Compare mortgage rates in Hawaii.

Introduction to Mortgage Rates

Hawaii’s real estate market offers a unique blend of natural beauty and cultural diversity, making it an attractive destination for homebuyers. However, navigating the mortgage landscape in Hawaii can be complex. This comprehensive guide aims to provide homebuyers with a thorough understanding of mortgage rates in Hawaii, including key factors, historical trends, available mortgage types, and tips for securing a competitive mortgage rate.

Mortgage interest rates are the fees charged by lenders for borrowing money to purchase a home. These home loan rates are not fixed and can fluctuate based on various economic factors and the borrower’s financial profile. Understanding how mortgage interest rates are determined is crucial for homebuyers to make informed decisions.

Where 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 other interest rates, including those for home loans. While mortgage rates are not directly tied to Fed rates, they generally follow the same economic trends.

Homebuyers should know, especially if you’re buying your first home, that your credit history also influences the interest rates you’re offered. Lenders typically consider a borrower’s credit score, down payment amount, loan-to-value ratio (LTV), and the type of mortgage loan.

How Interest Rates Affect Home Affordability

Mortgage rates have a significant impact on home affordability in Hawaii, sometimes rivaling the purchase price itself. Even small changes in interest rates can make a significant difference in monthly mortgage payments and overall housing costs.

For instance, a 1% increase in interest rate on an $800,000 mortgage can result in an additional $500+ in monthly payments, translating to $6,000 per year.

So it’s crucial for homebuyers to carefully consider interest rates when determining their budget and affordability.

Should Homebuyers Wait for Interest Rates to Drop?

Many first-time homebuyers face the dilemma of whether to purchase a home immediately or wait for interest rates to decrease. While it’s impossible to predict future interest rate movements with certainty, there are other factors to consider as well.

Waiting for interest rates to drop can be a gamble, as home prices may appreciate during the waiting period, potentially offsetting any savings from lower interest rates.

If a homebuyer is financially ready to take the plunge, that usually outweighs a less-than-perfect interest rate environment. After all, homeowners can refinance their mortgage to take advantage of lower interest rates in the future, potentially reducing their monthly payments and overall borrowing costs.

Hawaii Mortgage Rate Trends

Understanding historical mortgage rate trends can provide valuable insights into where rates may be headed. By analyzing past fluctuations, homebuyers can make more informed decisions about purchasing a home and securing a favorable mortgage rate.

Historical Interest Rates in Hawaii

In Hawaii, mortgage rates have experienced fluctuations over the years. While rates have risen in recent years, they remain below historical highs and are currently around the 50-year average.

This indicates that current mortgage rates in Hawaii are relatively favorable compared to historical trends.

Historical U.S. Mortgage Rates

For a broader perspective, it is also helpful to examine historical U.S. mortgage rates. By comparing Hawaii’s rates with national trends, homebuyers can gain a deeper understanding of the current mortgage landscape.

Factors Affecting Mortgage Rates in Hawaii

Many things influence mortgage rates in Hawaii and nationwide. Understanding these factors can empower homebuyers to make informed decisions and potentially secure a more favorable mortgage rate.

Some of these factors are economic, but others are entirely within the homebuyer’s control.

Economic Factors

Economic factors play a significant role in determining mortgage rates. These factors are often beyond the control of individual homebuyers but can have a substantial impact on borrowing costs.

•   The Fed: As mentioned earlier, the Federal Reserve’s decisions regarding short-term interest rates have a direct impact on mortgage rates. When the federal funds rate increases, mortgage rates tend to follow suit.

•   Inflation: Inflation can erode the value of savings and investments, making it more challenging for homebuyers to accumulate a down payment and qualify for a mortgage. It also makes loaning money more expensive for lenders, who can increase interest rates to compensate.

•   Unemployment rate: A strong economy with low unemployment can lead to higher mortgage rates due to increased demand for housing.

Consumer Factors

In addition to economic factors, several consumer-specific factors can influence mortgage rates. By understanding and managing these factors, homebuyers can improve their chances of securing a competitive mortgage rate.

•   Credit score: Lenders view a high credit score as an indicator of responsible financial behavior, reducing the perceived risk of default. As a result, borrowers with higher credit scores are often rewarded with lower interest rates.

•   Down payment: A larger down payment reduces the loan amount, making the borrower less risky in the eyes of the lender. Consequently, lenders may offer lower interest rates to borrowers who can make a substantial down payment.

•   Income and assets: A stable income and sufficient assets demonstrate the borrower’s ability to repay the loan, increasing their attractiveness to lenders and potentially leading to lower interest rates.

