Since 2008, New York home prices have risen 30%, and 5.4% in 2017 alone, according to Zillow. The median home value is $674,500, while homes currently listed for sale have median home prices of $825,000, hinting at continued increases in the years to come.
The U.S. Census notes that New York’s median home values are more than double national medians, which hover in the $320,000 range.
Due to the unique factors impacting current mortgage rates in New York–i.e., population density, high loan amounts, rising home prices, high property taxes, proximity to global talent pools, and homebuyer competition–residents should make special note of the real estate environment they face and what advantages they may have.
Current Mortgage Rates in New York
Mortgage Rate Factors in New York
When researching mortgage options in New York, it’s important to recognize the long list of factors that influence the specific mortgage rate one might receive.
For instance, a 3.5% interest rate for a conventional 30-year fixed-rate mortgage is vastly different from a 3.5% interest rate for a 5/1 adjustable-rate mortgage (ARM), despite the rates being superficially exactly the same.
Over the life of a loan, spending a fraction of a percentage point more can result in tens of thousands of extra dollars 30 years from now. That’s why a fundamental understanding of each factor that helps to determine mortgage and refinancing rates is necessary for borrowers, regardless of income level.
Below are seven elements, in particular, that borrowers should be mindful of:
Credit Score
Lenders view people with higher credit scores (in the 700+ range) as typically less risky than borrowers with poorer scores (600 and below). Credit scores shed light on the perceived liability of a borrower and the mortgage terms for which they qualify.
High credit scores often produce lower mortgage rates, and the opposite is true as well. In practice, credit-reporting bureaus like Experian, Equifax, and TransUnion look into the credit history of borrowers as it pertains to loans, credit cards, and recurring payments.
Lenders then assess the compiled credit score to predict how reliable someone may be in regard to meeting home loan terms and paying down a mortgage on schedule. The federal government is a great resource for more information on credit reports, as consumers are entitled to one free credit report per year from each of the aforementioned bureaus.
Down Payment
The type of home loan you choose will be a large determinant as to its down payment. Setting aside loan type, though, the down payment itself can subsequently influence a borrower’s current and future interest rates.
In general, a larger down payment equates a lower interest rate, as the borrower has demonstrated to the lender that he or she is willing to put up a substantial stake in the property, thus decreasing the risk of being unreliable in meeting future payment obligations.
The traditional benchmark used by most financial institutions is a 20% down payment. However, borrowers who can’t meet this threshold may purchase private mortgage insurance (PMI), which reduces the down payment amount while tacking on an additional charge for regular monthly payments.
Type and Amount of Loan
As mentioned, the type of loan available to borrowers depends both on lender offerings and on meeting specific eligibility requirements. A fixed-rate mortgage, for instance, locks in interest rates throughout the duration of the loan, unless borrowers opt to refinance.
An ARM typically begins with a beginning teaser rate which then increases at the five-, seven-, or 10-year mark. Additionally, home loans that are more expensive and are accompanied by a larger down payment may result in a lower interest rate.
Other types of mortgages, and their respective amounts, such as VA, construction, and jumbo loans, have their own stipulations and rate considerations as well, which vary by lender.
Type of Interest Rate
The precise figure that borrowers can expect to pay in interest broadly boils down to, among other factors, whether the rate terms are structured as fixed or adjustable. A fixed-rate of interest means that borrowers pay a certain percentage of interest every month in addition to their recurring mortgage balance, a figure that holds steady over the life of the loan.
This structure makes it easier for borrowers to plan out their finances from year to year. An ARM has a rate that is variable, in that the percentage of interest paid each month changes over time. Should their lender raise rates, borrowers paying an adjustable-rate can expect to see their total monthly payments become more expensive.
The caveat is that lenders offer low introductory rates at first, which can be enticing to borrowers, saving them money for a period of time. If a borrower can be sure of paying most of the loan within the low-rate period (or conversely, plans on selling the home before it’s up), an ARM may be an ideal mortgage type.
Home Location
The region, state, city, neighborhood, and exact location of the property influences mortgage and refinancing rates. That’s because certain property types are riskier than others, prompting lenders to increase mortgage rates.
According to Fannie Mae, condos, manufactured units, and properties with more than one unit are generally perceived as more of a risk than a traditional single-family residence. Dense urban areas like New York City often contain real estate that is highly concentrated with condos and multiunit residences, which can impact the rates New York borrowers receive.
Type of Refinance
Refinancing is the process of replacing one type of home loan with another, usually with the goal of improving loan-to-value ratios, gaining access to capital, paying off homes more quickly, or reducing mortgage rates. There are many types of refinancing options, including the most popular, a rate-and-term, which typically results in a lower interest rate.
Consumers often pursue conventional fixed-rate refinances in the hopes of reducing interest rates as well. Adjustable-rate and cash-out refinance loans can produce higher mortgage rates, but borrowers intent on these strategies often refinance again in the future to obtain favorable rates down the road.
Loan-to-Value
The amount a borrower owes on a home versus the appraised value of that home is known as the loan-to-value ratio. For example, if a borrower still owes $100,000 on a $300,000 home, his or her LTV is about 66%. Lenders often require that borrowers purchase mortgage insurance if their LTV is higher than 80%.
Once a borrower’s LTV drops below 80%, as they continue to pay down their mortgages, it may be time to refinance so that mortgage insurance is no longer needed. They can also refinance into a fixed-rate mortgage with a lower interest rate because their strong LTV ratio is a promising sign to lenders.
Get the Best Mortgage Rates in New York
As seen above, comparison shopping is part of the home buying and refinancing process, and it’s one of the best ways to save money.
The Consumer Financial Protection Bureau notes that 47% of mortgage borrowers don’t shop around at all–they speak to one lender only. Such a strategy is really no strategy at all. A difference of just 0.5% when bargaining for mortgage interest terms can mean saving $60 a month (or pay $60 more).
In just seven years, this translates to about $5,000 extra dollars in mortgage payments.
A best practice, when researching and negotiating mortgage terms, is to have as much information as possible; in other words, knowledge is power. This could mean working through a low-fee agent, visiting four to five lenders before settling on a firm decision, and looking into comparable home values in a given area.
It’s also important to understand that much of the mortgage and refinancing process is entirely negotiable, especially as regards the core loan type, loan amount, and down payment.
Further, associated fees (appraisal, origination, document preparation, application, title insurance, etc.) are not standardized across the financial industry, as some lenders waive these types of charges outright, or fold them into the mortgage cost.
Recommended Companies in New York
Mortgage lending options in New York are plentiful. Top lenders include:
- Rocket Mortgage: Ranking near the top of J.D. Power’s Primary Mortgage Origination Customer Satisfaction list for eight consecutive years, Rocket Mortgage offers simple, accurate mortgage terms with a short application process.
- CrossCountry Mortgage: With a wide range of mortgage purchasing and refinancing options, CrossCountry Mortgage offers a collaborative approach toward agreeing on mortgage terms and has helpful checklists and calculators for consumers to use to their advantage.
- Ally Bank: Being an online-only financial institution doesn’t prevent Ally Bank from providing personalized mortgage services, and interest rates on 30-year fixed-rate mortgages are often less than 5%. Intuitive prequalification, application, and underwriting processes make home loans easy to understand, process, and obtain.
- Guaranteed Rate: In addition to a digital mortgage platform, Guaranteed Rate has four locations in New York, receives high marks from Yelp and BBB, and has web pages devoted to real-time mortgage rates and APR terms for borrowers to conveniently research.
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