Compare mortgage rates in North Dakota.

Introduction to Mortgage Interest Rates

Securing a home loan is a crucial step in the homebuying process in North Dakota. Mortgage interest rates are influenced by both the state of the economy and the borrower’s credit score, down payment, income, and assets. This guide explores factors that influence mortgage rates, popular mortgage types, and strategies for securing the best possible rate.

Where Mortgage Rates Come From

The Federal Reserve, also known as the Fed, plays a key role in shaping mortgage rates. The Fed sets the short-term interest rates that banks use as a benchmark for their lending rates. Although mortgage rates are not directly tied to Fed rates, they generally follow the same economic trends. When the Fed lowers interest rates, mortgage rates typically decrease, creating a more favorable environment for homebuyers.

An individual lender might fine-tune the rate a given homebuyer is offered based on several financial metrics, including the buyer’s credit score, income, assets, and more.

How Interest Rates Affect Home Affordability

Mortgage rates play a crucial role in determining home affordability. Even a seemingly small difference in interest rate can have a substantial impact on the affordability of a home. For instance, a 1% increase in interest rate on a $300,000 mortgage over 30 years can result in more than $70,000 in additional interest paid over the life of the loan.

Rising interest rates can contribute to middle-income Americans being priced out of the housing market. A modest increase in interest rates can make it challenging for families to qualify for a mortgage or afford the monthly payments, limiting their ability to purchase a home.

Should Homebuyers Wait for Interest Rates to Drop?

Many homebuyers grapple with the dilemma of whether to purchase a home immediately or delay in hope that mortgage rates will decrease. Those who qualify as a first-time homebuyer might be especially likely to hesitate because they typically have tighter budgets.

The bottom line? It is impossible to predict future interest rate movements with certainty, and there are several factors to consider when making this decision. First, delaying might give home prices time to rise. Second, postponing ownership also postpones your ability to build equity in a home.

Remember that you always have the option to undertake a mortgage refinance in the future if interest rates decline significantly or if your financial profile improves to the degree that you might qualify for a better rate.

North Dakota Mortgage Rate Trends

Understanding historical mortgage rate trends in North Dakota can provide valuable insights, especially if you have never shopped for a home in North Dakota before. Current mortgage rates in North Dakota remain below historical highs. The cost of living in the state is one of the lowest in the U.S., and average mortgage rates in the state have tended to fall below the U.S. average too.

Historical U.S. Mortgage Rates

To gain an even broader perspective, it is beneficial to examine historical U.S. mortgage rates. Whatever a homebuyer might hear about current mortgage rates in North Dakota, they are still far below the double-digit numbers of the 1980s.

Factors Affecting Mortgage Rates in North Dakota

Numerous factors influence mortgage rates in North Dakota and across the nation. These factors can be broadly categorized into economic factors and consumer factors, each playing a role in shaping the mortgage rate landscape.

Economic Factors

•  The Fed: As noted above, the federal funds rate, set by the Federal Reserve, serves as a benchmark for other interest rates, including mortgage rates. When the federal funds rate increases, consumers may see higher mortgage rates.

•  Inflation: An increase in the general price level of goods and services impacts mortgage rates. When the purchasing power of money decreases it becomes more expensive for lenders to lend money and they may increase interest rates to maintain profit margins.

•  Unemployment: A high unemployment rate may prompt the Fed to lower its rate, so unemployment has an indirect effect on mortgage rates.

Consumer Factors

•  Credit score: Lenders view borrowers with higher credit scores as less likely to default on their loans, making a lender more willing to offer lower interest rates.

•  Down payment: Lenders may offer lower interest rates to borrowers who make larger down payments. These buyers have a greater ownership stake in their home from Day One, lowering risk for the lender.

•  Income and assets: A steady income and sufficient assets provide assurance to lenders that the borrower has the financial capacity to repay the loan.

•  Type of mortgage loan: The type of mortgage loan selected can also impact the interest rate. For example, adjustable-rate mortgages (ARMs) often have lower initial rates compared to fixed-rate mortgages. Additionally, government-backed loans, such as VA mortgages, may offer more favorable rates.

Recommended: Average Monthly Expenses for One Person

Types of Mortgages Available in North Dakota

North Dakota offers a diverse range of mortgage types to cater to the varying needs of homebuyers. These include fixed-rate mortgages, adjustable-rate mortgages, FHA loans, VA loans, USDA loans, and jumbo loans. Would-be homeowners in North Dakota might want to take a close look at their options.

Fixed-Rate Mortgage

Fixed-rate mortgages offer stability and predictability by locking in the interest rate for the entire loan term. This ensures that the principal and interest payments remain constant throughout the life of the loan. Fixed-rate mortgages are commonly 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 generally come with lower interest rates but higher monthly payments, while longer loan terms offer lower monthly payments but higher overall interest costs.

Adjustable-Rate Mortgage (ARM)

Adjustable-rate mortgages (ARMs) provide initial lower interest rates compared to fixed-rate mortgages. However, these rates can adjust periodically after a fixed introductory period, based on prevailing market conditions.

The initial lower interest rate of ARMs can provide significant savings for borrowers who plan to sell their property or refinance before the fixed introductory period concludes. However, borrowers should carefully consider the potential for future interest rate increases and ensure that the long-term financial implications align with their plans.

FHA Loans

FHA loans, insured by the Federal Housing Administration, are designed to make homeownership more accessible to borrowers with limited financial resources. They typically have more lenient eligibility requirements and allow for lower down payments compared to conventional loans. The federal government’s backing of the loans provides lenders with a safety net in case of borrower default. This allows lenders to offer more flexible eligibility criteria.

VA Loans

VA loans are exclusively available to eligible veterans, active-duty military members, Reserve and National Guard members, and surviving spouses. These loans offer competitive interest rates and do not require a down payment, making them an attractive option for borrowers who request the VA’s certificate of eligibility and qualify for the loan.

USDA Loans

USDA loans are specifically designed for borrowers whose income falls beneath a certain ceiling to purchase a home in a rural area. These loans are backed by the U.S. Department of Agriculture (USDA) and offer favorable terms, including no down payment requirement and competitive interest rates.

Jumbo Loan

A jumbo loan is designed for borrowers seeking to finance a home that exceeds the conforming loan limit set by the Federal Housing Finance Agency (FHFA) for its specific geographic location. These loans typically require a larger down payment and may have stricter credit score requirements compared to conventional loans. In most places in the U.S., and throughout North Dakota, the conforming loan limit for a single-family home is $832,750.

