Mortgage interest rates fluctuate daily and vary depending on the type of mortgage, program, product, and individual circumstances. Factors such as personal credit score, income, down payment, current situation, and future plans will influence the choice of mortgage type, program, or product.

Generally, when considering only interest rates, adjustable rates tend to be lower than fixed rates, and shorter terms (such as 20 or 15 years) typically have lower rates than 30-year terms. Conventional QM (Qualified Mortgage) programs also tend to have lower rates than Non-QM (Non-Qualified Mortgage) loans. However, it’s important to consider monthly payments and choose a program that aligns with your individual situation and future plans. We recommend getting a free consultation and obtaining a Pre-approval to find out the interest rate and loan amount you qualify for.

*U.S. Average 30-Year Mortgage  Rate Trend (2018 – 2024):

2024 (Current): 5.95% – 6.25%

2023: 6.5% – 7.5%

2022: 6% – 7%

2020-2021: 2.65% – 3.2%

2018-2019: 4.5% – 5%

There are countless mortgage products available in the U.S. We don’t limit ourselves to one bank’s program, but instead compare mortgage programs from about 199 financial institutions, including various mortgage banks, credit unions, online lenders, and private lenders across the U.S. This allows us to offer options that help each individual select the most suitable terms. As mortgage specialists, we assist with mortgage shopping on behalf of our clients, ensuring that they find the most favorable terms.

According to a study by the CFPB (Consumer Financial Protection Bureau), shopping around for mortgages can lower your interest rate by an average of 0.5%. A difference of even 0.5% in interest rates can be significant for individuals. We are dedicated to supporting you every step of the way, from the initial consultation to the final process.

When purchasing a home, the minimum down payment required for a conventional loan is typically 3%. However, if the down payment is less than 20%, you will need to pay for Private Mortgage Insurance (PMI) on a monthly basis. Alternatively, you can take out a piggyback loan to meet the 20% requirement and avoid PMI. It’s important to have the down payment funds in your personal bank account at least two months prior to avoid issues with fund verification. Please plan and prepare ahead of time.

Down Payment Assistance Programs:

Especially for first-time homebuyers, there may be down payment assistance programs available at the state, city, or county level. In some cases, employers may also provide partial down payment assistance. A first-time homebuyer is defined as someone who has not owned a home in the past three years and may be eligible for various benefits when applying for a mortgage.

Gift Funds from Family:

You can receive down payment funds as a gift from close family members. In this case, a signed gift letter from the donor is required.

Loan Differences Based on Occupancy Purpose:

The down payment requirements differ depending on whether the home is being purchased as a primary residence or for investment or rental purposes. Investment properties may require a higher down payment.

U.S. Government Loan Programs:

1. FHA Loan (Federal Housing Administration):

   If you have a low credit score or a smaller down payment, an FHA loan may be a good option. The FHA loan is a government-backed mortgage insured by the Federal Housing Administration.

   • 3.5% down payment for credit scores of FICO 570 or higher
   • 10% down payment for credit scores of FICO 500 or higher

2. VA Loan (Veterans Affairs):

   Available to former or active U.S. military personnel, VA loans are government-backed and may offer the option to purchase a home with no down payment.

3. USDA Loan (U.S. Department of Agriculture):

   This program supports home loans for low-to-moderate income buyers in rural areas, with no down payment required in eligible regions.

The first step in purchasing a home is to obtain a mortgage pre-approval. Through pre-approval, your income and credit score are evaluated, allowing you to determine how much you can borrow and what your monthly payments will be. This makes the home shopping process more efficient and saves time.

A free consultation can help calculate your income and expenses to determine your maximum monthly payment. You can also explore various options that fit your credit score, personal situation, and future plans. A detailed Pre-approval Letter can give you a competitive edge when submitting an offer to purchase a home.

Once you’ve decided on a property and submitted the required documents and application, you can receive a Loan Estimate (LE) within 3 days. The Loan Estimate includes all details about the loan, such as the interest rate, monthly payments, repayment term, and fees. You can also compare at least 3-4 pre-approval offers.

Consultations can be done over the phone, and applications can be completed via KakaoTalk or video call. Documents are exchanged via email.

Documents needed for pre-approval:

1. Tax returns: Last 2 years
2. Pay stubs: Last 1 month
3. Bank statements: Last 2 months
4. ID: Driver’s license or passport

Refinance for Better Terms Than Your Current Mortgage:

You can consider refinancing if you want to lower your interest rate or reduce your monthly payments. You can also switch from a fixed interest rate to an adjustable one, or vice versa, and shorten your repayment term from 30 years to 20 or 15 years.

Cash-Out Refinance:

Cash-out refinancing allows you to withdraw the accumulated equity in your home as cash.
Equity = Home Value – Outstanding Loan Balance (Debt)

We provide various options to help you choose the best terms for your individual situation and strive for a fast closing process.

If you already have a mortgage and have sufficient equity in your home, you may qualify for a second mortgage or junior mortgage.

Home Equity Loan (HELOAN):
This loan allows you to borrow a lump sum and repay it in fixed monthly installments over a set repayment period.

Home Equity Line of Credit (HELOC):
With a Line of Credit account, you can borrow only the amount you need and pay the minimum interest on the amount used. This is a revolving account, meaning once you repay the borrowed amount, you can borrow again. Typically, after a 10-year revolving period, the remaining balance must be repaid over the next 10 to 20 years.

When applying for a mortgage loan, the most important factors considered by lenders are your repayment ability and credit score. The higher your credit score, the more likely you are to receive better terms and a lower interest rate.

