Today's Rates In Rhode Island
Finding the best Rhode Island mortgage rates is not simply a matter of leaving it up to fate – or to Providence, as it were. You need to shop around and find the lender who's got the best deal for you.
Surprisingly, nearly half of all U.S. mortgage borrowers don't shop around for a mortgage, seriously considering only one lender before applying, according to a study by the Consumer Financial Protection Bureau. More than three-quarters only apply to a single lender or broker, rather than submitting multiple applications to see who's offering the best deal.
This is a costly mistake. A difference of only a quarter of a percentage point on a $300,000 home loan can cost you an additional $45 a month on a 30-year loan, adding up to more than $16,000 in additional interest costs over the life of the loan.
You should seek to compare rates and terms from at least three different lenders when shopping for a Rhode Island home loan and preferably more. In addition, you don't want to just look at the mortgage rates when comparing loans – pay close attention to the fees as well, which sometimes offset the savings from a lower rate.
You also want to make sure you're choosing the right type of home loan. Some Rhode Island borrowers will get their best deals with a conventional mortgage backed by Fannie Mae or Freddie Mac when buying a home or refinancing a current mortgage. Others will find an FHA loan or VA mortgage is a better fit.
Looking to borrow money for home improvements or another purpose? Choose between a standard home equity loan or a home equity line of credit (HELOC). Or maybe a cash-out refinance would be the best option for you.
That's a lot of options, a lot of choices. To help you navigate your way, we've got a lot of information resources to help you become a knowledgeable borrower, as well as tools like various mortgage and financial calculators to help you crunch the numbers. Just follow the links at the top and bottom of this page.
In the meantime, here's a short overview of some of the main things to know about Rhode Island mortgage rates and shopping for loans.
About Rhode Island mortgage rates
Current Rhode Island mortgage rates for some of the more popular types of loans are listed above. That's a good starting point. But those aren't necessarily the rates you'll pay.
For one thing, mortgage rates are changing constantly, depending on market conditions. Rates can move up or down every day, sometimes several times a day. So things may have changed by the time you're ready to apply.
Also, the current mortgage rates you see listed are averages of what borrowers paid all over Rhode Island. Some paid more, some paid less, depending on factors like their credit score, down payment, whether they purchased discount points and the pricing of the lenders they chose.
When shopping for a mortgage in Rhode Island, remember that the rates are only part of the story. Don't just grab the lowest advertised rate you see and figure you're done. Pay attention to the fees as well. Closing costs on a mortgage typically vary from 2-6 percent of the loan amount, which is a big bite. Compare fees at least as carefully as you do rates – a mortgage calculator can be helpful here.
APR and discount points
Two things that are particularly useful to pay attention to when shopping for a home loan are the annual percentage rate (APR) and discount points.
APR is a way of reflecting the full cost of a loan, both the mortgage rate and all closing costs, as a single figure. It's often a better way to compare loans than just looking at the rate itself, particularly with fixed-rate mortgages. The APR is essentially the interest rate that, applied to the loan amount, would give you the same monthly payment you would have if you added your closing costs into the loan as well. By law, it must be included with any offers for a mortgage rate, including advertisements and rate quotes.
You also want to pay attention to how many discount points are included with a loan. Discount points are a special kind of fee that lets you buy a lower mortgage rate by prepaying interest. Each point costs 1 percent of the loan amount and lowers the rate by a certain fraction of a percentage. Buying discount points can save you money over time, but be wary of low rate offers that include multiple points – they may not be as good a deal as they first appear.
Personal factors that affect your rate
The rate you get on a Rhode Island mortgage is affected by a number of personal factors. Some of these have a bigger effect on some types of loans than others, so keep that in mind when choosing a loan. They include:
- Your credit score: You credit score not only affects whether you can qualify for a mortgage or not, but generally has an impact on the rate you'll pay as well. Borrowers with scores of 740 and above get the best rates, with rates gradually increasing with lower scores. Borrowers with scores below 600 can expect sharply higher rates, assuming they can find a lender to approve them.
- Down payment: Your down payment also affects the rate you get, with borrowers who put down 20-30 percent or more getting the best rates. Many lenders will approve loans with as little as 3 percent down, particularly for borrowers with good credit, but expect to pay a higher rate in exchange. When refinancing, your home equity replaces the down payment.
- Debt-to-income level: Borrowers who carry low levels of debt are less risky that those who have big debt payments to make each month, so they qualify for better scores.
- Loan amount: High-value mortgages, those that exceed the lending limits set for Fannie Mae and Freddie Mac loans, usually have higher rates than conforming loans do. These are called jumbo loans. At the other end of the scale, very small mortgages, those under $80-$100k or so, may also carry higher rates, because loans that small are otherwise not worthwhile for lenders to make.
Types of Rhode Island home loans
The type of mortgage you get also affects your rate. Some of the main ones are:
- Conforming loans: Also called conventional loans, these are loans that conform to the guidelines set by Fannie Mae or Freddie Mac. Mortgage rates for these loans are explicitly tied to your credit score and down payment, though borrowers can qualify with credit scores as low as 620 and those with good credit can make down payments of as little as 3 percent.
- FHA loans: These have less stringent credit requirements than conforming loans do, which makes it easier for Rhode Island first-time homebuyers and those with flawed credit to qualify. Minimum credit scores can be as low as 500, but few lenders will actually go that low. However, borrowers with weaker scores and/or small down payments will often find they can get better rates on an FHA loan than with a conforming mortgage. Down payments can be as little as 3.5 percent, even with so-so credit, but the upfront charges are higher than on conventional loans.
- VA loans: For military veterans and active duty personnel who qualify, these offer no-down payment mortgages up to generous lending limits, with no requirement for monthly mortgage insurance payments. However, VA loans charge upfront funding fees ranging from 1.25-3.3 percent of the loan amount, with the lesser fees charged to those making a down payment.
- Jumbo loans: These are for high-value loans that exceed the lending limits on conforming loans. As previously noted, these generally carry higher rates and have stiffer credit and down payment requirements. These can be somewhat flexible, however, and lenders may allow fairly low credit scores in return for higher rates and a large down payment, or a small down payment for a borrower with good credit willing to pay a higher rate.
- Home equity loans: These allow you to borrow against the equity you have in your home to obtain funds for any purpose you wish. They are often used to finance home improvements, educational or medical expenses or to start-up or support a small business. Options include a standard home equity loan, which involves borrowing a single sum of money; or a home equity line of credit (HELOC), which is like a credit card secured by your home that allows you to borrow funds as you wish. A third option is a cash-out refinance, which involves refinancing your current mortgage for a higher amount than you presently owe, and receiving the difference in cash.