Current Mortgage Rates in Louisiana

Like most of the nation, Louisiana has experienced a hike in mortgage interest rates during the past few years. Even though housing prices haven’t seen the spike that other states have lately, this additional cost has priced many would-be homebuyers out of the market and weakened buyer demand. 

Local and national factors are affecting mortgage rates, homebuyers, and the real estate market in the Pelican State. Despite the challenges, there are several programs available to Louisiana residents to help with down payments, closing costs, and more.

Louisiana has a unique predicament in that neither high interest rates nor prices are its biggest real estate problem. Property insurance rates in Louisiana are some of the highest in the nation. Residents of Louisiana are projected to pay an average annual premium of $7,809 for homeowners insurance this year, compared to the current U.S. average of $2,377, according to the National Association of REALTORS®. 

This is largely due to the devastation from the 2020 and 2021 hurricane seasons, which caused more than 20 insurers to become insolvent or leave the state. The problem for homebuyers is that even if they can handle the mortgage payments, they may not be able to find affordable homeowners insurance to close the loan.

The sky-high insurance premiums have weakened demand for housing and kept mortgage interest rates lower than the national average. 

Nationally, mortgage rates have risen since the pandemic in response to the hike in the federal funds rate by the Federal Reserve. This is the interest rate that banks charge each other for overnight lending. Mortgages tend to track slightly higher than this rate. The Fed raised these rates to combat the rising inflation in 2022 and 2023. 

Additionally, the U.S. Treasuries influences mortgage rates. Mortgages are riskier securities than Treasurys, so they generally run about 2 percentage points higher as they have to be more competitive to account for the additional risk. 

Louisiana has several homebuyer assistance programs. They are administered through the Louisiana Housing Corporation. Some are for first-time homebuyers only, while others are available to people in certain professions

• Mortgage Revenue Bond: This program helps those who earn 80% of the area median income or less to meet down payment and closing cost requirements. This assistance offers between 5% and 9%, depending on the loan amount. You must be a first-time homebuyer, have a minimum credit score of 640, not exceed local income limits, and stay within purchase price limits.
• Mortgage Revenue Bond Assisted: This program offers a deferred second mortgage of up to 4% of the mortgage amount and reduced mortgage insurance. You must be a first-time homebuyer unless the property is in a targeted area. You also have to meet the local income limits, which may be as high as 140% of the local median income in targeted areas, and have a minimum credit score of 640. The purchase price must not exceed program limits.
• Premier Conventional: You do not have to be a first-time homebuyer for this program. It offers competitive interest rates on 30-year loans to borrowers who make less than $99,000 per year and have a credit score of at least 640. This loan doesn’t have origination or discount fees. It also has reduced private mortgage insurance (PMI) and a 97% loan-to-value ratio (LTV).
• Premier Government: This program pairs with government loans and is good for new purchases only (not refinances). There is no borrower investment required. Borrowers must have credit scores over 640, a debt-to-income ratio (DTI) of less than 50%, and an income of less than $99,000. Homebuyer education is required.
• Delta 100: This program is especially for residents of the Delta parishes in northeastern Louisiana. It helps first-time homebuyers who lack traditional credit as there is no minimum credit score. Borrowers must contribute $1,500 or 1% of the loan in cash, whichever is less (no gifts are allowed). These loans do not require PMI and offer up to 3% for closing costs and prepaid items. The maximum loan amount is $242,000. Household income limits apply.
• Mortgage Credit Certificate: Low- and moderate-income first-time homebuyers can use this program to get a federal tax credit of up to 40% of their mortgage interest. The credit maxes out at $2,000 per year. It can be used in conjunction with down payment assistance programs.
• Pathways to Homeownership: This program offers borrowers a deferred second mortgage of up to $55,000 and up to $5,000 toward closing costs. It’s designed for those who haven’t owned a primary residence in the last three years, single parents, and displaced homemakers. Borrowers must be below 80% of the area median income. The loan is forgiven if you stay in the home for 10 years.
• Keys for Service: This is an interest-free soft-second loan of up to 4% of the loan amount that is forgiven after five years. It is available to workers in approved professions such as first responders, government employees, teachers, and health care workers. The income limit is $125,000.

While you have no control over the broader market forces that govern mortgage interest rates, there are steps you can take to position yourself to qualify for the best rate possible when considering a home purchase:

• Increase your credit score: Improving your credit is essential as it influences lenders' decisions on whether to issue you a mortgage. Get a copy of your credit report to identify and address any errors. Explore ways to boost your score if necessary, such as paying down debts or making payments on time.
• Make a substantial down payment: Saving for a hefty down payment provides you with a significant advantage when you apply for a mortgage: Lenders will see you as a less risky borrower. Save as much as possible, and ask your lender if you are eligible for any down payment assistance programs.
• Choose a shorter loan term: Opting for a shorter-term loan, such as a 15-year mortgage, can often result in lower interest rates compared to a 30-year mortgage. If you can comfortably manage higher monthly payments, choosing a shorter loan term translates to less interest over time.
• Shop multiple lenders: Conducting a thorough comparison of lenders is essential. Get pre-approved with at least three lenders to assess the terms and rates they offer. Narrow down your choices to the most favorable options, and don't hesitate to negotiate with each company to secure the most competitive interest rate.

The most common types of mortgages on the market in Louisiana are conventional, FHA, VA, USDA, and jumbo loans. Private lenders administer conventional and jumbo loans while government agencies administer FHA, VA, and USDA loans. However, government loans are underwritten by third-party banks and credit unions that also set their own qualification guidelines.

Conventional

• Description: Mortgage from a bank/mortgage broker; backed by private lenders instead of the government
• Min. credit score: 620
• Max. DTI: 45%
• Min. down payment: 3%
• Mortgage insurance if less than 20% down?: PMI often required
• Notes: Some conventional loans don’t require PMI, but they often have high interest rates

VA

• Description: Mortgage loans backed by the Department of Veterans Affairs
• Min. credit score: Varies by lender
• Max. DTI: 41%
• Min. down payment: 0%
• Mortgage insurance if less than 20% down?: No
• Notes: Only for qualifying veterans and surviving spouses 

USDA

• Description: Mortgages for low- to middle-income borrowers in designated rural counties
• Min. credit score: 640
• Max. DTI: 41%
• Min. down payment: 0%
• Mortgage insurance if less than 20% down?: No PMI; annual fee instead
• Notes: Annual fees are typically rolled into monthly mortgage payments

FHA

• Description: Loans insured by the Federal Housing Administration
• Min. credit score: 580 for most; 500 with 10% down payment
• Max. DTI: 43%
• Min. down payment: 3.5%
• Mortgage insurance if less than 20% down?: Mortgage insurance premium required
• Notes: Mortgage insurance includes both an upfront and monthly payment

Jumbo

• Description: These loans exceed conventional mortgage limits 
• Min. credit score: 680, but varies by lender
• Max. DTI: 43%
• Min. down payment: 10%
• Mortgage insurance if less than 20% down?: PMI required
• Notes: Upper limits for jumbo loans are based on geographic area