrow up to a certain limit, and you only have to pay interest on the amount you borrow for the first 10 or so years. The interest rates on HELOCs tend to be variable, however, which means they can go up and down with the market. Not sure which one is for you? Our guide to HELOC vs Home Equity Loans may be able to help.

Home Equity Conversion Mortgage (HECM)

An HECM is a government-insured reverse mortgage designed to help homeowners aged 62 and older access the equity in their homes. You can receive HECM funds as a lump sum, regular payments, or a line of credit. The beauty of it is that no monthly payments are required as long as you live in your home. This makes HECMs different from home equity loans and HELOCs, which do require monthly payments. Keep in mind, though, that HECMs often come with higher closing costs and a longer application process.

Cash-Out Refinance

A cash-out refinance is a type of mortgage refinance. The refi pays off your old mortgage and gives you the homeowner a lump sum of cash based on your home equity. It’s generally easier to qualify for a cash-out refinance than other options, and you may be able to borrow up to 80% of your home’s equity.

The Takeaway

Home equity loans can be a great way to get the cash you need for a variety of uses, from home renovations to high-interest debt consolidation. To get the best rate on your home equity loan, utilize financial tools and calculators, and take the time to shop around for deals that meet your specific financial needs and objectives. That way you can feel confident that you’re making the best choice for your situation.

FAQ

What would the monthly payment be on a $50,000 home equity loan?

The monthly payment on a $50,000 home equity loan can vary depending on a number of factors, including the interest rate, loan term, and any fees. For example, a loan with an 8.00% interest rate and a 10-year term results in a monthly payment of $607. To get an accurate estimate of your monthly payment, it’s a good idea to use a loan calculator.

What is the monthly payment on a $100,000 HELOC?

When you’re thinking about a home equity line of credit, it’s important to consider the monthly payments that come due after the draw period. They’re determined by two things: the interest rate and how much of the HELOC you use. Assuming you use the full amount and make no payments during the draw period, with 8.50% and a 20-year term, the payment would be $868. To get a better idea of what your actual payments might look like, try using a HELOC calculator.

What is the payment on a $25,000 home equity loan?

When you’re mulling over a $25,000 home equity loan, the payments will depend on your interest rate and loan term. For a loan with an 8.00% interest rate and 10-year term, the monthly payment would be $303. To figure out your actual payment, run the numbers through a trustworthy loan calculator.

What would the payment be on a $30,000 home equity loan?

When it comes to a $30,000 home equity loan, the interest rate and loan term are the primary factors that determine the payment amount. For example, a $30,000 loan at 8.00% repaid over 7 years gives you a monthly payment of $468. The same loan amount and interest rate repaid over 15 years lowers the monthly payment to $287 but increases the total interest paid. To get an accurate estimate of your payments, it’s advisable to use a reliable loan calculator.

What might disqualify you from getting a home equity loan?

An unfavorable credit history, insufficient equity in your home, a high debt-to-income ratio, and inadequate insurance coverage for your property could all make you ineligible for a home equity loan. These factors suggest a higher risk of default to lenders and can significantly impact your ability to secure a home equity loan.

What are the benefits of a HELOC?

HELOCs, or home equity lines of credit, offer a variety of benefits. They are flexible, have lower interest rates than most credit cards, and you may only have to pay interest on the amount you use for the entire draw period (usually 10 years). These features make HELOCs a great option for homeowners who need more flexibility and lower costs when borrowing money.

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.

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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

SOHL-Q324-069

Compare HELOC rates in Florida.

Introduction to HELOC Rates

When you’re looking for the best HELOC rates in Florida, it’s important to compare offers from different lenders. Your home equity, credit score, and other factors will significantly influence the rates you’ll be offered, and each lender may weigh your information slightly differently.

But first it’s helpful to have a solid understanding of what is a home equity line of credit. Below, you’ll gain valuable insights into all the factors that influence HELOC rates, the strategies you can use to secure the most favorable rates. and the other types of home equity loans you may want to consider.