•   Type of mortgage loan: The type of mortgage loan selected can impact the interest rate. Adjustable-rate mortgages (ARMs) often have lower initial rates compared to fixed-rate mortgages, but the rates can adjust over time. Government-backed loans, such as VA loans, may offer lower rates due to reduced risk for lenders. Additionally, shorter loan terms typically come with lower interest rates than longer terms.

Types of Mortgages Available in Hawaii

Hawaii offers a diverse range of mortgage types to cater to the needs of different homebuyers. Understanding the available options can help borrowers choose the most suitable mortgage for their financial situation and long-term goals.

Each type of mortgage loan has its own unique characteristics, advantages, and disadvantages. Homebuyers should carefully consider their financial circumstances, risk tolerance, and long-term plans when selecting a mortgage.

Conventional loans are not backed by the government and typically require a down payment and a good credit score (around 620). Fixed-rate conventional loans offer stable interest rates throughout the loan term, while adjustable-rate loans (ARMs) have interest rates that can fluctuate.

Fixed Rate Mortgage

Fixed-rate mortgages provide peace of mind with a consistent interest rate throughout the entire loan term. This stability allows homebuyers to accurately budget their monthly payments and plan for the future with certainty.

Fixed-rate mortgages are available in terms of 10, 15, 20, or 30 years, providing borrowers with options to tailor the loan to their financial situation.

Adjustable Rate Mortgage (ARM)

Adjustable-rate mortgages offer an initial period of lower interest rates, followed by periodic adjustments based on market conditions. This can be beneficial for homebuyers who plan to sell or refinance before the fixed-rate period ends — typically after 5, 7, or 10 years.

However, it is important to carefully consider the potential risks associated with ARMs, as interest rates can increase over time, leading to higher monthly payments.

Homebuyers should thoroughly understand the ARM terms, including the initial interest rate, adjustment frequency, and potential rate caps, to make an informed decision.

FHA Loan

FHA loans, backed by the Federal Housing Administration, are designed to make homeownership more accessible to borrowers with less-than-perfect credit or limited down payment funds.

FHA loans have more flexible credit and income requirements compared to conventional loans, making them a viable option for first-time homebuyers or those with lower credit scores.

The FHA insurance requirement — which borrowers are required to maintain for the life of the loan — allows lenders to offer FHA loans with lower down payment requirements, typically around 3.5% of the purchase price.

VA Loans

VA loans, offered by the Department of Veterans Affairs, provide exceptional benefits to eligible veterans, active-duty military members, and certain surviving spouses.

VA loans offer competitive interest rates and do not require a down payment, making them an attractive option for eligible borrowers.

Additionally, VA loans do not have mortgage insurance requirements, potentially saving borrowers thousands of dollars over the life of the loan.

USDA Loans

USDA loans, backed by the U.S. Department of Agriculture, are specifically designed for low-income borrowers seeking to purchase homes in rural areas (and some suburban ones).

USDA loans have relaxed credit requirements and do not require a down payment, making them an excellent option for eligible borrowers in rural communities. Keep in mind, though, the loans require a 1% upfront fee and a 0.35% annual fee, based on the remaining principal.

USDA loans offer competitive interest rates and flexible underwriting guidelines, catering to the unique needs of rural homebuyers.

Jumbo Loans

Jumbo loans are nonconforming loans that exceed the conventional loan limits set by the Federal Housing Finance Agency (FHFA). These loans are typically used to finance high-value properties.

In Hawaii, where housing prices are much higher, jumbo loans play a significant role in facilitating the purchase of more expensive properties. The conforming loan limit in much of the state is $1,249,125 for a single unit. In higher-pricer counties Kalawao and Maui, the conforming loan limit is $1,299,500.

Popular Places to Get a Mortgage in Hawaii

Securing a mortgage often depends on choosing the right location, where home prices are affordable and mortgage terms are favorable. By researching and comparing different areas within Hawaii, homebuyers can increase their chances of obtaining a competitive mortgage rate.

That said, the cost of living in Hawaii is one of the highest in the nation. Considering the cost of living in different areas can help homebuyers make informed decisions about where to purchase a home and secure a mortgage.

Least Expensive Locations

For homebuyers seeking more affordable housing options, several areas in Hawaii offer lower average home prices and potentially more favorable mortgage terms. Still, affordability here is a relative thing. The Cost of Living Index (COLI) ranks the states against the overall cost of living in the U.S. Hawaii ranks number 1, with an index of 188.4, almost twice the national average.

•   Hilo, Hawaii: average home value $515,219, up 5% over last year

•   Waianae, Oahu: $580,349, up 2.1%

Recommended: Best Affordable Places in the U.S.

