Compare Current Mortgage Rates in Washington DC

Interest rates play a big role in your monthly mortgage payment and how much your loan costs over time. You could save hundreds or thousands of dollars over time by getting a lower interest rate, but doing so may require a little work. Here’s a breakdown of how mortgage rates are set.

Mortgage lenders in Washington, D.C., use the same factors to determine interest rates that other lenders use across the U.S. However, interest rates can vary depending on the state or city you live in, according to the Consumer Financial Protection Bureau (CFPB).

Mortgage rates can shift due to various economic factors, and the rate you receive also depends on your financial standing. Here’s a breakdown of why mortgage rates fluctuate and how lenders determine rates in the nation’s capital: 

Economic trends and monetary policies

More homebuyers tend to take out mortgage loans during periods of economic growth, which pushes mortgage rates higher. The opposite is true, too: Mortgage rates often plummet during economic downturns. 

The Federal Reserve’s monetary policies also play a role. One of the central bank’s goals is to control inflation by changing its target for the federal funds rate. The Fed increases its benchmark rate when inflation is high in an effort to bring inflation down. The Fed may also lower the federal funds rate when inflation is low. Mortgage rates generally climb higher when the Fed rate rises and vice versa. 

Global economy

Global events can impact what we pay for goods and services as well as the cost of borrowing money at home. For instance, Russia’s invasion of Ukraine caused the U.S. and other countries to sanction Russian oil and other goods, which disrupted the supply chain. 

Economic or political instability can also cause investors to sell assets tied to riskier countries and purchase investments tied to more stable countries. This may put downward pressure on mortgage rates.

The borrower

The above factors help push rates into a general range, and your financial standing determines the rate you receive within those limits. Generally, you have a better chance of getting a lower interest rate if you have strong credit, a low debt-to-income ratio (DTI), a larger down payment, and funds in your savings account. These factors increase the likelihood that the home is affordable to you, which creates less risk for the lender.

There are several homebuyer assistance programs in Washington, D.C., administered by the D.C. Housing Finance Agency (DCHFA). Depending on the program you choose, you may be able to take out an affordable home loan or get help paying for some of the upfront costs of buying property. You may — or may not — have to be a first-time homebuyer to take advantage of these offers: 

• DCHFA’s DC4ME: The DC4ME program is open to full-time employees of eligible government agencies. You get a mortgage with a reduced interest rate and the option of down payment assistance, which comes in the form of an interest-free loan. To qualify, you’ll need to meet a few requirements and certify that you haven’t owned a home within the past three years. 
• Mortgage Credit Certificate (MCC): The MCC program allows you to claim a federal tax credit of up to 20% of your annual mortgage interest. You may qualify if you haven’t owned a home within the past three years, you’re a veteran, or you’re purchasing a home in a targeted area. 
• DC Open Doors: Through the Open Doors program, you can take out a home loan with a reduced interest rate and get assistance with your down payment and closing costs. You’ll need to work with a participating lender and meet the program’s eligibility requirements. 

When you’re looking to buy a home in Washington, D.C., here are steps you can take to find the best mortgage rate:

• Check your credit: Generally, a higher credit score can help you get a competitive interest rate, thereby lowering your monthly mortgage payments and the total interest you pay on the loan. If you’re not sure where your credit stands, you can check your credit reports for potential errors and take steps to improve your credit score if necessary.
• Determine your budget: If you’re not sure how much home you can afford, consider using this rule of thumb: Spend no more than 28% of your gross monthly income on your housing payment. For instance, you’d aim for a monthly mortgage payment of $1,400 if you and your partner earn $5,000 a month. Setting an affordable budget can help you get a good interest rate since you pose less risk to the lender. 
• Research and compare lenders: Getting rate quotes from multiple lenders puts you in a better bargaining position. This strategy helps you identify your options and pick the lender that offers the best terms.
• Get pre-approved for a mortgage: A mortgage pre-approval is a letter that shows how much you can expect to borrow and at what terms. It’s a step further than a rate quote because a lender pulls your credit and reviews your financial documents. This is the best way to find out what you qualify for. 

Lenders in Washington, D.C., offer many different types of home loans, and the best one for you depends on your personal needs. The major mortgage programs include FHA loans, VA loans, and conventional loans, and lenders may also offer customized mortgages of their own. Here are some of your options in the nation’s capital:

FHA loans

An FHA loan is a type of home loan geared toward people with lower credit scores and smaller down payments. You may qualify for one of these mortgages with a credit score of at least 580 and a minimum down payment of 3.5%. If your credit score is lower, between 500 and 579, you’ll need to put down at least 10%. 

Be prepared to pay an upfront mortgage insurance premium when taking out the loan, plus monthly mortgage insurance for at least 11 years. 

VA loans

A VA loan is another mortgage program that’s available through private banks and credit unions and guaranteed by a federal agency: the U.S. Department of Veterans Affairs. VA loans are available only to eligible service members, veterans, and surviving spouses. 

If you qualify for a VA loan, you won’t have to make a down payment or pay for mortgage insurance. Plus, interest rates are competitive, and most buyers won’t have to worry about loan limits. But one downside is the upfront funding fee that you’ll pay at closing. The fee ranges between 1.25% and 3.3% of the home's purchase price, and you can choose to roll the fee into the loan principal. 

Conventional loans

A conventional home loan is any mortgage that isn’t backed by a government agency. The most common type is the conforming loan, which means it meets the requirements to be purchased by Fannie Mae or Freddie Mac. To qualify, borrowers typically need a credit score of at least 620, a maximum DTI of 45% in most cases, and a down payment of at least 3%.

These mortgages have high loan limits and no private mortgage insurance if your down payment is at least 20%.