It’s important to understand everything that goes into your mortgage rate before you buy a home in Louisiana. Benzinga put together a list of go-to facts and updated rates to make your home buying process as easy as possible.
Get Instant Mortgage Rate Quotes
Tip: compare 2-3 lenders for best rate
Quick Look: Best Mortgage Lenders in Lousiana
- Quicken Loans: Best Overall
- Better.com: Best for Streamlined Process
- Bank of America: Best for First-time Buyers
- CitiBank: Best for Quick Closing
- nbkc Bank: Best for VA Loans
What is a Mortgage Rate?
When you take out a loan, your principal amount will be accompanied by an interest rate. This interest rate is referred to as your mortgage rate. Mortgage rates vary depending on many factors, as well as the mortgage type you choose.
What Factors Impact Your Mortgage Rate?
Before you contact lenders, understand what factors a lender might consider to determine your mortgage rate.
- Your credit score: One of the main factors lenders take into consideration is your credit score. A higher credit score can show lenders that you are financially responsible and will likely repay your loan without incident. Let’s say your credit score is lower — the lender may approve a lower mortgage amount. Lenders may also give you a higher interest rate if they consider you to be at a higher risk of default.
- The economy: The current state of the economy can also play a huge part in your mortgage rate. Stable employment rates and wages usually means that there’s likely more demand for mortgages. Lenders may increase mortgage rates when the economy is on a downswing. Less demand for mortgages might mean that lenders lower mortgage rates.
- Your down payment: Your down payment is the amount of money you initially pay on your new home. The larger your down payment, the lower your mortgage amount will be. Let’s say you put down 20% or more down on your home. You’ll likely receive a lower interest rate.
- Mortgage type: Each lender offers certain mortgage types. They all have their pros and cons — mortgage rates can vary significantly and can depend on your mortgage term.
- Mortgage term: You’ll select your mortgage term as you select your lender and mortgage type. Your mortgage term is the number of years you have to repay your loan. Typically, shorter-term loans offer lower interest rates with higher monthly payments. Longer-term loans often have a higher interest rate but lower monthly payments.
What is a Mortgage Type?
Mortgage types are the loan options available to you when you buy a home. Some mortgage types are not backed by the federal government and others are government-backed loans that have eligibility requirements.
- Conventional: Conventional loans are among the most common loan types. These mortgage types are not insured or backed by the federal government. Conventional loans can have fixed or adjustable rates and often have various mortgage terms.
- FHA: Federal Housing Administration loans are a part of a mortgage insurance program managed by the U.S. government. The government insures your lender against losses if you default on your loan. FHA loans could be an attractive option if you don’t want to put down a large down payment. These mortgage types require you to pay mortgage insurance, however, and will increase your monthly payments.
- USDA: U.S. Department of Agriculture loans are another government-backed option if you’re planning to buy a home in a rural area. Your income must be no higher than 115% of the adjusted area median income. This median income varies depending on the area.
- VA: The U.S. Department of Veterans Affairs offers VA home loans to benefit military members and their families. You can skip the down payment and finance 100% of your home purchase if you’re eligible for this mortgage type. The VA guarantees your loan and would reimburse the lender for any losses if you default on your loan.
What is a Mortgage Term?
Your mortgage term is the length of time over which you pay back your loan. The decision between fixed and adjustable interest rates is also included in your mortgage term.
- 30-year fixed: The 30-year fixed mortgage term is the standard mortgage type in America. You can expect to have a fixed interest rate that will not change over the 30-year life of your mortgage. This mortgage term is a good option if you’re planning to stay in your home for many years and prefer to pay off your mortgage with smaller payments over a longer period of time.
- 15-year fixed: The 15-year fixed mortgage term is similar to the 30-year fixed mortgage term in that you will receive a fixed interest rate that will not change over the lifetime of your loan. One clear benefit of this loan is that you will pay off your mortgage in a shorter period of time, likely with a lower interest rate. The 15-year fixed mortgage can save you more money in the long term, despite higher monthly payments.
- 5/1 ARM: This adjustable-rate mortgage term offers the benefit of both fixed and adjustable interest rates. You can expect to pay a fixed interest rate for the first 5 years of your mortgage, and after 5 years, your interest rate will adjust annually. This term can be beneficial if you want lower and more predictable payments over the first few years of your mortgage. Often, the fixed-rate for these hybrid mortgage terms can be lower than traditional fixed-rate mortgages. Know that the first number (in this case, 5) represents the number of years you will receive a fixed interest rate and that the second number (1) represents how often the interest rate changes after that initial 5-year period.
