Will Rising Mortgage Rates Make It Harder to Qualify for a Home Loan?

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While would-be homeowners may face new challenges, qualified borrowers should still be able to get a loan.

After rates repeatedly hit record lows last year, things have looked very different in 2022.

Mortgage rates have been steadily rising throughout the year and that trend is expected to continue for the foreseeable future.

What does this mean for would-be homeowners? Here's what you need to know about today's average mortgage rates on April 21, 2022, as well as about the impact of rising rates on qualifying for a loan.

Mortgage Type Today's Interest Rate
30-year fixed mortgage 5.289%
20-year fixed mortgage 5.183%
15-year fixed mortgage 4.399%
5/1 ARM 4.124%

Data source:The Ascent's national mortgage interest rate tracking.

30-year mortgage rates

The average 30-year mortgage rate today is 5.289%. This rate was below 3.00% in 2021, so it has increased substantially.

20-year mortgage rates

The average 20-year mortgage rate today is 5.183%. Although it's lower than the 30-year rate, it's far above what it was last year, and it means monthly payments for this loan will be much higher.

15-year mortgage rates

The average 15-year mortgage rate today is 4.399%. Many people find 15-year mortgages aren't affordable because repaying your loan over such a short time necessitates high monthly payments. That's especially true with rates going up.

5/1 ARMs

The average 5/1 ARM rate is 4.124%. An ARM is an adjustable-rate mortgage. The initial starting rate is guaranteed for just five years and the rate can change once annually after that. If rates are higher in five years, total loan costs and monthly payments will be higher.

How do rising rates affect your ability to get a loan?

When mortgage rates rise, as they have this year, borrowers face higher monthly payments. This creates added challenges with regards to loan approval.

See, mortgage lenders consider a person's income relative to housing costs; as well as their income relative to total debt -- including their new mortgage payments. If your housing costs exceed around 28% of income or your total debt costs exceed 36%, then you may not get approved for a competitive loan.

Unfortunately, you're more likely to exceed these thresholds when monthly payments are higher due to increased rates. You may need to reduce the amount you borrow to get approved for a loan. You can shop around among the best mortgage lenders to find out how much you can borrow at today's average rates. This will help you determine how much of a home loan you can afford.

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