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Known for its sandy beaches and quaint, seaside colonial towns, more and more of Rhode Island’s residents make the jump from renting a space to owning their own home.
Are you thinking about purchasing a home in Rhode Island? Make sure you don’t overpay for your property. Read our guide to mortgage rates in Rhode Island before you invest.
What is a Mortgage Rate?
Every mortgage loan payment includes 2 parts: a principal payment and an interest payment. The principal portion of the payment goes toward reducing the balance of your loan. Your interest goes to your lender in exchange for servicing your loan.
Your mortgage rate is the annual percentage of interest you’ll pay to your lender each year. Most lenders calculate mortgage rate as a total percentage of your outstanding loan balance. For example, if you have a mortgage rate of 4%, it means that you’ll pay 4% of your outstanding loan balance each year in interest. The specific amount you’ll pay in interest will change over time as you reduce your outstanding balance.
However, if you have a fixed-rate loan, your monthly payment won’t change. Instead, a larger percentage of your monthly payment will go toward reducing the amount you owe. This process is called amortization.
When you compare mortgage rates, you’ll usually see 2 numbers listed: an interest rate and an annual percentage rate (APR). Your interest rate is the base rate you’ll pay for your loan, while your APR is the interest plus any annual fees your lender charges. Always remember to shop by APR, not interest rate, as this is the effective mortgage rate you’ll actually pay.
5 Best Mortgage Lenders in Rhode Island
The lender you choose will make a major difference in how easy or difficult your home buying process is. Let’s take a look at a few of our favorite mortgage lenders in Rhode Island.
1. Best Overall: Quicken Loans®
Whether you’re buying your 1st home or your 5th, you’ll find an easy and quick mortgage process with Quicken Loans. The mortgage company offers the comprehensive Rocket Mortgage® by Quicken Loans® platform, which makes applying for a mortgage loan exceptionally simple.
Quicken Loans’ application process is highly-streamlined. Most users who apply for a loan will receive an instant decision, and the application is basic enough to complete on a phone or tablet.
Quicken Loans is one of the best lenders for first-time buyers, offering all types of government-backed mortgage loans. Quicken Loans also services jumbo loans and conventional loans for consumers investing in a 2nd home or rental property. With a variety of loan options and a simple application, Quicken Loans is our top choice for all home buyers.
2. Best for Veterans: Veterans United
Veterans United is a special type of lender that specializes in VA loans. VA loans are a government-backed mortgage loan for veterans and active-duty service members and their families.
Veterans United employs a full team of former service members from each branch of the military. The Veterans United team can help you determine if you qualify for a VA loan, assist in getting your paperwork together and ensure the process goes smoothly. Veterans United also offers conventional loan solutions if a VA loan isn’t right for you.
3. Best for First Time Home Buyers: Bank of America
Online mortgages can be a convenient way to buy a home and get a loan. However, when you’re investing in your 1st property, it can be comforting to know that you have a physical location to visit if something goes wrong.
Bank of America is among the largest mortgage lenders in Rhode Island, with over 25 locations across the state. Bank of America offers a number of mortgage solutions specifically for first-time buyers, including FHA and VA loans. You can begin your mortgage application online — or you can head into your local Bank of America to learn more and apply in person.
4. Best for Online Lender: Better.com
Better.com is a unique online lender with a simple goal — to make applying for a mortgage less frustrating. Better.com has streamlined its mortgage application down to only the most vital steps.
You can apply for a home loan in as little as 15 minutes, and most applicants receive a decision immediately. The application is so simple you can finish it entirely from your phone or tablet.
Better.com is also one of the best mortgage lenders for low rates. You can instantly view mortgage rates based on your home loan value, credit score and location. If you find a better mortgage rate from a competitor, Better.com will beat it and give you a $1,000 credit for your closing costs thanks to its Better Price Guarantee.
5. Best for Self-Employed Individuals: Wells Fargo
If you’re self employed, you might have trouble getting a mortgage loan — even if your income is well above the average for your area. This is because mortgage lenders need to know that your income will remain consistent throughout the term of your loan. Your term can stretch up to 30 years into the future. If you don’t have recurring paychecks, it’s more difficult to prove that your income is consistent.
Wells Fargo is one of the best choices if you’re self-employed and looking to buy a home. The only special income documentation you’ll need is your last 2 bank statements and your most recent quarterly profit-and-loss statement.
Wells Fargo also offers both conventional and government-backed mortgage loans, which makes it a great choice if you’re both self-employed and a first-time buyer.
What Factors Impact Your Mortgage Rate?
You don’t want to pay more than you have to for your mortgage loan. Where exactly does your mortgage rate come from? Your rate can be influenced by a number of factors, including:
- Your credit score: Your credit score is a 3-digit number that represents your reliability as a borrower. If you have a higher credit score, lenders consider you to be less of a risk as a borrower — which means you’ll get a lower mortgage rate.