Most Expensive Locations

Certain areas in Hawaii are notorious for their sky-high housing costs and potentially less favorable mortgage terms. Homebuyers considering areas like Honolulu (average home value $785,867) should be prepared for stricter lending criteria and higher monthly payments. In addition, the average monthly expenses for one person in the city are 165% of the national figure.

Tips for Securing a Competitive Mortgage Rate in Hawaii

Obtaining a competitive mortgage rate can significantly reduce the overall cost of homeownership. By following these tips, homebuyers in Hawaii can increase their chances of securing a favorable mortgage rate. Even a small difference in interest rate can translate to thousands of dollars in savings over time.

Compare Interest Rates and Fees

Shopping around and comparing interest rates and fees from various lenders is crucial in securing a competitive mortgage rate. Lenders may offer different rates and terms based on their own criteria and market conditions. By comparing multiple offers, homebuyers can identify the most advantageous option.

In addition to interest rates, it is important to consider any upfront costs or closing fees associated with the mortgage loan. These fees can vary among lenders and can impact the overall cost of borrowing.

Get Preapproved

Obtaining preapproval for a mortgage strengthens a homebuyer’s position and allows for a smoother and more efficient home-buying process. Preapproval demonstrates to sellers that the homebuyer is a serious and qualified candidate, potentially increasing the chances of a successful purchase. The mortgage preapproval process can take about 10 days.

You’ll fill out a thorough application and provide documentation. The mortgage preapproval process can take 10 days or more, but the work is well worth it.

Hawaii Mortgage Resources

Hawaii offers resources and programs to assist homebuyers, particularly first-time buyers and those with limited financial resources. These resources can provide valuable support and guidance throughout the home-buying process.

These resources can help make the dream of homeownership more attainable for a wider range of individuals and families.

First-Time Homebuyer Programs

Hawaii offers several programs specifically designed to help first-time homebuyers overcome financial hurdles and achieve homeownership. These programs may provide down payment assistance, low-interest loans, or other forms of support.

Qualifying as a first-time homebuyer varies by program, with some requiring specific credit scores.

•   HHOC Mortgage Down Payment Assistance Loan Program. The DPAL Program offers qualifying buyers a first mortgage with a 3% down payment, plus a deferred second mortgage of up to $125,000 for down payment or closing cost assistance.

•   HHFDC Affordable Resale Program. This program offers condos purchased by the agency for sale to qualified residents through a public drawing or lottery.

•   HHFDC Mortgage Credit Certificate Program. Low-income borrowers can use the certificate to claim a portion of their annual mortgage interest, up to $2,000, as a federal tax credit every year.

Tools & Calculators

SoFi provides online tools and calculators to help homebuyers estimate their monthly mortgage payments, resources to determine their eligibility for assistance programs and compare different loan options. These resources can empower homebuyers to make informed decisions throughout the homebuying process.

Refinancing Options in Hawaii

Homeowners in Hawaii may also explore refinancing options to potentially lower their interest rates or tap into home equity. A mortgage refinance is when you pay off your current home loan with a new mortgage, typically with more favorable terms. Refinancing can be a strategic move to reduce monthly payments, consolidate debt, or access cash for other financial needs.

The FHA Streamline Refinance program offers a simplified and cost-effective way for FHA loan holders to refinance their mortgages.

VA Interest-Rate Reduction Refinance Loans (IRRRL) allow eligible veterans and active-duty military members to refinance their VA loans to obtain a lower interest rate.

Closing Costs, Taxes, and Fees in Hawaii

Closing costs associated with home purchases can vary depending on the location and the specific transaction. In Hawaii, buyers can expect to pay between 3%-6% of the home’s purchase price in closing costs. For an $800,000 mortgage, for example, closing costs can range from $24,000 to $48,000.

These costs may include loan origination fees, appraisal fees, title insurance, and other administrative expenses.

Homebuyers should carefully review and understand all closing costs associated with their home purchase to ensure they have sufficient funds available.

The Takeaway

Compare mortgage rates in Montana.

Introduction to Mortgage Rates

Securing a home loan is a crucial step in the homebuying process, and understanding mortgage rates is essential for making informed financial decisions. A diverse range of mortgage options are available in Montana. By comparing lenders and their mortgage rates, homebuyers can potentially save thousands of dollars over the life of their loan.

Mortgage interest rates are calculated using a complex combination of factors, which fall into two categories: market conditions and the borrower’s financial status. Economic factors include the Federal Reserve’s interest rates, inflation, and unemployment rates, while borrower-specific factors include credit score, down payment, income and assets, and the type of mortgage loan.

