Compare mortgage rates in Delaware.

Introduction to Mortgage interest Rates

As you may know, mortgage interest rates are not set in stone. But do you know how they’re determined? Mortgage rates are set via a complex mix of economic factors and the borrower’s financial status. Understanding the factors that influence mortgage rates can help homebuyers make informed decisions and secure the most competitive rate for their situation.
Here, we’ll do a deep dive into home loan rates, as well as homebuyer assistance programs, tools and calculators, and closing costs.

Where Mortgage Rates Come From

The Federal Reserve, often referred to as the Fed, holds the key to mortgage rates. The Fed sets short-term interest rates, which serve as a benchmark for other interest rates, including mortgage rates.

When the Fed raises short-term interest rates, it becomes more expensive for banks to borrow money. As a result, they pass on this increased cost to borrowers in the form of higher mortgage rates. Conversely, when the Fed lowers interest rates, mortgage rates typically follow suit, making it more affordable for borrowers to secure a home loan.

A homebuyer’s financial profile also figures into mortgage rates. We’ll get into that below.

How Interest Rates Affect Home Affordability

Many homebuyers underestimate the significant impact that mortgage rates have on home affordability. Even a small change in the interest rate can make a substantial difference in the monthly mortgage payment and the overall cost of the loan. For middle-income Americans, even half-a-percentage increase in the interest rate can put homeownership out of reach.

Say you’re going to buy a $400,000 home, just a little less than the U.S. median sale price right now. You’ve saved up a 20% down payment, or $80,000, and plan on taking out a 30-year mortgage.

With a fixed interest rate of 7.00%, your monthly payment would be about $2,128 per month, before additional costs like homeowners insurance and property taxes. At 6.50%, that payment goes down to $2,022, and at 6.00% it drops to $1,918. So in this scenario, a full percentage point drop equates to $210 per month in savings, or $2,520 per year.

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’d 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?

Whether to buy a home now or wait for interest rates to drop is a common dilemma for first-time homebuyers. It’s important to consider the opportunity cost of waiting. Home prices tend to appreciate over time, and waiting may mean missing out on potential gains in home equity — or seeing home prices rise out of reach.

Remember, homeowners have the option to refinance their mortgage in the future if interest rates decrease. 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.

Delaware Mortgage Rate Trends

Examining historical mortgage rate trends can offer valuable insights into the housing market. While mortgage rates rose in recent years, they remained below historical highs. In fact, current rates are hovering around the 50-year average, indicating a relatively stable mortgage environment compared to past decades. (The FHFA stopped reporting this data after 2018.)

While rates may continue to drop in the short term, the long-term trend suggests that current rates are already relatively favorable compared to historical averages.

Historical U.S. Mortgage Rates

For further context, let’s check out historical U.S. mortgage rates. In the early 1980s, mortgage rates reached unprecedented highs, peaking at over 18%. Since then, rates have generally trended downward, with occasional periods of increase. The current rates, hovering around 5%, represent a significant decline from those historical peaks.

Factors Affecting Mortgage Rates in Delaware

Many factors influence mortgage rates in Delaware and across the country. Some of these are economic, while others are within the homebuyer’s control. Understanding these factors can help borrowers make informed decisions and position themselves for the best possible mortgage rate.

Economic factors that impact mortgage rates include the Fed’s interest rate decisions, inflation, and unemployment rates. Borrower-specific factors such as credit score, down payment, income, assets, and type of mortgage loan also play a role in determining the interest rate offered.

Economic Factors

•   The Fed: As noted above, the Fed sets short-term interest rates, which serve as a benchmark for other interest rates, including mortgage rates. Although mortgage rates are not directly tied to Fed rates, they tend to follow the same economic trends.

•   Inflation: Inflation, the general increase in prices and fall in the purchasing power of money, affects mortgage rates. 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 for the reduced value of their loans.

•   Unemployment rate: The unemployment rate, an indicator of economic health, influences mortgage rates. A lower unemployment rate generally signifies a strong economy, which leads to increased demand for housing. This increased demand puts upward pressure on home prices and, consequently, mortgage interest rates.

Consumer Factors

•   Credit score: A credit score represents an individual’s credit history and debt repayment behavior. A higher credit score indicates a lower risk of default, making borrowers more attractive to lenders. As a result, individuals with higher credit scores typically qualify for lower mortgage interest rates.

•   Down payment: The down payment, the upfront payment made by the borrower toward the purchase of a home, impacts mortgage rates. A larger down payment reduces the loan amount required from the lender, lowering the risk associated with the loan. Consequently, borrowers who make a larger down payment may be offered a lower mortgage interest rate.

•   Income and assets: Lenders carefully evaluate a borrower’s income and assets to assess their ability to repay the loan. A steady income, a stable employment history, and sufficient assets provide reassurance to lenders. Borrowers with strong income and asset profiles may be rewarded with lower mortgage interest rates.

