Best Available Purchase Rates for August 14, 2025

An interest rate is the percentage of the loan amount that a lender charges for borrowing money. It's essentially the cost of borrowing and is expressed as an annual percentage. For mortgages, the interest rate determines how much you'll pay in interest over the life of the loan. A lower interest rate means lower monthly payments and less interest paid overall. Interest rates can be fixed (staying the same throughout the loan term) or adjustable (changing over time based on market conditions).

APR (Annual Percentage Rate) is a broader measure of the cost of borrowing that includes not only the interest rate but also other fees and costs associated with the loan, such as origination fees, discount points, and certain closing costs. APR gives you a more complete picture of the total cost of the loan, making it easier to compare different loan offers. While the interest rate affects your monthly payment, APR shows the true annual cost of the loan.

Mortgage points, also called discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. One point typically costs 1% of your loan amount and usually reduces your interest rate by about 0.25%. For example, on a $200,000 loan, one point would cost $2,000. Points can be a good investment if you plan to stay in your home long enough to recoup the upfront cost through lower monthly payments.

The amount of mortgage you can qualify for depends on several factors: your income, debt-to-income ratio (DTI), credit score, down payment, and the type of loan you're seeking. Lenders typically prefer a DTI ratio of 43% or less and consider your monthly income, existing debts, and estimated property taxes and insurance. A higher credit score and larger down payment can help you qualify for a larger loan amount. Use our mortgage calculator to estimate your potential loan amount and monthly payments.

The best type of mortgage loan depends on your individual circumstances. Conventional loans are popular for borrowers with good credit and a stable income. FHA loans are great for first-time buyers with lower credit scores or smaller down payments. VA loans offer excellent terms for veterans and active military. Jumbo loans are designed for high-value properties. Consider factors like down payment requirements, interest rates, loan terms, and your long-term financial goals when choosing a mortgage type.

A teaser rate is an introductory interest rate that's lower than the standard rate and typically offered on adjustable-rate mortgages (ARMs). This rate usually lasts for a specific period, often 3-10 years, before adjusting to a variable rate based on market conditions. While teaser rates can offer lower initial payments, it's important to understand how much your rate and payments could increase after the introductory period ends.

Mortgage closing costs typically range from 2% to 5% of your loan amount. These costs include lender fees (application, origination, and underwriting), third-party fees (appraisal, title search, and insurance), prepaid expenses (property taxes and homeowners insurance), and points if you choose to buy down your rate. The exact amount varies by location, lender, and loan type. Some closing costs can be negotiated, and some lenders offer credits or options to roll closing costs into your loan amount.

The Federal Reserve influences mortgage rates indirectly through its monetary policy decisions. When the Fed adjusts the federal funds rate (the rate banks charge each other for overnight loans), it affects short-term and variable interest rates throughout the economy. While mortgage rates aren't directly tied to the federal funds rate, they often move in the same direction. The Fed's policies also affect inflation expectations and the overall economic environment, which impact long-term rates like mortgages.