Where Mortgage Rates Come From

The Federal Reserve, familiarly known as “the Fed,” sets the short-term interest rates that banks use. Although home loan rates aren’t directly tied to Fed rates, they tend to follow the same economic trends. When the Fed cuts rates, chances are mortgage rates will drop too.

How Interest Rates Affect Home Affordability

Mortgage rates have a bigger impact on home affordability than people may realize. Even small interest rate changes can put homeownership out of reach for middle-income Americans. For instance, a 1% increase in interest rate on a $300,000 loan can add almost $200 to the monthly mortgage payment, a significant amount in a family budget.

Should Homebuyers Wait for Interest Rates to Drop?

If you’re buying your first home, you may wonder if you should act now or wait for interest rates to come down even more. Conventional wisdom says that waiting for rates to drop may mean missing out on the opportunity to buy a home at an affordable price, as home prices tend to appreciate over time. Even if rates do drop significantly, homeowners can always refinance their mortgage to take advantage of lower rates.

Montana Mortgage Rate Trends

Homebuyers were pleased when the Fed lowered its benchmark rate by 0.50% in September 2024. The move came after years of rate hikes intended to curtail inflation. Economists anticipate more rate cuts to come, lasting into 2025.

Historical Interest Rates in Montana

In Montana, mortgage rates have ranged from a high of 8.10% in 2000 to a low of 3.58% in 2012, and even lower in early 2021. Mortgage rates rose in recent years, but still remained below historical highs. In fact, current rates are around the 50-year average.

Historical U.S. Mortgage Rates

To provide some context, the average 30-year fixed mortgage rate in the United States has ranged from under 3% to 18% since 1971. The highest rates were seen in the early 1980s, while the lowest rates were recorded in early 2021.

Factors Affecting Mortgage Rates in Montana

Many elements influence mortgage rates in Montana and nationwide. Some of these are economic, while others are within the homebuyer’s control.

Economic Factors

•   The Fed. The federal funds rate serves as a benchmark for other interest rates, including mortgage rates. When the Fed lowers its rate, mortgage rates tend to follow.

•   Inflation. When inflation rises, 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.

•   Unemployment rate. 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

•   Credit score. A higher credit score generally results in a lower mortgage interest rate. Lenders view borrowers with high credit scores as less risky, making them more likely to offer favorable rates.

•   Down payment. Increasing the down payment can reduce the 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.

•   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.

•   Type of mortgage loan. Certain types of mortgages 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 a longer term.

Types of Mortgages Available in Montana

A SoFi survey found that understanding mortgage options is one of the trickiest parts of the home buying process, with 38% of would-be owners admitting they were confused.

Various mortgage types — including fixed-rate, adjustable-rate, FHA, VA, and USDA loans — are available to meet the needs of different homebuyers. Conventional loans can be fixed-rate or adjustable, and conforming (for most median-priced homes) or jumbo.

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, which can be beneficial if planning to sell before the fixed period ends. However, after the initial fixed-rate period, the interest rate adjusts periodically based on market conditions — usually after 5, 7, or 10 years.

An ARM is labeled with two numbers, such as a 5/1 ARM. The first is the number of the years in the introductory period (5, 7, and 10 year ARMS are the most common). The second is the period when the interest rate will reset. So a 5/1 ARM has a 5-year introductory period, followed by one adjustment per year. A 7/6 ARM has a 7-year introductory period, followed by interest rate adjustments every 6 months.

FHA Loans

FHA loans typically have more lenient eligibility requirements than conventional loans. These loans are insured by the Federal Housing Administration, which helps reduce the risk to lenders and may result in lower interest rates. Keep in mind, however, that mortgage insurance is required for the life of the loan.

VA Loans

Backed by the Department of Veteran Affairs, VA loans are available to veterans, active-duty military members, and some Reserve and National Guard members. One of the primary benefits of VA loans is that they do not require a down payment. Borrowers apply to private lenders, after obtaining a certificate of eligibility (COE) from the VA.

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 may offer lower interest rates compared to conventional loans. These loans do require a 1% upfront fee and a 0.35% annual fee, based on the remaining principal.

Jumbo Loans

Jumbo loans are conventional mortgage loans that exceed the conforming loan limit set by the Federal Housing Finance Agency (FHFA). In Montana, the conforming loan limit for a single-family home is $726,000. Jumbo loans typically have higher interest rates than conforming loans due to the increased risk associated with lending above the conforming limit.

Popular Places to Get a Mortgage in Montana

Securing a mortgage often depends on choosing the right location, where home prices are affordable and mortgage terms are favorable. One way home buyers search for affordable areas is by looking at the local cost of living (COL).

