Current Rates For FHA, USDA, VA, and Conventional

You've likely heard the news that the Federal Reserve raised interest rates. This did not create a linear effect. Instead, economists have reported wide fluctuations in mortgage interest rates, including an unexpected decline in August 2022 however that dip was short-lived and have reached a new multi-year high. The interest rates also tend to vary across different types of mortgages and even by state.

At the time of writing this article, Bankrate estimated an average 30-year mortgage interest rate of 6.81% across America. Interest rates play a crucial role in housing affordability, so examining the differences is crucial.

What Are the 5 Main Types of Mortgages?

The lender you use and your finances will determine which mortgages you become eligible for and choose. Even so, there are five common types of mortgages that most mortgage lenders provide.

1. Government-Backed Loans

These loans include government guarantees to protect creditors if you default on the loan. Consequently, they tend to have lower interest rates and more lenient lending terms. For example, they require low down payments or none at all. These are some of the most common programs that fall under this mortgage type:

VHA Loan: Veterans Affairs backs these loans. They are available to qualified veterans, reservists, active-duty military members and some qualifying family members.
FHA: The Federal Housing Administration mortgage program is open to homebuyers with a minimum down payment of just 3.5% of the purchase price.
USDA Loan: The U.S. Department of Agriculture provides this no-down-payment mortgage program to low- and moderate-income buyers in eligible rural areas.

2. Conventional Loan

Conventional loans receive no guarantees or backing from federal entities. These loans have both fixed- and adjustable-rate options and you can usually choose between a 15- or 30-year term. You'll need to make a down payment of at least 3%, although some lenders require as much as 20%. If you make a down payment of less than 20%, your lender will require you to buy private mortgage insurance. PMI covers the lender from losses if you default on the loan.

3. Jumbo Loan

Fannie Mae and Freddie Mac are government-sponsored entities that buy and securitize conventional mortgages. They set limits on how much lenders can offer to homebuyers. Jumbo loans make it possible for people to secure homes that cost more than this limit. Homes that might fall into this category include single-family homes in upper-class neighborhoods or condos in big cities.

4. Fixed-Rate Mortgage

A fixed-rate mortgage has an interest rate that remains the same for the entire term of the loan, which could range from 15 to 30 years. Because the interest rate is locked in, your monthly mortgage payments won't change over the life of your loan.

5. Adjustable-Rate Mortgage

An adjustable-rate mortgage has a fixed interest rate for an initial period ― typically three, five, seven or 10 years. After the initial period, your interest rate will adjust annually depending on current market conditions. ARMs usually start with lower monthly payments than fixed-rate mortgages, but your payment could increase if interest rates rise.

What Are the 2022 Interest Rates for Government-Backed Loans?

Because of the lower risk to lenders, government-backed loans usually have lower interest rates than other loan programs. The federal government created each loan program to appeal to different demographics, so the interest rates vary.

VA Loan

At the time of writing this article, Bankrate calculated the national average for weekly VA rates at 7.14% for a 30-year loan. This is almost 1% less than the national average. It presents a fantastic opportunity for qualified military persons and their families to purchase a home even when other Americans get priced out of the market.

FHA Loan

People considering the FHA loan program have an even better chance of securing a slightly lower interest rate. The weekly average for a 30-year FHA loan currently sits at 7.16%. Almost any qualified homebuyer meeting minimum requirements can qualify for the FHA loan, which opens up many opportunities. Down payment requirements are also low at just 3.5%.

USDA Loan

Bankrate does not explicitly track USDA loan mortgage interest rates the same way it follows other loan types. However, the USDA announced an interest rate of 7.32% for Single Family Housing Direct home loans. This rate took effect on August 1, 2022, and included payback terms of up to 38 years.

What Are the 2022 Interest Rates for Conventional Loans?

Most finance websites do not track average interest rates for conventional mortgages. However, you can tell a lot by the range of interest rates posted by affiliates of creditors. For example, when writing this, NerdWallet's rates ranged from an interest rate of 6.92 to 7.71%.

Bankrate shows a similar spread. The creditors its references have interest rates that range from 6.8% to 7.71%.

What Are the 2022 Interest Rates for Jumbo Loans?

At the time of writing this article, Bankrate estimated an average interest rate of 5.53% for a 30-year jumbo mortgage across America. Surprisingly, this is lower than the week before when it reached 5.66%. Despite the high average, Bankrate's spread of mortgage offers shows an internal average of 4.87%. Creditor offerings range from as low as 4.125% to 5.5%.

What Are the 2022 Interest Rates for Fixed vs. ARM Loans?

When choosing a mortgage, some homeowners look beyond traditional offerings to consider whether to get a fixed or ARM loan. Homebuyers paid an average of 5.49% interest for a 5/1 adjustable-rate mortgage as of August 1, 2022. Compare this to an average of 5.28% mortgage interest rate on 30-year fixed mortgages for that period.

What Factors Affect 2022 Mortgage Interest Rates?

Homebuyers watching the fluctuations with bated breath might wonder what affects the numbers. The American economy experienced record growth after it rebounded from pandemic lockdowns. However, the expansion was so fast that it also contributed to record levels of inflation. The Federal Reserve has gradually increased the interest rates to slow inflation.

There is almost nothing individual consumers can do about inflation or rising interest rates at the federal level. However, there are a few aspects of your finances and home search that have a direct impact on what you pay in interest.

Credit History

Financial institutions use your credit history to determine how much risk you introduce to their portfolio. The higher the assumed risk, the higher the interest rate. A high credit score indicates lower risk. Additional factors that work in your favor include low credit usage, perfect payment histories and lengthy credit history.

Here are some factors that might work against you in your credit history:

Delinquencies related to unpaid or underpaid debts
Recent bankruptcies that still show on your credit report
Low or no current credit usage
A shaky employment history

Debt-to-Income Ratio

Creditors calculate your DTI by dividing your monthly gross income by your credit obligations for that period. This number gives them an idea of how much financial stress you're currently under and how likely you are to default on your mortgage. A low DTI is better for securing a lower interest rate.

A low DTI also indicates that you have plenty of room in your budget to make payments on a new mortgage. A high DTI might suggest that you're already struggling to keep up with financial obligations, which could lead to defaulting on the loan. This could cause lenders to raise your interest rates to match the level of risk. DTI also determines the maximum size of your loan.

Home Cost vs. Loan Amount

The size of the loan relative to the purchase price impacts your interest rate. High loan-to-value ratios increase the risk for creditors. Consequently, they charge a higher interest rate to make up for it. A lower loan-to-value ratio indicates that you're putting more money down, which decreases the risk to creditors.

Home Location

Creditors perceive properties in certain areas as being riskier than others. For example, a home in a high-crime area is more likely to fall into foreclosure than a home in a stable neighborhood. Similarly, a home in an area prone to natural disasters is considered riskier than one in a safe location. Creditors account for this increased risk by charging higher interest rates on loans for these types of properties.

Type of Home

For example, creditors view a family home as a lower risk than an investment property. This is because you're more likely to default on an investment property if the rental market dries up or the home's value plummets. Creditors account for this increased risk by charging higher interest rates on loans for investment properties.

The Lender

Shop around for the best deal. Don't just go with the first lender you talk to about your purchase. Get quotes from several different lenders and compare the interest rates that they're offering. You might be surprised at how much variation there is from one lender to the next.

The Bottom Line

Interest rates strongly impact whether you can afford a home, but there are ways to get good rates in any economy. You can also use online mortgage calculators to estimate your monthly payments based on the interest rate, loan amount, loan term and other factors. Doing this can help you determine your budget and set realistic expectations for the homebuying process.