For conventional mortgages, a minimum FICO credit score of 620 is typically required. However, FHA government loans allow for lower credit scores. For example, with a FICO score of 570 or higher, a loan is available with a minimum 3.5% down payment, and with a FICO score as low as 500, a 10% down payment is required.

Fixed Interest Rate:

A fixed interest rate provides stability as it remains unchanged throughout the loan term. While monthly payments may be higher compared to adjustable rates, it is advantageous if you plan to stay in the home long-term or have a stable income. If you want to lower your interest rate, you would need to go through a refinance.

Adjustable/Variable Interest Rate:

An adjustable interest rate starts with a fixed rate for the first few years (typically 3 to 10 years), after which it fluctuates based on market conditions. The initial interest rate is generally lower than a fixed rate, making it suitable for short-term stays. However, choosing it solely for the lower rate can be risky in the long term if the rates increase.

When an Adjustable Rate is Favorable:

• If you plan to sell the house within 10 years
• If you plan to refinance within 10 years
• If you need a larger loan amount than what a fixed-rate loan offers

For conventional mortgage loans, income verification typically requires 2 years of tax returns, W2s, and pay stubs. However, for self-employed individuals or freelancers who have been in business for over 2 years, income verification can be done using bank statements or 1099 forms instead. This often shows a higher income compared to tax returns. In this case, a Non-QM (Non-Qualified Mortgage) product is used, and a down payment of 10%-25% is required.

For those who have been living in the U.S. and consistently filing taxes for over 2 years but do not yet have a Social Security Number (SSN), it is possible to obtain a mortgage using an ITIN (Individual Tax Identification Number). In this case, a Non-QM (Non-Qualified Mortgage) product is used, and 2 years of tax returns along with a down payment of 10%-20% are required.

Foreign nationals residing outside the U.S. can also obtain a mortgage for investment properties. A Non-QM (Non-Qualified Mortgage) loan is available, requiring a 25%-30% down payment. The required documents include a passport, bank statements, a U.S. bank account, and proof of income.

A Reverse Mortgage is a financial product where elderly homeowners use their home as collateral to receive a loan from a financial institution. Unlike a traditional mortgage, a reverse mortgage allows the borrower to receive monthly payments or a lump sum from the lender, using the home as collateral. The borrower does not have to repay the loan as long as they continue living in the home. Repayment is required when the borrower either sells the home or passes away.

Features of a Reverse Mortgage:

• Eligibility Requirements: Generally, homeowners aged 62 or older can apply for a reverse mortgage.

• Loan Repayment: The borrower can continue living in the home, and the loan is repaid when the borrower sells the home or passes away. Even if the loan balance exceeds the home’s value, the borrower is not required to pay the excess amount.

• Payment Methods: The loan can be received in the following ways:

  • Monthly payments
  • Lump sum
  • Line of credit, allowing withdrawals as needed

• Homeownership Maintenance: The borrower remains the owner of the home and is responsible for ongoing costs such as property taxes, insurance, and maintenance.

• Interest and Loan Repayment: The interest accrued on a reverse mortgage is added to the loan balance and is not repaid during the loan term. The loan is typically repaid from the proceeds of the home sale.

A reverse mortgage can be a way for elderly homeowners with no or limited income to access the equity in their home for cash. However, borrowers must continue to cover the costs of maintaining the home, and there is a risk that the loan balance may exceed the home’s value.

There are several economic and personal benefits to purchasing a home. Here are the key advantages:

Economic Benefits:

• Building Equity: Each monthly mortgage payment contributes to building your home equity. Over time, this can grow into substantial wealth.

• Appreciation in Value: Real estate tends to appreciate in value over time, which means you can potentially sell your home for a profit. Recently, home prices have risen significantly and quickly (see chart below).

• Fixed Monthly Payments: With a fixed-rate mortgage, your housing costs remain consistent each month. Unlike rent, which can increase annually, owning a home protects you from this risk.

• Tax Benefits: Homeowners can receive tax deductions on mortgage interest and property taxes, which can reduce overall tax liability.

• Potential Rental Income: If you have extra space or own a second property, you can rent it out to generate additional income.

Personal Benefits:

• Stability: Owning a home allows you to stay in one place for a long period, providing a sense of stability. You also have the freedom to renovate and customize your home to suit your personal preferences.

• Sense of Accomplishment: Homeownership can bring a sense of pride and accomplishment. For many, it is an important milestone in life.

• Control Over Your Environment: Unlike renting, owning a home gives you control over modifications and repairs without needing approval from a landlord.

• Privacy: Owning a home typically offers more privacy compared to living in apartments or condos.

• Community Engagement: Homeownership often fosters stronger connections with neighbors and the local community, leading to a greater sense of belonging.

Terry Kwon – Licensed Mortgage Loan Originator

Terry Kwon brings over 20 years of experience in real estate and finance, providing trustworthy mortgage loan services. Purchasing a home in the U.S. is an important milestone, both economically and personally. Considering the growing population and rising home prices in the U.S., real estate purchases play a crucial role in wealth accumulation. We are here to help you take the first step toward achieving your American Dream.

Loan Factory, Inc.

We partner with Loan Factory because it is a mortgage brokerage company with over 18 years of history and is one of the top 1-2 mortgage brokerage in the U.S.  Loan Factory collaborates with over 199 real estate wholesale lenders to provide each customer with the most competitive and favorable terms. Additionally, Loan Factory is licensed in 48 states across the U.S. and has a high reputation, with more than 8,000 five-star Google reviews.