Current Mortgage Rates in Louisiana
Mortgage rates are based on the prices of bonds called mortgage-backed securities. Think of them like stocks. Mortgage-backed securities are traded in a similar fashion to stocks, which means they can fluctuate at any moment.
Like stocks, mortgage-backed securities are driven by the current market and influence mortgage rates. Benzinga frequently updates current mortgage rate charts to reflect the most relevant data.
|Loan Type||Current Mortgage Rate|
|5/1 ARM (adjustable rate)||3.54%|
Calculating Interest in Louisiana
Your mortgage interest is calculated based on the outstanding loan amount. Each month, your bank will multiply your outstanding loan amount by the interest rate on your loan. That number will then be divided by 12 to determine your monthly interest.
|City||Average Home Value||Loan Term||Current Rate||Monthly Payment||Total Interest Paid|
|Baton Rouge||$163,000||30-year fixed||3.76%||$755.80||$109,089.31|
|New Orleans||$175,400||30-year fixed||3.76%||$817.94||$118,057.39|
Lender Credit Score Minimums in Louisiana
Your credit score plays a significant part in your mortgage and interest rate. Lenders use your credit score information to help determine whether your mortgage payments will be on time.
Credit scores are based on your credit history, which includes the age of your credit accounts, the types of credit lines and loans you have open, whether your payments are made on time and the total debt you currently have to your name.
|Lender||Minimum Credit Score Required|
|Bank of America||620|
|nbkc (online banking)||620|
5 Best Mortgage Lenders in Louisiana
As you start your home buying process, select a few mortgage lenders that offer the types and terms you need. Here are some of the best mortgage companies in Louisiana.
1. Best Overall: Quicken Loans
Quicken Loans probably has the type of mortgage you’re searching for. Home Loan Experts are just a quick phone call away if you’re not sure which loan type is right for you. You can also use the Quicken Loans mortgage loan calculator to sort through your options.
Quicken even offers a loan type that allows you to choose a fixed-interest loan with a flexible number of years to fit your financial goals. This lender is an excellent place to start your home buying journey.
2. Best for Streamlined Process: Better
Looking for quick and easy? Better might be the lender for you. It offers a simple digital mortgage experience with no hidden fees or commissions. Better can provide you with your loan estimate immediately after you answer just a few simple questions.
You can also get pre-approved for a mortgage or refinance in less than 20 minutes. The process with Better shows you what’s happening each step of the way. Better offers you a simple, transparent process.
3. Best for First-Time Buyers: Bank of America
Bank of America is one of our favorite lenders for first-time buyers. It provides numerous resources to help you understand mortgages, refinancing, home equity and how to manage your loan.
Bank of America offers qualified buyers an Affordable Solution Loan that only requires 3% down. This makes homebuying on a modest income in Louisiana a much more feasible option.
4. Best for a Quick Closing: Citibank
Citibank offers the opportunity to close on your mortgage in only a matter of days, which makes it a preferred option for streamlined home purchases.
Citibank offers many resources on its site to help you select the best and most affordable loan and refinancing options for you. Its pre-approval process is also free — another major benefit.
5. Best for VA Loans: nbkc Bank
You can’t go wrong with nbkc if you’re eligible for a VA home loan. The company doesn’t require origination fees, lender fees, underwriting fees or processing fees.
Also, nbkc also offers a streamline refinancing option to lower your interest rate. Take advantage of the refinancing offer and use your VA eligibility when you initially purchase your home.
Your Next Steps
Frequently Asked Questions
1) Q: How do I get pre-approved?
First, you need to fill out an application and submit it to the lender of your choice. For the application you need 2 previous years of tax returns including your W-2’s, your pay stub for past month, 2 months worth of bank statements and the lender will run your credit report. Once the application is submitted and processed it takes anywhere from 2-7 days to be approved or denied. Check out our top lenders and lock in your rate today!
2) Q: How much interest will I pay?
Interest that you will pay is based on the interest rate that you received at the time of loan origination, how much you borrowed and the term of the loan. If you borrow $208,800 at 3.62% then over the course of a 30-year loan you will pay $133,793.14 in interest, assuming you make the monthly payment of $951.65. For a purchase mortgage rate get a quote here. If you are looking to refinance you can get started quickly here.
Q: How much should I save for a down payment?
Most lenders will recommend that you save at least 20% of the cost of the home for a down payment. It is wise to save at least 20% because the more you put down, the lower your monthly payment will be and ultimately you will save on interest costs as well. In the event that you are unable to save 20% there are several home buyer programs and assistance, especially for first-time buyers. Check out the lenders that specialize in making the home buying experience a breeze.