What Is a HELOC?

A HELOC is a revolving credit line based on the home equity you have built up by paying off your home loan. Many lenders will let you borrow up to 90% of your home’s value, minus your mortgage. Don’t confuse a HELOC vs. a home equity loan. A HELOC is a credit line. You can draw funds from it as you need them, up to whatever ceiling your lender allows, and you only pay interest on the portion of the credit line you use. (A home equity loan is a lump-sum payment.)

A HELOC has two phases: a draw period and a repayment period. It’s important to understand how they differ.

The Draw Period

During the HELOC’s draw period (usually 10 years), you can access funds up to your credit limit, make payments to pay down your balance, and borrow the money again. The borrower is usually required to make interest payments during the draw period, but payments toward the principal may be optional. HELOC interest rates are variable, so at some point during the draw period, the interest rate on your HELOC will change, moving up or down in lockstep with the larger market, within limits established in your HELOC agreement. If you are making interest-only payments on your HELOC during the draw period, a HELOC interest-only calculator can help you see what your monthly bill might be based on how much of the credit line you have used to date.

The Repayment Period

During the repayment period, typically 10 to 20 years, borrowers repay what they have borrowed with interest. The interest rate may continue to change. Using a HELOC repayment calculator can help you understand how the interest rate and term impact monthly payments and total interest paid.

Where Do HELOC Interest Rates Come From?

HELOC interest rates in Florida are tied to lenders’ prime rates — aka the rate they charge their most creditworthy customers. But prime rates are influenced by the Federal Reserve’s policies. Understanding this can help borrowers get a sense of where rates might be headed, an important thing if you’re thinking about getting a HELOC or wondering how your variable interest rate may change.

How Interest Rates Impact HELOC Affordability

You already know from your home mortgage that small variations in your interest rate can make a big difference in affordability over the course of a loan. Here’s a look at how that plays out over three HELOC levels, if you were to borrow the full amount of the credit line.

HELOC Interest Rate Trends

Fluctuations in the prime rate are to be expected during the lifespan of your HELOC, so it’s a good idea to become somewhat familiar with the recent history of the average prime rate, as shown in the chart below. The rate reached a low of 3.25% in 2020 and a high of 8.50% in 2023. Looking back over a much longer span of time, as shown in the graphic, you’ll see that rates as low as 3.25% don’t come around very often.

Historical Prime Interest Rate

Historical U.S. Prime Rates

Factors Influencing HELOC Rates

The prime rate is, well, a primary factor influencing HELOC rates in the state of Florida. But it’s not the only determinant of the rate you’ll be offered. Here are some factors that are distinctive to each borrower that help determine whether you can qualify for a HELOC and what rate you are offered.

Home Equity

Generally, a minimum of 15% to 20% equity is required to qualify for a HELOC. But having more significant home equity places you in a lower-risk category from a lender’s perspective, potentially leading to better interest rates.

Credit Score

Maintaining a high credit score, ideally 680 or higher, is mission-critical when applying for a HELOC. Many lenders prefer a credit score of 700 or above. The better your score, the more favorable a Florida HELOC rate you can expect.

Stable Income

Of course, lenders evaluate your income to make an informed decision regarding your ability to repay the HELOC. But the consistency of your income stream is important, too. You’ll be asked to submit documentation that verifies your income, such as pay stubs and tax returns, and if your income has ups and downs, you can expect to need more documentation than usual.

Loan-to-Value Ratio

Most HELOC lenders require your combined loan-to-value ratio (mortgage balance plus HELOC amount / appraised home value) to be 90% or less. The ratio is a key metric in determining your credit limit. For example: If your home value is $500,000, your mortgage balance is $300,000, and you want a $100,000 line of credit, then your LTV ratio would be 80%.

Variable vs Fixed Interest Rates

As we’ve seen, HELOCs are characterized by variable interest rates, which are subject to fluctuation. Initially, variable interest rates are lower compared to fixed rates, but they undergo adjustments in accordance with prevailing market conditions. It’s important to understand this if you’re looking at HELOC rates within the state of Florida.