Popular Places to Get a Mortgage in North Dakota

Securing a mortgage often hinges on choosing the right location, where home prices are affordable. Here are some popular places in North Dakota to obtain a mortgage.

Least Expensive Locations

The following locations in North Dakota are some of the least expensive places to obtain a mortgage, based on how local costs compare to the cost of living in the U.S. See more options in SoFi’s list of best affordable places in the U.S.:

•  Bismarck: This is one of the state’s larger cities and has a cost of living slightly below the state average which, as noted above, is already one of the lower cost of living ratings for the U.S.

•  Valley City: This small city of fewer than 10,000 people has a cost of living profile similar to that of Bismarck. It’s about an hour’s drive from Fargo.

•  West Fargo: This is an especially family-friendly city and has a cost of living rating that is five points lower than the overall North Dakota number.

Most Expensive Locations

North Dakota is so relatively affordable overall that even Williston, one of its more expensive cities based on cost of living, is still seven points below the U.S. average.

Tips for Securing a Competitive Mortgage Rate in North Dakota

Obtaining a competitive mortgage rate can lead to significant savings over the life of a loan. Take these steps for best results.

Compare Interest Rates and Fees

Shopping around and comparing interest rates from multiple lenders is essential to securing the best mortgage deal. It is also important to inquire about any upfront costs or closing fees associated with the loan. It may take some time to compare interest rates and fees from various lenders to reveal the full picture, but it can yield significant savings.

Get Preapproved

Obtaining preapproval for a mortgage strengthens your position with sellers as a serious buyer. Going through the mortgage preapproval process means sharing fairly comprehensive financial information with a potential lender, but once you’ve done so and been preapproved, you can take swift action when you find your dream home. Additionally, some lenders offer the option to lock in the interest rate for a certain period, providing protection against possible rate increases.

Recommended: Mortgage Prequalification vs. Preapproval

North Dakota Mortgage Resources

North Dakota has several programs to assist homebuyers, particularly if you are buying your first home, have limited financial resources, or both.

First-Time Homebuyer Programs

The state’s FirstHome program is for those who have not owned a principal residence in the last three years (a common way that programs in many states define first-time homebuyers). There are both income and home purchase price limits for eligibility. Other programs are directed at single parents with at least one dependent living at home, military members, or people with a permanent disability. Find all the details on the North Dakota Housing Finance Agency (NDHFA) site .

Down Payment Assistance

A down payment assistance program can make all the difference for homebuyers who have limited funds. Through its DCA (Down Payment and Closing Cost Assistance) program, NDHFA provides low-income buyers with mortgage loans to cover down payment and closing costs up to three percent of the first mortgage loan amount. The funds come in the form of a credit toward the homebuyer’s out-of-pocket cash needs. Again, there is an income ceiling. The home must also be a primary residence.

Tools & Calculators

Online tools and calculators can help would-be homeowners in North Dakota run the numbers on mortgage scenarios, home prices, and see how different down payment amounts might affect their costs.

Refinancing Options in North Dakota

Homeowners in North Dakota, like others nationwide, can seek out a refinance of their mortgage from a bank or other mortgage lender. Those with certain government-backed loans also have the opportunity to refinance their existing mortgage. The FHA Streamline Refinance program, for example, is designed for homeowners with FHA-insured mortgages. It offers a simplified refinancing process with minimal documentation requirements, making it easier for homeowners to obtain a lower interest rate.

VA Interest-Rate Reduction Refinance Loans (IRRRL) provide an opportunity for veterans and other VA loan holders to refinance their loans and potentially lower their monthly payments. This program allows for a streamlined refinancing process without the need for a new appraisal.

Closing Costs, Taxes, and Fees in North Dakota

Closing costs and fees are additional expenses associated with purchasing a home. In North Dakota, buyers can expect to pay between 3% and 6% of the home’s purchase price in closing costs. Higher-priced homes and properties in certain areas may incur higher closing costs.

The Takeaway

North Dakota’s mortgage landscape offers any option a would-be homebuyer might need. By staying informed about current mortgage rates, exploring the state’s assistance programs, and paying close attention to personal financial metrics such as credit score, individuals can make the right moves and achieve successful homeownership in North Dakota.

FAQ

This section addresses frequently asked questions related to mortgage rates in North Dakota.

Will mortgage rates drop in North Dakota?

It’s hard to say with certainty if mortgage rates will drop in North Dakota because there are so many things that contribute to rate increases and decreases.

Will mortgage rates ever go back to normal?

The definition of “normal” mortgage rates can vary greatly over time. Mortgage rates are influenced by a complex interplay of economic factors and personal financial metrics, and one generation’s normal might be another generation’s high or low.

Will North Dakota home prices ever drop?

Real estate market trends are influenced by supply and demand, economic conditions, and local market dynamics. Predicting future home price movements with certainty is challenging, and your best bet for insight is to ask a real estate professional who specializes in the specific market area you’re wondering about.

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

The decision of whether it is a good time to buy a house in North Dakota depends on individual circumstances, financial readiness, and market conditions. Using a home affordability calculator to determine what your budget would be, and then looking at real estate web sites to see if any homes in your chosen area fit that budget, would be a good way to assess whether it might be time to buy.

How do I lock in a mortgage rate?

Some lenders offer the option to lock in the interest rate for a certain period, typically ranging from 30 to 90 days. This often requires paying a fee to the lender. Locking in the interest rate provides protection against potential rate increases during the property search and purchase process.

How do mortgage interest rates work?

Mortgage interest rates are determined by a combination of factors, including the prevailing federal funds rate set by the Federal Reserve, inflation, and unemployment rate, as well as the borrower’s credit score, down payment amount, income, assets, and type of mortgage 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.

†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.

SOHL-Q324-089

Compare mortgage rates in Maine.

Introduction to Mortgage Interest Rates

Securing a home loan is a crucial step in the homebuying process in Maine, and understanding mortgage interest rates is essential for making an informed financial decision. Mortgage rates dictate the interest fees charged by lenders for borrowing money to purchase a home. You may be focused on prevailing interest rates as you think about purchasing a home, but your credit score and the type of mortgage loan you choose will play a significant role in determining the interest rate you’re offered. Let’s look at how all of this plays out in the Pine Tree State.

