Today's mortgage and refinance rates: January 23, 2021 | Higher rates

Mortgage and refinance have increased slightly since last Saturday, but overall, they're still at historic lows. If your finances are strong, it could be a good time to apply for a mortgage. But you'll probably want a fixed-rate mortgage, not an adjustable-rate mortgage.

Mat Ishbia, CEO of United Wholesale Mortgage, told Insider there isn't much of a reason to choose an ARM over a fixed rate right now.

ARM rates used to start lower than fixed rates, and there was always the chance your rate could go down later. But fixed rates are lower than adjustable rates these days, so you probably want to lock in a low rate while you can.

Today's mortgage rates: Saturday, January 23, 2021

Rates from Ad Practitioners LLC.

Mortgage rates have increased since last Saturday, but they're still low overall.

Keep in mind that these are the national average rates for conventional mortgages, which are what you probably think of as "regular mortgages." You may get lower rates on government-backed mortgages through the FHA, VA, or USDA.

Mortgage rate are at historic lows in general. Low rates typically signal a struggling economy. Mortgage rates will probably stay low as the US continues to grapple with the COVID-19 pandemic.

Today's refinance rates: Saturday, January 23, 2021

Rates from Ad Practitioners LLC.

Refinance rates have also gone up since last Saturday. But like mortgage rates, they're still low in general.

How do 15-year fixed rates work?

With a 15-year fixed mortgage, you'll pay down your loan over 15 years and pay the same rate for the entire life of the loan.

A 15-year fixed-rate mortgage is less expensive 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.

How do 30-year fixed rates work?

With a 30-year fixed-rate mortgage, you pay down your loan over 30 years, and your rate is locked in for the entire term.

A 30-year fixed-rate mortgage charges a higher interest rate than a 15-year mortgage. For a long time, you'd also pay a higher rate on a 30-year fixed mortgage than on an ARM. But right now, 30-year fixed rates are the better deal.

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

The good news is that you'll pay less each month on a 30-year term than on a shorter term, so you're spreading your payments out over a longer period of time.

How do ARMs work?

A fixed-rate mortgage locks in your interest rate for the entire life of your mortgage, but an adjustable-rate mortgage keeps your rate the same for the first few years, then changes it periodically. 

A 7/1 ARM keeps your rate the same for seven years, then alters it once per year. A 10/1 ARM locks in your rate for a decade, then changes it annually.

ARM rates are at historic lows these days, but a fixed-rate mortgage is still the better deal. It could be in your best interest to secure a low rate with a 30-year or 15-year fixed-rate mortgage rather than risk your rate increasing down the road with an ARM.

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

Ways to lock in a low mortgage rate

Even though rates are up since this time last week, they're still super low overall. It could be a good time to lock in a low rate.

You don't necessarily need to rush to apply for a new mortgage, though. Rates will likely stay low well into 2021, if not longer. If you want to land the lowest rate, consider taking some of the following steps before submitting an application:

• Increase your credit score by making payments on time, paying down debt, and letting your credit age. A score of at least 700 will help you out — but the higher your score, the lower your interest rate.
• Save more for a down payment. With a conventional mortgage, you may be able to put down as little as 3%. But the higher your down payment, the lower your rate will likely be. Because rates should stay low for a while, you probably have time to save more.
• Lower your debt-to-income ratio. Your DTI ratio is the amount you pay toward debts each month, divided by your gross monthly income. Most lenders want to see a DTI ratio of 36% or less, but an even lower DTI ratio can result in a better rate. To improve your ratio, pay down debts or look for opportunities to increase your income.

If you feel comfortable with your financial situation, now could be a good time to get a fixed-rate mortgage or refinance.

Laura Grace Tarpley is the associate editor of banking and mortgages at Personal Finance Insider, covering mortgages, refinancing, bank accounts, and bank reviews. Over her four years of covering personal finance, she has written extensively about ways to save, invest, and navigate loans.

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