Tools & Calculators

Online tools can assist you in estimating your payments and comprehending the financial implications of a home equity line of credit — both the short-term monthly payments and the full amount of interest you’ll pay over the repayment term. Here are three useful tools:

How to Qualify for a Competitive HELOC Rate

There are a few steps you can take to better your chances of qualifying for a competitive HELOC rate in the state of Florida.

Cultivate Your Credit Score

By ensuring timely payments and reducing credit card balances, you can considerably enhance your credit score, which is paramount for securing more favorable HELOC rates. Periodically reviewing your credit report and addressing any discrepancies can also be instrumental in improving your score.

Assess Your Home Equity

Regular mortgage payments help in building home equity over time, and increased home equity can lead to better terms and higher ceilings when applying for a HELOC.

Calculate Your Debt-to-Income Ratio (DTI)

Your debt-to-income (DTI) ratio is a crucial metric used by home equity lenders to assess your borrowing capacity. It is calculated by dividing your total monthly debt obligations by your gross monthly income. Ideally, lenders prefer a DTI below 36%, but some will accept a DTI below 50%.

Application Process for a HELOC in Florida

Taking the HELOC application process a step at a time can help you provide thorough and accurate information, which will speed things along. Grab your computer — and perhaps a cup of coffee — and get started.

Step 1. Run the Numbers

Start by making sure your credit score is at least 680; your DTI ratio is below 50%; and you have a minimum of 15% equity in your home. Meeting these minimums should help you qualify for a HELOC.

Step 2. Compare Lenders

Review the posted interest rates and terms for HELOCs for lenders in Florida. Examine their qualification criteria, loan minimums, and loan limits. You might see the draw and repayment periods a lender offers. This will help you find lenders that might suit your needs. If a lender offers an online prequalification process, take advantage of it to find out where you stand.

Step 3: Gather Your Documents

Compile these documents before you start your application: proof of identification; proof of income (pay stubs, last year’s W-2, your most recent tax return); employment history, such as a resume; and home insurance information. Have your most recent mortgage statement available, too. If your income is erratic, gather at least two tax returns plus a profit and loss statement from your business.

Step 4: Submit Your Application

Submit your application online, over the phone, or during an in-person visit — the method you use will depend on the lender and your personal preference. Double-check everything for accuracy before you sign off. Mistakes can slow things down.

Step 5: Get an Appraisal

A home appraisal will likely be needed. It helps the lender determine the precise amount of equity that is available for you to borrow. If your lender requests an in-person appraisal, try to schedule it as soon as possible.

Step 6: Prepare for Closing

Before you are able to access HELOC funds, you’ll need to sign the HELOC documents and pay any required fees. Some lenders obligingly make funds available within three business days following the closing of the HELOC. Take time to ensure you understand all terms and conditions before finalizing your HELOC.

Tax Benefits and Considerations

Homeowners can deduct HELOC interest if the borrowed funds are used for buying, building, or significantly improving their primary residence. Interest deductions are limited to interest paid on the first $375,000 of the mortgage principal for individual taxpayers ($750,000 for married couples filing jointly). Consulting a tax advisor can help you navigate the specific tax implications and confirm eligibility.

Closing Costs and Fees

HELOC closing costs are lower than home-buying or refinancing costs. An appraisal fee, ranging from $300 to $500, is often the highest expense. Other costs include application, loan origination, and administrative fees. Some lenders charge transaction or inactivity fees, or an early termination fee. Many lenders offer to reduce or waive closing costs but may charge a higher interest rate.

Alternatives to HELOCs

As noted above, there is another way besides a HELOC to get equity out of your home: a home equity loan. Let’s look at this option as well as some other possible avenues for borrowing.

