# Today’s Mortgage, Refinance Rates: Jan. 31, 2022

Mortgage rates have been inching upward in January. The 30-year fixed rates are now well over 3%, and 15-year rates are above 2.5%. Freddie Mac data shows that rates are starting to rise. The 30-year rates are now back to where they were before the COVID-19 pandemic began, and 15-year rates are almost to that point.

Rates should continue to rise this year. The Federal Reserve announced that it plans to increase the federal funds rate three times in 2022, and it will taper its purchasing of assets at twice the speed it had previously expected. This means that interest rates should increase in 2022.

## Mortgage calculator

Use our free mortgage calculator to see how today’s mortgage rates would impact your monthly payments. By plugging in different rates and term lengths, you’ll also understand how much you’ll pay over the entire length of your mortgage.

##### Mortgage Calculator

\$1,161
Your estimated monthly payment

• Paying a 25% higher down payment would save you \$8,916.08 on interest charges
• Lowering the interest rate by 1% would save you \$51,562.03
• Paying an additional \$500 each month would reduce the loan length by 146 months

Click “More details” for tips on how to save money on your mortgage in the long run.

## What is a mortgage rate?

A mortgage rate is the interest you pay on the money you borrow from a lender to buy or refinance your home. It’s basically the fee you pay for borrowing, expressed as a percentage. For example, you may take out a \$200,000 mortgage, plus a 2.75% interest rate.

There are two types of mortgage rates: fixed and adjustable.

A fixed-rate mortgage locks in your rate for the entire length of your mortgage. Even if rates in the US market increase or decrease, your rate will stay the same. This is an especially great deal right now, as rates are at historic lows overall.

An adjustable-rate mortgage keeps your rate the same for a predetermined amount of time, then changes it periodically. A 5/1 ARM locks in your rate for the first five years, then the rate fluctuates once per year. This is a riskier approach these days, because you risk your rate going up later since rates are low right now.

## How are mortgage rates determined?

Mortgage rates are determined by a combination of factors — some you can control, and some you can’t.

The main external factor is the economy. Interest rates tend to be higher when the US economy is thriving and lower when it’s struggling. The two main economic factors that impact mortgage rates are employment and inflation. When employment numbers and inflation go up, mortgage rates tend to increase.

You can control your finances, though. The better your credit score, debt-to-income ratio, and down payment, the lower your rate should be.

Finally, your mortgage rate relies on what type of mortgage you get. Government-backed mortgages (like FHA, VA, and USDA loans) charge the lowest rates, while jumbo mortgages charge the highest rates. You’ll also get a lower rate with a shorter mortgage term.

## How do I choose a mortgage lender?

First, think about what type of mortgage you want. The best mortgage lender will be different for an FHA mortgage than for a VA mortgage.

A lender should be relatively affordable. You shouldn’t need a super high credit score or down payment to get a loan. You also want it to offer good rates and charge reasonable fees.

Once you’re ready to start shopping for homes, apply for preapproval with your top three or four choices. A preapproval letter states that the lender would like to lend you up to a certain amount, at a specific interest rate. When you’re preapproved, your mortgage rate is locked in for 60 to 90 days. With a few preapproval letters in hand, you can compare each lender’s offer.

When you apply for preapproval, a lender does a hard credit inquiry. A bunch of hard inquiries on your report can hurt your credit score — unless it’s for the sake of shopping for the best rate.

If you limit your rate shopping to a month or so, credit bureaus will understand that you’re looking for a home and shouldn’t hold each individual inquiry against you.

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