Where Mortgage Rates Come From

The Federal Reserve plays a crucial role in setting short-term interest rates, which serve as a benchmark for other interest rates, including mortgage rates. While mortgage rates are not directly tied to Fed rates, they tend to follow similar economic trends. When the Fed’s interest rate is high, mortgage rates are likely to be higher as well. Lenders then adjust the specific rate they offer an individual borrower up or down based on the person’s financial data: credit score, income and asset levels, even how much of a deposit they plan to put down on a given property.

How Interest Rates Affect Home Affordability

Mortgage rates have a significant impact on home affordability. A seemingly small difference in mortgage rates can have a significant impact on average monthly expenses and home affordability. For instance, a one percentage point increase in interest rate on a $200,000 mortgage can result in an increase of over $120 in monthly payments. For a family on a tight budget, this could create a noticeable pinch. Moreover, in the 30 years it would take to pay off the loan, the borrower would spend more than $45,000 on additional interest.

Should Homebuyers Wait for Interest Rates to Drop?

Many homebuyers wonder if it is smarter to purchase a home immediately or wait for mortgage rates to decrease. This may be an especially challenging question if you are buying your first home and don’t have proceeds from the sale of a first residence to use as a deposit.

While waiting for lower interest rates may seem like a prudent strategy, it is essential to consider that interest rates are unpredictable. Delaying a home purchase also delays building equity in a home. And home prices could rise while you are waiting for interest rates to drop.

Remember that homeowners do have the option to refinance a mortgage if interest rates drop meaningfully after they make a home purchase. (It’s also worth looking into a refinance if your personal financial situation changes significantly — for example if your credit score increases.)

Maine Mortgage Rate Trends

Understanding historical mortgage rate trends in Maine can put current rates into context. Maine’s average mortgage rate tends to hover close to the national average. Take a look at how this plays out over almost two decades (2018 was the last year state averages were tracked).

Historical U.S. Mortgage Rates

Homebuyers following current mortgage rates in Maine could also look at average U.S. mortgage rates over several decades to gain some perspective. Rates may feel high in the present, but they are still well below the numbers seen in the 1980s.

Factors Affecting Mortgage Rates in Maine

Numerous factors influence mortgage rates in Maine and nationwide. Some of these factors are economic, while others are entirely within the homebuyer’s control.

Economic Factors

•  The Fed: As noted previously, the Federal Reserve’s 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, leading to higher mortgage rates. Conversely, a decrease in the federal funds rate can result in lower mortgage rates.

•  Inflation: Inflation, or the general increase in prices, also affects mortgage rates. As inflation rises, the purchasing power of money decreases, making it more expensive for lenders to lend money. To compensate for this, lenders may increase interest rates.

•  Unemployment: The unemployment rate is a metric the Fed watches closely. If unemployment rises, the Fed may lower interest rates to prompt an upswing in the job market.

Consumer Factors

•  Credit score: A higher credit score indicates a lower risk of default for the borrower. As a result, lenders are more likely to offer lower mortgage interest rates to borrowers with good credit scores.

•  Down payment: A larger down payment reduces the loan amount, which lowers the risk for the lender. Consequently, lenders may offer lower mortgage interest rates to borrowers who make larger down payments.

•  Income and assets: Lenders consider employment history, salary, investments, and emergency savings when assessing the borrower’s ability to repay the loan. Borrowers with a stable income and sufficient assets are more likely to secure lower mortgage interest rates.

•  Type of mortgage loan: Adjustable-rate mortgages (ARMs) often have lower initial rates compared to fixed-rate mortgages. Government-backed loans, such as VA mortgages, may also offer lower rates.

Types of Mortgages Available in Maine

Homebuyers in Maine have access to any type of mortgage they might need to suit their specific financial situation. Conventional loans are a popular choice and are offered by banks, credit unions, and other lenders. They can be fixed-rate or adjustable-rate. Conventional loans do not have a maximum allowable amount, although borrowers in Maine who need a loan for more than $832,750 will require a jumbo loan (more on that below).

Fixed-Rate Mortgage

With a fixed-rate mortgage, the interest rate remains the same for the entire loan term, typically 10 to 30 years. This provides peace of mind to borrowers, as they can accurately budget their monthly mortgage payments without worrying about fluctuations in interest rates. The choice of loan term does affect the monthly payment amount and the total interest paid over the life of the loan. Shorter loan terms result in higher monthly payments but lower total interest paid, while longer loan terms have lower monthly payments but higher total interest paid.

Adjustable-Rate Mortgage (ARM)

Adjustable-rate mortgages offer lower interest rates than fixed-rate loans for an initial period, but after that time the interest rate can adjust periodically based on market conditions. This arrangement can be advantageous for homebuyers who feel fairly certain they will sell or refinance their home before the initial fixed-rate period ends. However, it is essential to be prepared for the interest rate to adjust upward after the fixed-rate period, and to have a plan for paying the bigger bill.

FHA Loans

FHA loans, backed by the Federal Housing Administration, offer more flexible eligibility criteria compared to conventional loans. They have more lenient credit score and down payment requirements, making them an especially attractive option for first-time homebuyers and those with less-than-perfect credit.

VA Loans

VA loans, offered by the Department of Veterans Affairs, are a unique mortgage option available to eligible veterans, active-duty military personnel, Reserve and National Guard members, and surviving spouses. These loans offer several advantages, including no down payment requirement and competitive interest rates. To determine eligibility, would-be borrowers need to apply to the VA for a Certificate of Eligibility. With that in hand, they can work with a participating lender to apply for the loan.

USDA Loans

USDA loans, backed by the U.S. Department of Agriculture, are for borrowers whose income falls below a maximum ceiling and who are seeking to purchase a home in a rural area. Favorable terms include no down payment requirement and competitive interest rates.

Jumbo Loans

Jumbo loans cater to borrowers seeking a mortgage that exceeds the conventional loan limit of $832,750 for a single-family property. The maximum conventional loan amount is set by the Federal Housing Finance Agency (FHFA) and changes annually. Jumbo loans, which are larger than this limit, are also called nonconforming loans.

Popular Places to Get a Mortgage in Maine

Securing a mortgage often depends on choosing the right location. The cost of living and housing prices vary across different locations in Maine, but the state as a whole is the 14th most expensive one in the U.S. with a cost of living that is 8 points above the national average. Here are some of the least (and most) costly places you might go home-shopping in Maine.

Least Expensive Locations

When compiling a list of the best affordable places in the U.S., SoFi looked at cost-of-living data and average home values, among other factors. Here are the Maine cities that ranked as least-expensive locations:

•  Presque Isle: Set east of the North Maine Woods, this town of fewer than 10,000 people is known for year-round recreation in the beautiful outdoors. It’s also one of the less costly places to live in Maine.

