Today's mortgage and refinance rates in Kentucky

Buying a home in Kentucky

According to Zillow, the typical home value in Kentucky is much lower than the typical value of $259,906 across the US. The typical home value in Kentucky is $153,649, and Zillow expects the value to increase to $164,000 by September 2021.

First-time homebuyer programs in Kentucky

If you get a mortgage through a Kentucky Housing Corporation approved lender, you may be eligible for one of two down payment assistance programs:

  • Regular Down Payment Assistance: Receive a loan of up to $6,000 and repay it over 10 years at a 5.5% interest rate.
  • Affordable Down Payment Assistance: If you have a low-to-moderate income, you can get a loan of up to $6,000 and pay it back over 10 years at a 1% rate.

If you're buying a home in Louisville, you might qualify for a down payment assistance loan from the local government. You can borrow up to 20% of your purchase price, and the government may forgive part of the loan.

Historic mortgage rates for Kentucky

By looking at the average mortgage rates in Kentucky since 2010, you can see trends for 30-year fixed mortgages, 15-year fixed mortgages, and 5/1 adjustable mortgages:

Seeing how today's rates compare to historic Kentucky mortgage rates may help you decide whether you'd be getting a good deal by getting a mortgage or refinancing now.

30-year fixed rates

You'll pay a higher interest rate on a 30-year fixed mortgage than on a shorter-term fixed-rate mortgage. The 30-year fixed rates used to be higher than adjustable rates, but recently 30-year terms have been the better deal.

Monthly payments are relatively low for a 30-year term, because you're spreading payments out over a longer period of time than you would with a shorter term.

You'll ultimately pay more in interest with a 30-year term than you would for a 15-year mortgage, because a) the rate is higher, and b) you'll be paying interest for longer.

15-year fixed rates

A 15-year fixed-rate mortgage is more affordable than a 30-year term in the long run. The 15-year rates are lower, and you'll pay off the loan in half the amount of time.

However, your monthly payments will be higher on a 15-year term than a 30-year term. You're paying off the same loan principal in half the time, so you'll pay more every month.

Adjustable rates

An ARM keeps your interest rate the same for the first few years. Then your rate will change periodically, usually once per year. For example, a 5/1 ARM locks in your rate for the first five yours, then your rate will fluctuate every year.

ARM rates are at historic lows right now, but you still may want to go with a fixed-rate mortgage. A fixed-rate loan will lock in a super low rate for the entire life of the mortgage, while you'll risk your rate increasing later with an ARM.

For a long time, you could get a lower rate during the intro period of an ARM than you could with a fixed-rate mortgage. But right now, many lenders are offering lower fixed rates than intro rates for ARMs.

If you're considering an ARM, then you should still ask your lender about what your individual rates would be if you chose a fixed-rate versus adjustable-rate mortgage.

Refinancing your mortgage in Kentucky

Rates are at historic lows right now, so it could be worth it to switch your current mortgage for one with a lower rate — especially if the new rate would be significantly lower.

You don't necessarily need to refinance with the same lender you used for your initial mortgage. A different company may offer you a better deal this time around. Shop around for a lender who will offer the lowest rate based on your credit score and debt-to-income ratio, and the one that charges relatively low fees.

How to get a low interest rate on your mortgage

Here are some tips for landing a good interest rate on your mortgage:

  • Save more for a down payment. With a conventional loan, you may be able to put down as little as 3%. But lenders reward a higher down payment with a better interest rate. Mortgage rates should stay low for a while, so you may have time to save a bigger down payment.
  • Increase your credit score. Many lenders require a minimum credit score of 620 to receive a mortgage. But you can land a better interest rate with a higher score. The most important factor for boosting your score is to pay all your bills on time.
  • Lower your debt-to-income ratio. Your DTI is the amount you pay toward debts each month, divided by your gross monthly income. Most lenders want to see a DTI of 36% or less for a conventional mortgage, but a lower DTI can result in a lower rate. To improve your DTI, pay down debts or consider opportunities to increase your income.
  • Choose a USDA or VA loan. If you're eligible, you might consider a USDA loan (for low-to-moderate income borrowers buying in a rural area) or a VA loan (for military families). These types of mortgages typically charge lower rates than FHA or conventional loans — and you don't need any money for a down payment.

Improving your financial situation and choosing the right type of mortgage for your needs can help you get the best interest rate possible.

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