Mortgage Rates Rhode Island: Your Guide To The Best Rates
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Rhode Island is a small state usually associated with beaches and weekend getaways. However, its suburban atmosphere and fresh air are not the only reasons why many new homeowners are looking to move in. Average mortgage rates in the state are slightly below the national average, while the median home value is slowly increasing. This makes Rhode Island a prime candidate for new homeowners looking for a safe investment.
In this guide, we go over everything you need to know about mortgage rates in Rhode Island. We’ll even give you some important home-buying tips along the way to give you an edge over the competition!
Home Loan Options In Rhode Island
There are several different types of mortgage products available, each with its own set of pros and cons. Let’s take a look at the three main types you may encounter when looking to purchase a home in Rhode Island.
Conventional Home Loans
Mortgages offered by private lenders are called conventional home loans. Guarantor companies Freddie Mac and Fannie Mae secure these loans, which means these private institutions don’t have to worry about losing money if their clients default on their monthly payments. This keeps mortgages available and affordable.
In 2021, the conforming loan limit for a single-family home in Rhode Island is $ 548,250.
Fixed-Rate Mortgage
Fixed-rate mortgages are as simple as it gets. These loans have fixed interest rates, meaning your monthly payment will not change throughout the life of the loan. You can typically find these kinds of mortgages with 30-year terms, 20-year terms, and even 15-year terms.
Adjustable-Rate Mortgage (ARM)
Adjustable-rate mortgages have interest rates that annually change depending on the lender’s chosen market index. This means that your required monthly payment may increase or decrease depending on how well the housing market is doing in any given year.
To offset this unstable interest rate, most lenders have an introductory fixed-rate period. This period usually lasts 3-10 years and typically provides buyers with mortgage rates lower than their fixed-rate counterparts.
Jumbo Mortgage
Jumbo loans are used when homes are priced above the state’s local conforming loan limits. These mortgages are designed specifically for big property purchases and may be offered with either a fixed or adjustable rate, depending on the lender.
Since jumbo mortgages come with a higher risk due to the large amounts of money involved, jumbo rates also tend to be higher.
Government-Backed Loans
Government-backed home loan programs serve as an alternative to conventional mortgages. These loans usually have lower rates, more lenient credit score requirements, and more flexible terms.
FHA Loan
FHA loans are issued specifically by the Federal Housing Administration. To help lower-income homebuyers, these often have lower rates, no down payment requirements, and a minimum credit score requirement of 580. However, they do come with mandatory private mortgage insurance (PMI) fees.
VA Loan
VA loans are offered to both current and former military personnel, as well as their families. They typically come with no down payment or PMI requirements.
USDA Loan
USDA loans are specifically offered to those who are looking to purchase homes in eligible rural areas. These loans come with no down payment or PMI requirements. The tradeoff is that you can only choose a property from a specific list of USDA-approved areas.
Mortgage Refinancing
Mortgage refinancing plans refer to programs that replace your existing mortgage. This is usually done to take advantage of better refinance rates (mortgage and refinance rates can be very different) or to change the length of the loan term.
- Rate and term: This type of refinancing allows you to change your mortgage’s length or type to suit your current needs. Rate and term refinancing is often used to change an ARM into a fixed-rate mortgage or to capitalize on lower mortgage rates.
- Cash-out: Cash-out refinancing will allow you to convert home equity into cash by providing you with a loan amount bigger than your loan. After paying off the current mortgage balance, any money leftover can be used for other needs.
Current Mortgage Rates: Rhode Island
Mortgage rates in Rhode Island have historically been slightly lower than the national average. Here, we provide you with the most current mortgage and refinance rates in the state.
The data used in this table is taken from America’s major mortgage lenders and will be updated daily.
Today’s Mortgage Rates In Rhode Island
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Do take note that your actual loan terms and rates may vary depending on your circumstances. Rates found in this table are also subject to change without prior notice.
For a more personalized look at your possible Rhode Island mortgage rate, input your details into the mortgage tool found at the top of the page.
First Time Homebuyers Programs In Rhode Island
The state of Rhode Island offers a few first-time homebuyer programs through Rhode Island Housing. These programs are made for first-time buyers who may need some assistance with mortgage-related payments.