•  Gardiner: A small, historic community, Gardiner is attractive in part because it is within commuting distance of the state capital, Augusta.

•  Waterville: Home to Colby and Thomas colleges, Waterville is also 11 points below average on cost-of-living rankings in Maine.

•  Auburn: Half an hour north of Portland, Auburn is one of Maine’s more populous cities, but still small at around 25,000 people.

Most Expensive Locations

Easy waterfront access (whether ocean or a lake) is a hallmark of Maine’s most-expensive towns. Southport, Kennebunkport, Mount Desert, Brooklin, and South Bristol all boast beautiful views and average home selling prices north of $1 million.

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

Tips for Securing a Competitive Mortgage Rate in Maine

Obtaining a competitive mortgage rate can save borrowers thousands of dollars over the life of the loan. Take these steps to get the best possible rate:

Compare Interest Rates and Fees

Shopping around and looking closely not only at interest rates but also at fees from multiple lenders is crucial for securing a good mortgage deal. It’s essential to inquire about both upfront costs and closing fees associated with the mortgage loan. These fees can vary among lenders and can impact the overall cost of the loan.

Get Preapproved

Having a mortgage preappproval demonstrates to sellers that the homebuyer is a serious and qualified buyer. It also enables homebuyers to move swiftly when they find a suitable property, as they have already completed a significant portion of the mortgage application process.

If you’re worried that interest rates may drift northward, consider locking in your mortgage rate. By paying a fee to the lender, you can secure the current interest rate for a specified period, typically ranging from 30 to 90 days. This provides peace of mind and protection against potential interest rate increases.

Maine Mortgage Resources

The state of Maine recognizes the challenges faced by homebuyers and provides several resources and programs to facilitate homeownership.

First-Time Homebuyer Programs

The Maine State Housing Authority First Home Loan program offers low fixed-rate mortgages with little or no down payment required. Homebuyers can apply through a participating lender.

Down Payment Assistance

Down payment assistance programs provide financial support to help homebuyers overcome the challenge of saving for a down payment. In Maine, the Maine State Housing Authority’s First Generation Program provides up to $10,000 for qualified homebuyers who have never lived in a home owned by their biological parents or legal guardians. The program is also available to borrowers who have been in foster care at some point in their childhood. Attendance at financial and homebuyer education programs are required to qualify.

Tools & Calculators

Maine offers a mortgage calculator to help homebuyers estimate their mortgage payments including insurance and property taxes. Or use one of these helpful calculators:

Refinancing Options in Maine

Homeowners in Maine have the opportunity to refinance their existing mortgage through a conventional bank or other lender. A mortgage refinance can help owners to secure lower interest rates and potentially save money. There are also government-backed refinance options for eligible borrowers:

FHA-insured homeowners can take advantage of the FHA Streamline Refinance program, which allows them to refinance with minimal documentation and without the need for a new appraisal. This simplified process enables homeowners to obtain lower interest rates and reduce their monthly mortgage payments.

VA loan holders have the option to pursue an Interest-Rate Reduction Refinance Loan (IRRRL) to lower their monthly mortgage payments. This program allows eligible veterans and military personnel to refinance their VA loans and secure a lower interest rate, potentially resulting in significant savings over the life of the loan.

Recommended: Do You Qualify as a First-Time Homebuyer?

Closing Costs, Taxes, and Fees in Maine

Homebuyers in Maine should be aware of the associated closing costs, taxes, and fees when purchasing a home. Closing costs in Maine typically range from 3% to 6% of the home’s purchase price. These costs cover various expenses related to the home purchase, including title insurance, appraisal fees, loan origination fees, and recording fees. The specific closing costs associated with a home purchase in Maine can vary depending on the property value and location.

The Takeaway

Maine’s mortgage landscape offers a range of options for homebuyers, catering to different financial situations and needs. Each loan type has its own advantages and disadvantages, and homebuyers should carefully consider their financial circumstances and long-term goals when selecting the most suitable mortgage option. Knowing current mortgage rates and exploring available assistance programs can help homebuyers make smart decisions in the land of lobster and lighthouses.

FAQ

What is a mortgage rate?

A mortgage rate is the interest rate charged on a mortgage loan. It determines the amount of interest paid over the life of the loan and directly affects the size of the monthly mortgage payment.

Will mortgage rates drop in Maine?

Predicting future mortgage rate movements is challenging, and there is no guarantee that rates will drop. Economic conditions, inflation, and the Federal Reserve’s monetary policy influence mortgage rates.

Will mortgage rates ever go back to normal?

There isn’t really a “normal” where mortgage rates are concerned. They have fluctuated throughout history.

Will Maine home prices ever drop?

Real estate market conditions, including home prices, are influenced by supply and demand, economic factors, and local market dynamics. Predicting future home price movements is uncertain but a local-market expert (in the form of a local real estate agent) might give you some insight into what the future holds.

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

The decision of whether it is a good time to buy a house depends on your personal financial circumstances and market conditions. Factors such as mortgage rates, home prices, and your long-term goals (both residential and financial) should be carefully considered.

How do I lock in a mortgage rate?

Borrowers can lock in a mortgage rate by paying a fee to the lender, which guarantees the interest rate for a specific period, such as 30 or 90 days. This can provide protection against potential rate increases.

How do mortgage interest rates work?

Mortgage interest rates are determined by various factors, including the prevailing economic conditions, inflation, unemployment, and the Federal Reserve’s monetary policy. Lenders use these factors — as well as each borrower’s individual financial metrics — 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.

†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.

SOHL-Q324-074

Compare mortgage rates in Kansas.

Introduction to Mortgage Rates

Mortgage interest rates are calculated using a complex combination of factors, broadly categorized into the state of the economy and the borrower’s financial status. These factors impact the cost of borrowing money to purchase a home.

Lenders consider several Big Picture metrics when determining mortgage interest rates, including the current federal funds rate set by the Federal Reserve, inflation, and the unemployment rate.

Individual factors like credit score, down payment, income, assets, and loan type also play a significant role. Keep reading to learn more about how mortgage rates are set and what homebuyers can do to ensure they secure the best available rates.

Where Do 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 are not directly tied to Fed rates, they generally follow similar economic trends.

When the Fed raises interest rates, it becomes more expensive for banks to borrow money, leading to higher mortgage rates for consumers.