•   Type of mortgage loan: The type of mortgage loan a homebuyer chooses can influence the interest rate. Adjustable-rate mortgages (ARMs) often come with lower initial rates compared to fixed-rate mortgages. Additionally, government-backed loans, such as VA mortgages, may offer more favorable rates. And a shorter loan term typically corresponds with a lower interest rate.

Types of Mortgages Available in Delaware

Delaware offers a diverse range of mortgage types to cater to the needs of different homebuyers. Each has its own set of features, eligibility requirements, and interest rate structures.

Conventional loans, offered by private lenders and not backed by the government, provide flexibility in terms of interest rate options. They can be fixed-rate or adjustable-rate. Conventional loans may require a credit score of 620 or higher.

Fixed-Rate Mortgage

Fixed-rate mortgages offer stability and predictability in terms of monthly payments. The interest rate remains the same throughout the entire loan term, providing peace of mind to borrowers who prefer a consistent payment schedule. Fixed-rate mortgages are available in terms of 10, 15, 20, or 30 years.

The choice of loan term depends on the borrower’s financial situation and preferences. Shorter loan terms, such as 10 or 15 years, may come with higher monthly payments but result in significant interest savings over the life of the loan. Longer loan terms, such as 20 or 30 years, offer lower monthly payments but ultimately lead to paying more interest.

Adjustable-Rate Mortgage (ARM)

Adjustable-rate mortgages (ARMs) provide an initial period of lower interest rates, often referred to as the “teaser rate.” This lower rate can be attractive to borrowers looking to secure a lower monthly payment in the short term. However, after the initial period (often 5 or 7 years), the interest rate can adjust periodically, potentially leading to higher monthly payments in the future.

ARMs can be a suitable option for borrowers who plan to sell their home before the fixed-rate period ends or who are comfortable with the potential for fluctuating interest rates. It’s important to carefully consider the terms and potential risks associated with ARMs before committing to this type of mortgage.

FHA Loans

FHA loans, backed by the Federal Housing Administration, are designed to make homeownership more accessible to borrowers who may not meet the strict requirements of conventional loans. FHA loans typically have more lenient eligibility requirements, including lower credit score thresholds and lower down payment requirements.

VA Loans

VA loans, backed by the Department of Veterans Affairs, are exclusively available to veterans, active-duty military members, and certain members of the Reserve and National Guard. These loans offer competitive interest rates and do not require a down payment, making them an attractive option for eligible borrowers.

USDA Loans

USDA loans are tailored to low-income borrowers seeking to purchase a home in a rural area. These loans feature competitive interest rates and do not require a down payment, making them an excellent option for eligible individuals and families. The U.S. Department of Agriculture backs USDA loans, providing lenders with a guarantee against default. This makes homeownership more attainable for some borrowers.

Jumbo Loans

Jumbo loans are conventional loans that exceed the conforming loan limit set by the Federal Housing Finance Agency (FHFA). In Delaware, the conforming loan limits for single-unit residences is $832,750. Jumbo loans typically require a larger down payment and may have higher interest rates than conforming loans.

Popular Places to Get a Mortgage in Delaware

When searching for a mortgage, location plays a crucial role. Homebuyers should consider areas where home prices are within their budget and mortgage terms are favorable. Delaware, the second-smallest state in the nation, offers a range of cities and small towns, each with its own unique housing market and mortgage landscape.

The cost of living in a particular area can impact mortgage affordability. The Cost of Living Index (COLI) provides a valuable tool for comparing the cost of living across different locations. COLIs above 100 are more expensive than the average cost of living in the U.S., and those below 100 are less expensive. By considering the COLI, homebuyers can assess whether their income can comfortably support housing costs in a desired area.

Least Expensive Locations

For those seeking more affordable housing options, Delaware offers several locations with a lower cost of living. These areas include Milford (COLI: 95), Seaford (108.1), and Georgetown (108.1), where home prices tend to be more budget-friendly compared to other parts of the state.

Most Expensive Locations

On the other hand, areas such as Wilmington, Newark, and Rehoboth Beach are known for their higher cost of living. The average monthly expenses for one person will be higher in these areas. Home prices also tend to be higher, and mortgage rates may reflect the increased demand for housing.

Recommended: Best Affordable Places in the U.S.

Tips for Securing a Competitive Mortgage Rate in Delaware

Securing a competitive mortgage rate can make a substantial difference in the overall cost of a home. As shown above, even a slight variation in the interest rate can lead to significant savings or added expenses over the life of the loan. Therefore, it’s essential for homebuyers to take steps to secure the best possible mortgage rate.

