The end of the year can be a smart time to buy a home, as prices tend to cool off after the summer selling season and bottom out in the winter. In 2017, there's another reason why the end of the year could be a smart time to shop for your next home: Mortgage rates are as low as they've been all year.
Mortgage rates are at a 2017 low
According to the September 2017 EllieMae Origination Insight Report, mortgage rates for closed loans are at their lowest level since December 2016. The overall average 30-year mortgage rate dropped to 4.21%, 20 basis points lower than at the April peak.
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The decline in rates applies to the three major types of mortgage loans -- conventional, FHA, and VA.
|
Type of Loan |
September 2017 Average |
2017 Peak |
|---|---|---|
|
Conventional |
4.26% |
4.51% |
|
FHA |
4.23% |
4.36% |
|
VA |
3.99% |
4.15% |
|
Overall |
4.21% |
4.41% |
Data Source: EllieMae Origination Insight Report, September 2017.
It's also worth mentioning that, although this is the most recent month for which we have complete mortgage data for loans that closed, the average mortgage APR continued to fall in October. As of October 18, 2017, the most recent data available, the average contract rate for a 30-year mortgage had dropped another seven basis points, to 4.14%.
What mortgage rate should you expect to get?
Of course, these are the national averages, and the rate you get will depend on a few factors, such as your credit score, location, and your other qualifications, such as your income, savings, and employment history.
Your credit score is, perhaps, the most important factor, especially when talking about conventional mortgage interest rates. FHA and VA loans are guaranteed, and therefore represent less risk, so lenders tend to give borrowers lower rates than they otherwise would. However, with a conventional loan, lenders tend to give mortgage rates that vary significantly with a borrower's perceived risk.
For a conventional mortgage, which is by far the most common of the three, here are the current national average rates by credit score:
|
FICO Credit Score Range |
Average APR |
|---|---|
|
760-850 |
3.524% |
|
700-759 |
3.746% |
|
680-699 |
3.923% |
|
660-679 |
4.137% |
|
640-659 |
4.567% |
|
620-639 |
5.113% |
Data Source: www.myFICO.com as of 10/18/2017.
A couple of points. First, you'll notice that the overall rates in the chart above are significantly lower than those in the previous chart. As I mentioned earlier, the overall mortgage-rate report was based on actual mortgage data from the entire month of September, while the breakdown by credit score was based on average contract interest rates more than two weeks into October, when rates had fallen even further.
Next, it's also important to note that there's a geographic component to mortgage rates, as well. If you want to see a breakdown of up-to-date average mortgage rates for your state, myFICO.com has an excellent tool that will do just that, and will also calculate your hypothetical mortgage payment.
Low mortgage rates combined with lower prices are a winning combination
According to a NerdWallet study, home prices fall by an average of nearly 8.5% between the peak selling months of July and August and the winter lows. Combined with the drop in mortgage rates, this could translate to some serious savings for people who buy homes in the last few months of the year.