How Interest Rates Affect Home Affordability

Mortgage rates have a significant impact on home affordability, which is often overlooked by homebuyers. Even small changes in interest rates can significantly affect the monthly mortgage payments and the overall cost of homeownership.

Let’s say you put in a offer for $228,000, the average home value in Kansas. Assuming a 20% down payment of $45,600, you’ll need a mortgage for $182,400. With a 30-year, fixed-rate conventional mortgage and a 6.50% interest rate, your monthly payment will be $1,152. But hike up the rate by just 1% to 7.50%, and your monthly payment rises to $1,275 — a difference of $123 a month and $1,476 per year.

While that may be manageable for some homebuyers, consider that the extra percentage point means you’ll pay more than $44,000 in additional interest over the life of the loan. Rising interest rates can price middle-income families out of the housing market, limiting their ability to purchase a home — or accomplish other financial goals

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 decrease. While timing the market is challenging even for the experts, there are other factors to consider as well.

As you’re waiting for lower rates, home prices could rise abruptly, housing inventory could drop significantly, or your hidden gem of a neighborhood could be discovered by a flood of competing homebuyers. Any of those things could cancel out your interest-rate savings.

If you’re determined to secure the absolute rock-bottom mortgage rate, remember that you can always turn to a mortgage refinance. Refinancing allows homeowners to secure a lower interest rate in the future, saving them money over the long term.

Kansas Mortgage Rate Trends

Understanding historical mortgage rate trends can provide valuable insights into where rates are headed. Over a 20-year period, mortgage rates in Kansas ranged from almost 8.00% in 2000 to around 3.50% in 2012. Despite recent increases, current mortgage rates are still lower compared to historical highs. (The Federal Housing Finance Authority stopped keeping records after 2018.)

Historical U.S. Mortgage Rates

To provide a broader context, here’s a brief overview of historical U.S. mortgage rates. Back in the early 1980s, interest rates peaked at an astounding 18.00%. They remained high throughout the decade, averaging around 12.00%. Since then, they’ve dropped significantly, hovering around 4.00% in the 2000s and 2010s.

Post-COVID, rates have climbed a bit again but remain well below historical highs. This should reassure house hunters who are wondering if today’s mortgage rates are “normal.”

Factors Affecting Mortgage Rates in Kansas

Numerous factors influence mortgage rates in Kansas and nationwide, from economic conditions to borrower-specific characteristics. Understanding the interplay of economic and consumer factors can be a big help when you’re navigating the mortgage landscape.

While some factors, like the federal funds rate, are beyond an individual’s control, others, such as credit score and down payment, can be influenced by the homebuyer.

Economic Factors

Economic factors that impact mortgage rates include the federal funds rate, inflation, and unemployment rate.

•   The Fed: Changes in the federal funds rate directly affect mortgage rates, making it an important economic indicator for homebuyers.

•   Inflation: Inflation erodes the value of money, prompting lenders to raise interest rates to maintain their profit margins.

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

Consumer Factors

Consumer factors that influence mortgage rates include credit score, down payment, income and assets, and type of mortgage loan. This means you, the homebuyer, have the power to influence the interest rates you’re offered.

•   Credit score: A strong credit score demonstrates responsible financial behavior, making borrowers more attractive to lenders and leading to lower interest rates.

•   Down payment: A larger down payment reduces the loan amount, lowering the risk for lenders and potentially securing a lower interest rate.

•   Income and assets: Financial stability, as evidenced by a steady income and substantial assets, enhances a borrower’s creditworthiness and can lead to more favorable interest rates.

•   Type of mortgage loan: Different types of mortgage loans carry different interest rates, with adjustable-rate mortgages and government-backed loans often offering lower rates. Additionally, shorter loan terms generally have lower rates compared to longer terms.

Types of Mortgages Available in Kansas

Kansas offers various mortgage types to cater to different homebuyers’ needs, including fixed-rate, adjustable-rate, FHA, VA, and USDA loans.

Exploring the diverse mortgage options available in Kansas allows homebuyers to choose the loan that best aligns with their financial situation and homeownership goals.

If you’re buying your first home, you’re probably most familiar with conventional mortgage loans. These provide flexibility in terms of interest rates and loan amounts, making them suitable for a wide range of borrowers.

Fixed-Rate Mortgage

Fixed-rate mortgages provide stability and predictability by maintaining the same interest rate throughout the life of the loan. The consistent interest rate of fixed-rate mortgages offers peace of mind and allows for accurate budgeting.

Fixed-rate mortgages come with varying loan terms, typically ranging from 10 to 30 years, allowing borrowers to choose a repayment period that suits their financial circumstances.

Adjustable-Rate Mortgage (ARM)

Adjustable-rate mortgages (ARMs) offer lower initial interest rates compared to fixed-rate loans, but these rates can fluctuate over time. ARMs are an attractive option for those planning to sell or refinance before the fixed-rate period ends.

An ARM rate may be fixed for three, five, seven, or 10 years and then periodically adjust. If you see a 7/6 or 10/6 ARM, that means the rate on the home loan can adjust every six months after the introductory period.

FHA Loan

Backed by the Federal Housing Administration, FHA loans are designed for borrowers with less-than-perfect credit or limited down payment capabilities. FHA loans offer more accessible eligibility criteria, making homeownership possible for individuals who may not qualify for conventional loans.

FHA loans do require an upfront mortgage insurance premium (MIP) of 1.75% of the base loan amount, as well as monthly MIP for new homebuyers — most often 0.55%.

VA Loans

VA loans are exclusively available to veterans, active-duty military members, and certain Reserve and National Guard members. A significant advantage of VA loans is the elimination of the down payment requirement, making homeownership more attainable for eligible military personnel. If you’re interested in a VA loan, your first step is to obtain a certificate of eligibility from the VA.

USDA Loans

USDA loans are tailored to low-income borrowers seeking to purchase homes in rural areas. The backing of the U.S. Department of Agriculture ensures the availability of USDA loans to eligible borrowers in rural areas. One perk of these mortgages is that private mortgage insurance (PMI) is not required. You can find eligible rural areas in Kansas by entering the town name or zip code in the USDA mapping tool .

Jumbo Loans

Jumbo loans cater to borrowers seeking financing for homes exceeding the conventional loan limit. Throughout Kansas, the upper limit for a conventional loan is $832,750 for a single-family home. Any mortgage amount above that requires a jumbo loan.

Popular Places to Get a Mortgage in Kansas

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

Being strategic in your location selection can enhance your chances of achieving successful homeownership in Kansas.