Home Equity Loan

You’ve already learned that a home equity loan provides you with a lump sum instead of a line of credit. You’ll begin paying that loan back, with interest, as soon as you receive it. And since most home equity loans have a fixed interest rate, your monthly payment amount should remain steady for the duration of the loan. Borrowers can usually access up to 85% of the equity built in their home through a home equity loan and because the loan is secured by the borrower’s home, the interest rate will likely be better than the rate available for an unsecured loan.

Cash-Out Refinance

This type of mortgage refinance lets homeowners access cash by refinancing their mortgage for more than they owe. As you think about a cash-out refinance vs. a home equity line of credit or home equity loan, an important consideration is the refi interest rate as compared to your current home loan rate. If you happened to get a low rate on your home loan, a refinance may not make sense.

Personal Loan

A personal loan is a flexible, typically unsecured loan that you pay back in regular, fixed payments over a term of 2 to 7 years. Because this loan is unsecured, the interest rate you are offered could be higher than the rate on a HELOC or home equity loan. For some borrowers who don’t like the idea of using their home as collateral, this is an acceptable trade-off.

Credit Cards

Credit cards typically come with higher interest rates than HELOCs, which can make carrying a large balance from month to month expensive. While credit cards offer flexibility for smaller purchases, home equity loans or HELOCs provide larger sums at lower rates.

The Takeaway

Understanding where HELOC rates in Florida originate and how you can better your chances of getting an attractive rate is an important part of the borrowing process. By comparing lenders’ rates and terms, striving to maintain a great credit score, and providing all the necessary information a lender needs, you can improve your chances of a smooth borrowing process in Florida. Whether you’re doing substantial home renovations or being strategic about debt consolidation, a HELOC can serve as a highly versatile financial tool, providing you with the flexibility to achieve your goals.

SoFi now partners with Spring EQ to offer flexible HELOCs. Our HELOC options allow you to access up to 90% of your home’s value, or $500,000, at competitively lower rates. And the application process is quick and convenient.

FAQ

What is the monthly payment on a $50,000 HELOC?

How much you’ll pay depends on your loan term and interest rate. For example, with an 8.00% interest rate and a 10-year term, your monthly payment will be about $607. An 8.00% interest rate and a 20-year term would cost $418 per month.

Is a HELOC a good idea right now?

A home equity line of credit can be a smart choice for people with a steady income and a strong credit history. It’s versatile (you borrow what you need, up to the credit line, when you need it), and the funds can be used for any purpose. Nevertheless, homeowners should carefully compare interest rates and make sure they are comfortable with a HELOC’s variable interest rate before signing on.

What is the monthly payment on a $100,000 HELOC?

If you’re paying back the entire $100,000 borrowed with a HELOC over 20 years, your monthly payment could range from $716 to $868 if your interest rate was in the 6.00% to 8.50% range.

What are the benefits of a HELOC?

Perhaps the biggest benefit of a HELOC is that because it is a line of credit versus a lump-sum loan, you only withdraw the funds you need at any given time. And you only pay interest on the amount of the credit line you are using. HELOCs also tend to have competitive interest rates, especially when compared to unsecured loans such as personal loans.

Do you need an appraisal for a HELOC?

Most lenders require a home appraisal for a HELOC, although not all lenders require an in-person visit to your home by an appraiser. Some lenders use a computer model to estimate home value.

What disqualifies you from getting a home equity loan?

There are a few factors that can disqualify you from securing various types of home equity loans, including an unfavorable credit history, insufficient home equity, and an unstable source of income. When evaluating your application, lenders also scrutinize your debt-to-income ratio and loan-to-value ratio, as these provide clues about your overall financial stability.

How difficult is it to get a HELOC?

If your credit score is good, you have a nice amount of home equity, and your debts are under control, it shouldn’t be hard to get a home equity line of credit.

Does HELOC affect credit score?

A HELOC can affect your credit score in several ways. Applying for a HELOC results in a hard inquiry, which can temporarily lower your score. Additionally, high utilization of the HELOC can negatively impact your score; however, paying your monthly HELOC bill on time can help maintain a good credit score.

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.

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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

SOHL-Q424-019