- Property type: You can use a mortgage loan to buy a primary residence, a 2nd home or an investment property. Borrowers are most likely to pay back their mortgage on a primary residence — especially if they have more than 1 active mortgage loan. If you’re buying a home that you plan to live in full time, you’ll pay a lower interest rate than if you buy an investment property or 2nd home.
- Your down payment size: The less money your lender has to give you, the less risky you are as a borrower. You can likely secure a lower APR by bringing a larger down payment to the closing table.
These are just a few of the many factors that influence mortgage interest rates. The current state of the housing market, bond interest rates and even the overall state of the economy can influence what you’ll pay for your loan.
What is a Mortgage Type?
Let’s take a look at the different types of mortgage loans you can use to purchase a property:
- Conventional loans are the most common type of mortgage loan. You can use a conventional loan to purchase any type of property as long as you meet your individual lender’s standards. As a general rule, you’ll need a credit score of at least 620 points and a down payment of at least 3% of your loan value to qualify for a conventional loan.
- FHA loans are government-backed mortgage loans that make it easier to buy a home with a lower credit score. You can only use an FHA loan to buy a primary residence. You’ll also need a down payment of at least 3.5% and a credit score of at least 580 to qualify.
- USDA loans are a type of government-backed mortgage loan that require no money down to buy your first home in a rural area. To qualify for a USDA loan, you’ll need a credit score of at least 640 points and your home needs to be located in a USDA-targeted rural area.
- VA loans are a special type of home loan only issued to veterans and active-duty members of the armed forces. A VA loan can allow you to buy a home with 0% down and a credit score as low as 620 points. You must meet service requirements before you can qualify for a VA loan. These requirements vary by branch and status.
What is a Mortgage Term?
Your mortgage term is the length of time that you’ll make payments on your mortgage loan. For example, if you take out a 15-year mortgage loan in January 2020, you’ll make your last loan payment in January 2035.
There are multiple types of loan terms and term structures. Let’s take a look at a few of the most common mortgage terms:
- 30-year fixed mortgages require monthly payments for 30 years before they mature. The “fixed” part of the name refers to your APR. If you have a fixed-rate mortgage term, it means that your interest rate stays exactly the same from the 1st day you make a loan payment until you own your home or refinance.
- 15-year fixed- rate mortgages function like a 30-year fixed-rate loan, but you’ll only have 15 years’ of monthly payments. A 15-year fixed-rate loan usually has a lower APR than its 30-year counterparts.
- 5/1 ARM: An adjustable rate mortgage (ARM) is a type of mortgage loan with a variable interest rate. When you shop for an ARM, you’ll see 2 numbers listed, separated by a forward slash.
The 1st number refers to the fixed-rate portion of your loan. Every ARM begins with a period of fixed interest — most ARMs have fixed-rate periods between 5 and 20 years.
The 2nd number refers to the length of time between rate changes. For example, if you have a 5/1 ARM, it means that your loan begins with 5 years of a fixed interest rate. After 5 years, your lender will reassess your APR every 1 year.
After your fixed-rate period ends, your mortgage lender will reassess your APR as market rates change. Your APR might go up or down depending on how market interest rates are moving.
Current Rhode Island Mortgage Rates
Mortgage interest rates can vary depending on the overall state of the housing market and the economy as a whole. Mortgage rates can change quickly — you might even notice a change on an hour-to-hour basis.
Let’s take a look at current mortgage rates in Rhode Island. We update this table frequently to reflect the most accurate data available.
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Calculating Interest in Rhode Island
With so many factors that influence mortgage rates, is it really worth the effort to compare your loan options? Getting the lowest interest rate possible doesn’t just mean a lower monthly payment — it can also mean saving thousands of dollars by the time you own your home.
Let’s take a look at how much you might expect to pay in interest in a few of Rhode Island’s largest cities.
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Lender Credit Score Minimums in Rhode Island
Your credit score can influence your mortgage rate and your ability to get a mortgage loan. If you have a lower credit score, you’ll be perceived as a less-dependable borrower. Most lenders institute a minimum credit score to limit their lending risk.
Let’s take a look at the minimum credit score you’ll need to meet to qualify for a loan with some of Rhode Island’s largest lenders.
Find the Right Loan for You
A mortgage loan can mean committing to a lender for 30 years, and it’s important to know exactly what you’re getting into.
Don’t be afraid to take plenty of time to compare lenders before you apply for a preapproval. The last thing you want is to be stuck with a lender that doesn’t work for you — or even worse, a loan that’s too expensive.
Get Ready for Take Off
Rocket Mortgage® is an online mortgage experience developed by the firm formerly known as Quicken Loans®, America’s largest mortgage lender. Rocket Mortgage® makes it easy to get a mortgage — you just tell the company about yourself, your home, your finances and Rocket Mortgage® gives you real interest rates and numbers. You can use Rocket Mortgage® to get approved, ask questions about your mortgage, manage your payments and more.
You can work at your own pace and someone is always there to answer your questions — 24 hours a day, 7 days a week. Want a fast, convenient way to get a mortgage? Give Rocket Mortgage® a try.