Least Expensive Locations

While the overall cost of living statewide is almost 17% lower than the national average, it varies across different Kansas cities and towns. The Cost of Living Index (COLI) provides a comparison of the cost of living in different locations relative to the average cost of living in the U.S. Values above 100 indicate more expensive areas, while values below 100 point to more affordable locations.

Based on SoFi’s guide to the Best Affordable Places in the U.S., some less expensive locations in Kansas include:

•  Hays COLI 80.4. More than 40% of residents have attained a college degree, and major employers in the area offer jobs across health care, education, government, retail and manufacturing.

•  Pittsburg COLI 69.1. About two hours south of Kansas City, you’ll find this mining town with a charming downtown and plenty of good eats.

•  Salina COLI 75.8. Close to the heart of Kansas, the city is known for an abundance of manufacturing jobs and family-friendly attractions such as the Smoky Hill Museum and the Kenwood Cove Aquatic Park.

•  Topeka COLI 80. The capital city enables residents to live on a budget while accessing top-notch dining, entertainment, outdoor recreation, and basic goods and services.

•  Wellington COLI 76.5. This small town south of Wichita offers great job opportunities and multiple museums and parks.

Most Expensive Locations

Although Kansas is known for its affordable cost of living, the state has its affluent pockets with higher priced homes. Mission Hills (COLI 106.2) in Johnson County is reportedly the most expensive neighborhood in Kansas, with an average home price of about $2 million. Also in Johnson County, Fairway (106.2) is a quaint, suburban town that’s close to award-winning restaurants, country clubs, and excellent schools.

Recommended: The Average Monthly Expenses for One Person

Tips for Securing a Competitive Mortgage Rate in Kansas

As we’ve shown above, obtaining a competitive mortgage rate is necessary for saving money over the life of a loan. Even a slight difference in interest rate can result in significant savings or added costs over time. Here are some ways to ensure you’re getting the best available rate.

Compare Interest Rates and Fees

Comparing interest rates and fees from multiple lenders is essential for securing the most favorable mortgage terms. Shopping around for mortgage rates is highly recommended, allowing homebuyers to identify the most competitive offers and avoid unnecessary expenses.

When researching mortgages, make sure to compare not just APRs but also associated costs, including upfront fees and closing charges, which vary by lender.

Obtain Preapproval

Getting a preapproval for a mortgage strengthens a homebuyer’s position and facilitates a smoother home-buying process.

The mortgage preapproval process involves submitting financial documents and undergoing a credit check to assess your eligibility for a mortgage. A letter of preapproval from a lender demonstrates a borrower’s creditworthiness and financial readiness, enhancing their appeal to sellers and expediting the home-buying process.

In an environment of rising interest rates, locking in an interest rate during the preapproval process can provide peace of mind and protection against potential rate increases during the home search process.

Kansas Mortgage Resources

Although the Kansas housing market is relatively affordable, inventory in some areas is low and competition can be fierce. Fortunately, Kansas offers various resources and programs to assist homebuyers, particularly first-time buyers and those with limited financial resources.

Down Payment Assistance

There are multiple statewide down payment assistance programs for first-time and repeat homebuyers in Kansas. Participants must meet certain income limits and other financial requirements.

The Kansas Housing Resources Corporation First-Time Homebuyer Program offers a no-payment second mortgage to help cover their down payment and closing costs. The loan is forgiven after 10 years if it remains the buyer’s primary residence.

FHLBank Topeka runs the Homeownership Set-Aside Program to assist low- and moderate-income with their down payment, closing costs, and even repair costs. The five-year forgiveable grant of $2,500 to $15,000 must be repaid only if the homebuyer sells the home or refinances within five years.

Tools & Calculators

Various online tools and calculators are available to help homebuyers estimate their monthly mortgage payments, determine affordability, and compare different loan options. These tools can assist borrowers in making informed decisions about their mortgage.

Refinancing Options in Kansas

Homeowners in Kansas have refinancing options to potentially secure lower interest rates and optimize their mortgage terms.

With a conventional refinance, the existing mortgage is replaced with a new one, ideally with different terms and a lower interest rate. Similarly, a cash-out refi allows homeowners to take out a new mortgage for a larger amount than what they have left on their current mortgage and receive the excess amount as cash. As with your first mortgage, it pays to shop around with multiple lenders for the best deals.

FHA loan holders may obtain lower interest rates without extensive documentation requirements with an FHA Streamline Refinance. And VA Interest-Rate Reduction Refinance Loans (IRRRL) provide VA loan holders with an opportunity to lower their monthly payments by securing a reduced interest rate.

Closing Costs and Fees in Kansas

Closing costs associated with home purchases in Kansas typically range between 2% and 5% of the home’s purchase price. Understanding closing costs is essential for budgeting and financial planning during the homebuying process. The specific closing costs for a property can vary depending on its value and location within Kansas. Talk to your lender to request an estimate of your closing costs.

The Takeaway

Kansas’s housing landscape offers a range of options for homebuyers, encompassing various affordable neighborhoods, loan types, assistance programs, and refinancing opportunities. Empowered with knowledge and planning, homebuyers can navigate the Kansas mortgage market with confidence and secure a mortgage that supports their homeownership aspirations.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Will mortgage rates drop in Kansas?

Predicting future mortgage rate movements is challenging due to the influence of various factors, including the borrower’s financial profile. However, it may be comforting to know that current mortgage rates are on par with the historical average.

Will mortgage rates ever go back to normal?

The definition of “normal” mortgage rates varies over time. Current mortgage rates are higher than they were mid-pandemic; however, they’re in line with the 50-year historical average. In other words, they’re normal.

Will Kansas home prices ever drop?

Kansas housing prices are already pretty affordable compared to the national average. Beyond that, home prices are influenced by a number of local factors, which means they’re not consistent across the state. Your best bet is to consult with real estate professionals who specialize in the area(s) you’re interested in to gain insights into pricing trends.

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

Determining the ideal time to purchase a home involves considering personal financial circumstances, market conditions, and long-term goals. There’s no one-size-fits-all answer, and seeking advice from financial experts and real estate professionals can provide valuable guidance.

How to lock in a mortgage rate?

Locking in a mortgage rate involves working with a lender to secure a specific interest rate for a certain period, typically ranging from 30 to 90 days. This process ensures that the agreed-upon rate will be honored when the loan closes, protecting against potential rate increases.

How do mortgage interest rates work?