To qualify for these programs offered by RIHousing, you need to fulfill the following conditions:
- Accomplish a homebuyer education course
- Be a first-time homebuyer or have not purchased a property within the last 3 years
- Meet the credit score requirements
- Meet the RIHousing home price limits and household income limits
RIHousing First Time Homebuyer Loan
If you meet the criteria above, you’re eligible for up to 100% financing through the state’s first-time homebuyer loan program. This program offers a conventional or government-backed loan with competitive interest rates and down payment assistance. Just take note that you will need to meet its home purchase price limit of $453,863 as well as household income limits.
RIHousing 10kDPA Loan
This program offers up to $10,000 deferred down payment assistance for first-time buyers in Rhode Island. The loan accrues no interest and does not require a monthly payment. It is also completely forgivable as long as the purchased home is used as the primary residence throughout the loan’s tenure.
You will need a minimum credit score of 660 to qualify for this program.
FirstHomes Tax Credit
The program provides eligible borrowers with a Rhode Island mortgage credit certificate (MCC). This serves as a federal tax credit equal to up to 20% of your mortgage’s accrued annual interest. However, you will need to use the property you purchased as your primary residence for at least 10 years to continue availing of the MCC.
Buying A House In Rhode Island
Navigating the mortgage process can be tricky, especially if it’s your first time. We’ve come up with this quick guide to help guide you through the process of purchasing your first home.
Step 1: Evaluate Your Financial Situation
Understanding your financial situation will give you a good idea about what homes and mortgages you can afford. Before even contacting a realtor, you must make sure that you obtain the following:
- Your credit score
- Your debt-to-income ratio
- Cash for down payment/processing fees/origination fees
- Enough income saved up to make payments for at least 4 months
Step 2: Find A Trustworthy Realtor
Finding a good real estate agent with local experience will greatly improve your chances of finding and landing your dream home. Aside from showing you available homes, your realtor should be able to guide you and answer any questions about Rhode Island mortgage rates and loan terms.
Step 3: Get A Preapproval Letter
After doing your research and settling on a possible property, you will need to get a preapproval letter. This document will show the seller that you’re committed to and financially capable of buying the home. Do your research beforehand to make sure you settle on the best loan type for your situation.
To get pre-approved, you will need to apply for a loan. Make sure that you compare the mortgage rates of the top lenders in the state. A specific lender may offer a different mortgage rate and loan terms, so compare the available options beforehand. Low monthly payments are always a welcome bonus.
Step 4: Make An Offer
Consult with your realtor to come up with a fair offer for your chosen home. It’s likely that you aren’t the only one thinking about purchasing that home, so you have to move fast. As much as possible try to come up with an enticing offer that works within your budget.
Take note that the median home value in Rhode Island is $365,545, so adjust accordingly.
Step 5: Schedule Home Inspection and Appraisal
Before closing on the loan, make sure that you do your due diligence. Schedule inspections and appraisals to check the home for any issues and double-check the property value.
Step 6: Close The Loan
When all looks good, pay any processing fees/closing costs and ask any questions you may have before signing off on the document.
How To Get Better Rhode Island Rates
Mortgages are long-term commitments, so any mortgage discounts will help you save on interest payments down the road. Here are our top 4 tips on how to lower your mortgage interest rates and APR:
Improve Your Credit Profile
A lender typically bases their interest rates on how risky it would be to lend you money. Having good credit and a low debt-to-income ratio will lower your risk profile and show your lender that you are a trustworthy borrower. This can be done by:
- Paying for your bills on time
- Paying off any debt as soon as possible
- Reporting inconsistencies on your credit report
Choose Shorter Mortgages
A shorter mortgage tenure trades in a better mortgage rate for higher insurance premiums, saving you more money in the long run. Always try to aim for the shortest loan you can afford to take advantage of lower interest rates.
Pay For Discount Points
Discount points are upfront fees you can pay to lower your mortgage rate. They usually cost 1% of the loan amount upfront and reduce your rate by 0.25%.
Discount points are very helpful for long-term savings, but they do cost thousands of dollars. Make sure you’re committed to sticking with your home and loan for the long run.
Compare Mortgage Rates
Your interest rate will differ depending on the lender. Since most mortgage providers have their rates published online, comparing the different offerings is faster and more convenient than ever. Do your research on multiple lenders before settling on which one to apply for.
Closing Thoughts
The homeownership rate in Rhode Island is slowly going up and the market is moving fast, which is why preparation and decisiveness are key when attempting to buy your first home. Knowing the local rates and compiling mortgage resources will give you the best possible chance of scoring your dream home in the Ocean State.
If you’re looking for a mortgage to buy your Rhode Island home, Wesley is here to help. Contact us today to see exactly what we can do for you!