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

•   Glendive: COLI 79.7 out of 100

•   Miles City: COLI 81.5

•   Havre: COLI 81.7

Most Expensive Locations

•   Bozeman: COLI 125.7

•   Missoula: COLI 112.8

•   Kalispell: COLI 115.7

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 tens thousands of dollars. Here are some tips for securing a competitive mortgage rate in Montana:

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. Online mortgage comparison tools can make it easier to compare rates from different lenders.

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. Preapproval also gives you a better idea of how much you can afford to borrow, which can help you narrow down your home search. If time is of the essence, just keep in mind that the mortgage preapproval process can take 10 days or more.

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.

Montana Mortgage Resources

Montana offers various resources and programs to assist homebuyers, particularly first-time buyers and those with limited financial resources. Remember that to qualify as a first-time home buyer in most areas of Montana, you must not have owned a primary residence within the last three years. These resources are worth checking out:

•   Montana First-Time Homebuyer Tax Credit. This tax credit provides up to $2,000 for first-time homebuyers who purchase a home in Montana.

•   Montana Housing Assistance Program. This program offers down payment and closing cost assistance to eligible first-time homebuyers.

•   Montana Homebuyer Down Payment Assistance Program. This down payment assistance program is for eligible homebuyers who meet certain income and credit requirements.

Recommended: Montana First-Time Home Buying Assistance Programs & Grants

Tools & Calculators

SoFi provides online tools and calculators to help homebuyers estimate their monthly mortgage payments, resources to determine their eligibility for assistance programs and compare different loan options. These resources can empower homebuyers to make informed decisions throughout the homebuying process.

Refinancing Options in Montana

A mortgage refinance can be a smart way to lower your interest rate, reduce your monthly payments, or cash out some of your home equity. Here are a few refinancing options available in Montana:

FHA Streamline Refinance

The FHA Streamline Refinance allows FHA-insured homeowners to refinance into current mortgage rates with minimal hassle. This type of refinance does not require a new appraisal or credit check, making it a quick and easy way to lower your interest rate.

VA Streamline Refinance

This interest-rate reduction refinance loan (IRRRL) can reduce the monthly payments on VA loans by adjusting the APR. IRRRLs do not require a new appraisal or credit check, making them a convenient option for VA loan holders looking to lower their interest rate.

Cash-Out Refinance

With a cash-out refi, you take out a new mortgage for a larger amount than what you have left on your current mortgage and receive the excess as cash. You can use the cash for remodeling, debt consolidation, or paying for college costs.

Closing Costs, Taxes, and Fees in Montana

Buyers in Montana can expect to pay between 2%-6% of the home’s purchase price in closing costs. Closing costs include a variety of fees, such as the loan origination fee, appraisal fee, title insurance, and recording fees. These costs vary depending on the lender, the loan amount, and the property location.

The Takeaway

Montana’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 in Montana.

FAQ

Will mortgage rates drop in Montana?

On the heels of the Fed’s 0.50% rate cut, mortgage rates are expected to drop. Economics are anticipating more rate cuts to come, which will further lower mortgage rates into 2025. Beyond that, it is difficult to predict long-term mortgage rates with certainty.

Will mortgage rates ever go back to normal?

Current mortgage rates are close to the historical average, which makes them “normal.” Even after anticipated rate cuts, it’s unlikely we’ll see the sub-3.00% rates of 2021 again anytime soon.

Will Montana home prices ever drop?

Home prices in Montana are influenced by a variety of factors, including supply and demand, economic conditions, and population growth. It is difficult to predict whether home prices will drop in the future.

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

It’s probably as good a year to buy as any. Interest rate cuts are likely to spur more homeowners to put their homes on the market, increasing inventory. On the flip side, more homebuyers will increase the competition for available homes. The real test is whether you are ready, financially and otherwise, to make a move.

How to lock in a mortgage rate?

You can lock in a mortgage rate by obtaining a rate lock from a lender. A rate lock guarantees that the interest rate will not change for a specified period of time, up to 90 days. There may be a fee associated with locking in a mortgage rate. Obviously, rate locks are in less demand while rates are dropping.

How do mortgage interest rates work?

Mortgage interest rates are determined by a number of factors, including the prevailing market interest rates, the borrower’s credit score, the loan amount, and the loan term. The interest rate is expressed as a percentage and is added to the principal amount of the loan to calculate the total amount of interest paid over the life of the loan.

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-Q324-081

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.

Recommended: Average Monthly Expenses for One Person

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 $832,750 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 $832,750 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.

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.

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