Compare Interest Rates and Fees

Shopping around for mortgage rates is crucial to finding the best deal. Lenders offer different interest rates and fees, so it’s important to compare multiple options before making a decision. Online mortgage comparison tools can simplify this process by allowing homebuyers to quickly compare rates from different lenders.

In addition to the interest rate, inquire about any upfront costs or closing fees associated with the loan. These fees vary among lenders and can add to the overall cost of the mortgage. Be sure to factor these fees into your comparison when choosing a mortgage lender.

Get Preapproved

Getting preapproved for a mortgage is a valuable step in the homebuying process. It demonstrates to sellers that you’re a serious buyer and strengthens your position when making an offer. Preapproval also allows you to move quickly when you find the right property, as you’ll already have a clear understanding of your borrowing power.

The mortgage preapproval process involves a thorough review of your credit history. The lender will then issue a letter showing that you qualify for a certain loan amount at a specific interest rate. The letter is an offer, but not a commitment.

Delaware Mortgage Resources

Delaware recognizes the challenges that homebuyers face and offers various resources and programs to assist them, particularly first-time buyers and those with limited financial resources. These programs can provide financial assistance, education, and counseling to help individuals achieve their dream of homeownership.

To qualify as a first-time homebuyer, you typically must not have not owned a principal residence in the past three years.

First-Time Homebuyer Programs

The Delaware State Housing Authority offers several programs specifically designed for those buying their first home. These programs may provide down payment assistance, reduced interest rates, and other incentives to make homeownership more affordable for first-time buyers.

The Delaware First-Time Homebuyer Tax Credit allows eligible first-timers to claim up to 35% of their annual mortgage interest in the form of a federal tax credit of up to $2,000 a year. Learn more on the DSHA website.

Down Payment Assistance

Down payment assistance programs can help homebuyers overcome the challenge of saving for a down payment. These programs may provide grants, loans, or other forms of assistance to help cover the upfront costs of purchasing a home.

Home Sweet Home is a limited fund for up to $12,000 for down payment and closing costs on a primary residence with a maximum sales price of $285,000. Delaware Diamonds is another limited fund, for up to $10,000 for down payment and closing costs, that is forgivable after 10 years. And First State Home Loan offers 3% of the final loan amount for down payment and closing costs.

Tools & Calculators

SoFi offers a range of tools and calculators to help Delaware homebuyers make informed decisions. These tools can assist in calculating mortgage payments, determining affordability, and comparing different loan options.

Refinancing Options in Delaware

Homeowners in Delaware have the opportunity to refinance their existing mortgage to secure a lower interest rate. The FHA Streamline Refinance program, available to FHA-insured homeowners, offers a simplified process for refinancing with minimal documentation and appraisal requirements.

VA loan holders may also benefit from refinancing options. The Interest-Rate Reduction Refinance Loan (IRRRL) allows VA loan borrowers to refinance their existing loan to obtain a lower interest rate, potentially reducing their monthly payments.

Closing Costs, Taxes, and Fees in Delaware

Closing costs associated with purchasing a home in Delaware typically range between 2% and 5% of the home’s purchase price. These costs may include appraisal fees, title insurance, loan origination fees, and other administrative charges.

The specific closing costs in Delaware can vary depending on the value of the property and its location. Higher-priced homes and properties in certain areas may incur higher closing costs.

The Takeaway

Delaware presents a diverse range of options for homebuyers, catering to different financial situations and preferences. By staying informed about current mortgage rates and exploring assistance programs, individuals can make strategic decisions that align with their financial goals and achieve successful homeownership in the First State.

Remember, homeownership is a significant financial decision, and it’s essential to consult with a qualified mortgage professional to assess your individual situation and explore all available options. With careful planning and informed choices, you can navigate the Delaware mortgage market and realize your dream of homeownership.

FAQ

Will mortgage rates ever go back to normal?

“Normal” mortgage rates can be subjective and vary over time. The current rates may be considered normal relative to historical averages, but they can still fluctuate based on economic conditions. It’s essential to stay informed about market trends and consult with a mortgage expert to understand the current mortgage environment.

Will Delaware home prices ever drop?

Home prices are influenced by many factors, including supply and demand, economic conditions, and location. It’s advisable to consult with a real estate professional who can provide insights into the local housing market and help you make informed decisions.

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

The decision of when to buy a house involves personal circumstances, financial readiness, and market conditions. There is no one-size-fits-all answer. It’s important to assess your financial situation, consider long-term goals, and consult with a real estate professional to determine if buying a house in Delaware aligns with your current circumstances and future plans.

How do mortgage interest rates work?

Mortgage interest rates are determined by a combination of economic factors, including the Federal Reserve’s interest rate decisions, inflation, unemployment rates, and borrower-specific factors such as credit score, down payment, income, assets, and type of mortgage loan. Lenders use these factors to assess the risk associated with a loan and set the interest rate 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.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.

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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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