Mortgage interest rates are determined by various factors, including the current federal funds rate set by the Federal Reserve, inflation, the unemployment rate, the borrower’s credit score, down payment, loan amount, and loan term. Lenders assess these factors to determine the level of risk associated with a loan and set the corresponding interest rate.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

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

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

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

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

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-Q324-071

Compare mortgage rates in Iowa.

Introduction to Mortgage Rates

Mortgage interest rates are not simply determined by a single factor but rather by a complex interplay of economic conditions and each individual borrower’s financial profile. It all comes together in Iowa with a mortgage landscape that offers a range of options for homebuyers.

If you’re purchasing a home in Iowa, it helps to have a basic understanding of mortgage rates — where they come from and how to ensure you’re well positioned to get your best possible rate. Study this guide.

Where Do Mortgage Rates Come From?

The Federal Reserve, often referred to as the Fed, plays a pivotal role in determining mortgage rates. The Fed sets the short-term interest rates that banks use as a benchmark for their lending rates. Although home loan rates are not directly tied to Fed rates, they tend to follow the same economic trends.

But there’s more to it than that: Each would-be borrower has their own individual risk profile, and lenders will decide exactly what rate to offer a borrower based on their credit score, income and assets, and other metrics. We’ll give you more details on that below.

How Interest Rates Affect Home Affordability

Mortgage rates have a significant impact on home affordability. In Iowa, the average home value is about $220,000. If you purchased a home for that amount and made a 20% down payment, you would be borrowing $176,000. At a 6.5% interest rate, your monthly mortgage payment would be $1,112. But at 7.5% interest, your monthly payment would be $1,230. Over the life of the loan, assuming a 30-year term, you would pay more than $42,000 in additional interest at the higher rate.

Recommended: Average Monthly Expenses for One Person

Should Homebuyers Wait for Interest Rates to Drop?

Many people grapple with the dilemma of whether to purchase a home immediately or wait for interest rates to drop. This is especially true of those buying a first home, who don’t have the sale of an existing residence to rely on for a down payment.

While it’s true that rates can fluctuate, it’s impossible to say exactly when they will hit a given number. And it’s important to consider the opportunity cost of waiting: Home prices could rise while you wait for interest rates to fall. And a delay in purchasing means a delay in building equity in a home that you own. Remember, too, that you can always refinance your mortgage if interest rates decrease in the future.

Iowa Mortgage Rate Trends

Below you’ll see Iowa’s average mortgage rates over almost two decades. As you can see, Iowa’s rates fall, rise, then fall again, and so on, always sticking fairly close to the national average. Looking at rates over time may provide some reassurance that current rates are not exceptionally high compared to historical norms.

Historical U.S. Mortgage Rates

Three decades of U.S. average rates shows that mortgage rates today are not at their lowest level ever, but nor are they at the double-digit highs seen in the early 1980s.

Factors Affecting Mortgage Rates in Iowa

As mentioned above, numerous factors influence mortgage rates in Iowa and across the nation. Some of these factors are economic, while others are entirely within the homebuyer’s control. Let’s examine these a bit more closely.

Economic Factors

•   The Fed: The Federal Reserve plays a crucial role in setting the tone for mortgage rates. Its rates serve as a benchmark for other interest rates, including mortgage rates. When the Fed raises rates, higher mortgage rates often follow.

•   Inflation: Inflation, which refers to the rate at which the price of goods and services increases, can also impact mortgage rates. When inflation rises, the purchasing power of money decreases, making it more expensive for lenders to lend money. To compensate for this, lenders may increase interest rates to maintain their profit margins.

•   Unemployment rate: The unemployment rate is another economic factor that influences mortgage rates. When the Federal Reserve sees unemployment ticking upward, a rate drop may follow.

Consumer Factors

•   Credit score: A borrower’s credit score is a crucial factor in determining what mortgage rate they’ll be offered. A higher credit score, which reflects a history of responsible borrowing and debt management, indicates lower risk to lenders. As a result, borrowers with higher credit scores typically qualify for lower mortgage interest rates.

•   Down payment: The amount of down payment a borrower can make also impacts mortgage rates. A larger down payment reduces the loan amount, which in turn reduces the risk for the lender. To incentivize larger down payments, lenders may offer lower interest rates to borrowers who can make a substantial down payment.The amount of down payment a borrower can make also impacts mortgage rates. A larger down payment reduces the loan amount, which in turn reduces the risk for the lender. To incentivize larger down payments, lenders may offer lower interest rates to borrowers who can make a substantial down payment.

•   Income and assets: A steady income and sufficient assets provide assurance to lenders that the borrower can consistently make mortgage payments. Lenders will assess the borrower’s employment history, salary, investments, and emergency savings to evaluate their financial stability.

•   Type of mortgage loan: The type of mortgage loan chosen can also affect 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.

Types of Mortgages Available in Iowa

Iowa offers a diverse range of mortgage options to homebuyers. Having a basic understanding of what might be on the mortgage menu can help you maximize your borrowing power.

Fixed-Rate Mortgage

Fixed-rate mortgages provide stability and predictability by maintaining the same interest rate and monthly payment amount throughout the life of the loan, making it easier for borrowers to budget and plan their finances.

Fixed-rate mortgages are typically 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 generally have lower interest rates but higher monthly payments, while longer loan terms have higher interest rates but lower monthly payments.

Adjustable-Rate Mortgage (ARM)

Adjustable-rate mortgages (ARMs) are characterized by an initial lower interest rate compared to fixed-rate loans. This can be attractive to borrowers who are planning to sell their home or refinance before the fixed-rate period (usually 5, 7, or 10 years) ends. After the initial rate period, the interest rate can adjust periodically based on a predetermined index. This adjustment can lead to fluctuations in monthly mortgage payments.

FHA Loans

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. They may be especially attractive to those who qualify as a first-time homebuyer, in part because they typically have more lenient eligibility requirements compared to conventional loans.

VA Loans

VA loans are specifically designed for eligible veterans, active-duty military members, certain Reserve and National Guard members, and surviving spouses. These loans are backed by the Department of Veterans Affairs (VA) and offer competitive interest rates, no down payment requirement, and flexible credit guidelines.

One of the significant advantages of VA loans is the absence of a down payment requirement. This can be particularly beneficial for service members and veterans who may not have substantial savings for a down payment.

USDA Loans

USDA loans, provided by the United States Department of Agriculture (USDA), are tailored for borrowers whose income falls within government guidelines and who are seeking to purchase a home in a rural area. These loans offer competitive interest rates, no down payment requirement, and flexible credit guidelines.

