Mortgage Rates Surge: October 7, 2024 Update on 30-Year and 15-Year Loans

As of October 7, 2024, mortgage rates have seen a notable increase, with the average rate for a 30-year fixed mortgage now at 6.82%, according to data from Curinos. This marks a rise from last week's average of 6.67%. For those considering a 15-year mortgage, the current average rate stands at 5.96%, up from 5.69% last week. Additionally, the average rate for a 30-year jumbo mortgage has climbed to 6.87%.

The annual percentage rate (APR) for a 30-year fixed-rate mortgage is currently 6.84%, an increase from 6.67% the previous week. The APR reflects the total cost of the loan over its lifespan, including interest and fees. For a $100,000 mortgage at the current interest rate, borrowers can expect to pay approximately $653 monthly in principal and interest, resulting in a total interest payment of around $135,077 over 30 years.

For the 15-year mortgage option, with an interest rate of 5.96%, the monthly payment would be about $842 per $100,000 borrowed, leading to a total interest cost of approximately $51,515 over the life of the loan. The APR for this loan type is 5.99%, up from 5.72% last week.

The jumbo mortgage market is also experiencing changes, with the average interest rate for a 30-year fixed jumbo mortgage now at 6.87%. This is a slight increase of 0.12 percentage points from the previous week. Over the past year, jumbo mortgage rates have fluctuated significantly, with a low of 5.50% and a high of 10.50%.

For a $750,000 jumbo mortgage at the current rate, the monthly payment in principal and interest would be approximately $4,924.

When embarking on the homebuying journey, calculating affordability is crucial. Factors such as income, debt levels, and savings play a significant role in determining what you can afford. The APR is a key figure, as it provides insight into the total cost of a mortgage if held for the full term.

Interest rates for mortgages are influenced by various factors, including the overall health of the economy, benchmark interest rates, and individual borrower characteristics. The Federal Reserve's monetary policy and inflation rates can also impact mortgage rates. While an increase in the Fed's rates does not directly cause mortgage rates to rise, it can lead to higher borrowing costs for banks, which in turn affects consumers.

To secure competitive mortgage rates, home buyers should focus on improving their financial profiles. A good credit score (typically between 670 and 850) and a debt-to-income (DTI) ratio below 43% can enhance your chances of qualifying for favorable rates. Additionally, making a down payment of at least 20% can help avoid private mortgage insurance (PMI).

Conventional loans, offered by private lenders, generally require good credit and a minimum 20% down payment for the best rates. However, some lenders provide first-time homebuyer programs with lower down payment options, sometimes as low as 3%.

For buyers with limited credit or financial resources, government-backed loans may be more accessible. FHA loans, for instance, require a minimum down payment of 3.5% with a credit score of 580 or higher. Those with scores between 500 and 579 may need to put down at least 10%. It's important to note that FHA loans come with upfront and annual mortgage insurance premiums.

USDA loans are available for eligible rural residents with moderate or low income and do not require a down payment, although they do involve upfront and annual guarantee fees. For military veterans, VA loans are an excellent option, often requiring no down payment and only a one-time funding fee, without the annual fees associated with FHA and USDA loans.