Jumbo Loans

Conventional mortgage loans (those not backed by the government) have a maximum lending limit set by the Federal Housing Finance Agency (FHFA). For 2026, the conforming loan limit for a single-family home in most U.S. counties (and throughout Iowa) is $832,750. A jumbo loan is a conventional loan that exceeds this limit. Jumbo loans may have more stringent requirements of borrowers because lenders take on more risk with these loans.

Popular Places to Get a Mortgage in Iowa

When it comes to securing a mortgage, location plays a crucial role. Homebuyers should consider choosing areas with affordable home prices and favorable mortgage terms. Some popular places in Iowa for obtaining a mortgage include Des Moines, Cedar Rapids, Iowa City, and Davenport.

The cost of living in an area can significantly impact mortgage affordability. The Cost of Living Index (COLI) provides a comparison of the cost of living in different states relative to the national average. Iowa has a relatively low COLI, making it an attractive option for homebuyers seeking affordability.

Least Expensive Locations

Within Iowa, some of the places that made SoFi’s list of the best affordable places in the U.S. include Urbandale and Waterloo. Waukee and Grimes were among the best affordable places for families. Young adults might especially like Coralville, outside of Iowa City. And if you are retiring in Iowa, take a look at Clear Lake and Marion.

Most Expensive Locations

The highest cost-of-living location in Iowa is also its largest city, Des Moines. Other higher-cost areas include West Des Moines, Ankeny, and Johnston. These areas are known for their higher home prices and overall cost of living. The good news is that Iowa has one of the lowest cost of living levels in the U.S., with a state average that is 15 points below the national average. So even an area that is considered expensive in Iowa might still be relatively affordable when compared to many other cities in the U.S.

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

Tips for Securing a Competitive Mortgage Rate in Iowa

As we have seen, obtaining a competitive mortgage rate can significantly impact the overall cost of homeownership in Iowa. Take these steps:

Compare Interest Rates and Fees

To secure the best possible mortgage rate, it’s essential to factor both interest rates and fees into your calculations, and to compare offers from multiple lenders. Fees can vary among lenders and can add to the overall cost of the mortgage.

Get Preapproved

Getting preapproved for a mortgage is a crucial step in the homebuying process. The mortgage preapproval process involves providing the lender with your financial information and obtaining a conditional approval for a specific loan amount. This strengthens your position as a buyer, gives you a clear picture of how much house you can afford, and allows you to move quickly when you find the right property.

If you’re concerned interest rates might rise, you can lock in your rate for a certain period, typically ranging from 30 to 90 days, by paying a fee to the lender. This can provide peace of mind and protect you from potential rate increases.

Iowa Mortgage Resources

Iowa provides a range of resources and programs to support homebuyers, especially first-time buyers and those with limited financial means. These resources include down payment assistance programs.

First-Time Homebuyer Programs

The Iowa’s Finance Authority’s FirstHome Program is designed to assist novice homebuyers, those who have served in the military, and people purchasing a home in specific parts of the state. It offers competitive rates which aren’t determined based on credit score. Loans may require only a 3% down payment. There is a household income and home price eligibility requirement which varies based on the county. Iowa defines a first-time homebuyer as someone who has not owned a principal residence in the last three years.

Down Payment Assistance

Iowa buyers with a household income below $163,800 can apply for the Homes for Iowans Down Payment and Closing Cost Assistance program. This is a second loan that will offer up to 5% of a home’s sale price (with no maximum price). There are no monthly payments on the loan; borrowers repay it if they sell or refinance the home, or when they pay their first mortgage in full. Iowans can also combine down payment assistance with the FirstHome loan program.

Tools & Calculators

Online tools and calculators can help would-be homeowners estimate their mortgage payments, compare interest rates, and determine what they can afford.

Refinancing Options in Iowa: Exploring Your Possibilities

Homeowners in Iowa have the option to refinance their existing mortgage to secure a lower interest rate or change the terms of their loan. Most lenders will help those with conventional mortgages refinance. Refinance options are also available for government-backed loans, including the FHA Streamline Refinance, which allows FHA-insured homeowners to refinance with minimal hassle.

VA loan holders can benefit from the Interest-Rate Reduction Refinance Loan (IRRRL), which allows them to refinance their VA loan to obtain a lower interest rate and reduce their monthly payments.

Closing Costs and Fees in Iowa: What to Expect

Closing costs associated with purchasing a home typically range from 3% to 6% of the home’s purchase price. These costs include appraisal fees, title insurance, loan origination fees, and recording fees. The specific closing costs in Iowa 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

Iowa’s mortgage landscape offers plenty of options for homebuyers, catering to different financial situations and preferences. By staying informed about current mortgage rates, exploring assistance programs, and carefully considering refinancing options, individuals can make strategic decisions that will allow them to be happy homeowners in the Hawkeye State.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

FAQ

Will mortgage rates drop in Iowa?

Mortgage rates will likely drop in Iowa, but trying to predict when that will happen — or whether they will rise further before dropping — is nearly impossible. Your best bet is to keep up on larger market conditions, such as the movement of the Federal Reserve rate, and keep even closer tabs on your personal financial markers, including your credit score.

Will mortgage rates ever go back to normal?

It’s hard to say, since the definition of “normal” mortgage rates can vary over time. Mortgage rates have experienced fluctuations throughout history, and what is considered normal in one decade or generation can change.

Will Iowa home prices ever drop?

Real estate market trends, including home prices, are influenced by a combination of economic, demographic, and local factors. Predicting future home price movements is tricky, but a local real estate agent who follows the specifics in the market would be a good person to consult on this matter.

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

Determining the right time to buy a house involves considering personal financial readiness, market conditions, and long-term goals. There is no one-size-fits-all answer, and what is a good time for one person may not be for another. Take a good look at home prices in your chosen neighborhood, then use an online mortgage calculator and home affordability calculator to see if your finances are ready for the market.

How do I lock in a mortgage rate?

To lock in a mortgage rate, you can work with a lender to secure a specific interest rate for a certain period, typically ranging from 30 to 90 days. This usually involves paying a fee to the lender, known as a rate lock fee. By locking in a rate, you protect yourself from potential interest rate increases during the specified period.

How do mortgage interest rates work?

Mortgage interest rates are determined by a mix of economic factors, such as the Federal Reserve’s interest rate decisions, and personal financial metrics such as credit score, down payment, loan type, and loan term.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

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

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

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

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

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.

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