Is 3.625 a Good Mortgage Rate for Your Home Loan?

Mortgage rates play a major role in determining how much you’ll pay for your home over time. Even small differences can add up to thousands of dollars, making it important to understand whether the rate you’re offered is competitive. A 3.625% mortgage rate might seem low compared to past decades, but its value depends on market trends, loan terms, and personal financial circumstances.

Several factors influence whether this rate is a good deal, including credit score, loan type, and current housing conditions. Understanding these elements will help determine if 3.625% is favorable or if better options are available.

Comparing Mortgage Rates to Average Ranges

Mortgage rates fluctuate based on economic conditions, lender policies, and broader financial markets. A 3.625% rate may seem attractive, but its competitiveness depends on how it compares to prevailing averages. In early 2024, 30-year fixed mortgage rates ranged between 6% and 7%, making 3.625% significantly lower than what most borrowers were offered. However, historical context matters—rates in 2020 and 2021 dropped below 3% due to Federal Reserve policies, meaning that while 3.625% is low by recent standards, it isn’t unprecedented.

Lenders set rates based on inflation, bond yields, and Federal Reserve actions. The 10-year Treasury yield, which influences mortgage pricing, has remained elevated due to inflation concerns and monetary policy adjustments. If inflation slows and the Fed cuts interest rates, mortgage rates could decline, making today’s offers less attractive in hindsight. Conversely, if inflation remains high, rates may stay elevated, making 3.625% a more favorable deal.

Regional differences also matter. States with high housing demand, such as California and Florida, often see slightly higher mortgage rates due to increased lender risk. Meanwhile, areas with lower home prices and slower market activity may offer more competitive rates. Borrowers should compare their offers to local averages rather than relying solely on national figures.

Assessing Credit Score and Down Payment Factors

Lenders assess mortgage applicants based on risk, with credit score and down payment size being two of the most influential factors. A higher credit score signals financial responsibility, leading to lower interest rates. Generally, a score above 740 qualifies for the best rates, while those in the 620-700 range may receive higher offers. Borrowers with scores below 620 often face significant rate increases or may need to explore government-backed loans like FHA or VA loans, which have more flexible credit requirements.

The down payment also affects mortgage rates. A larger upfront payment reduces lender risk, often resulting in better terms. Conventional loans typically require at least 3% down, but putting down 20% or more eliminates private mortgage insurance (PMI), which can add hundreds of dollars to monthly payments. Borrowers who contribute a substantial down payment may qualify for lower rates.

Examining Loan Term Differences and Interest Rate Types

The length of a mortgage impacts both the interest rate and total repayment amount. A 30-year fixed mortgage is the most common choice, offering lower monthly payments but higher overall interest costs due to the extended repayment period. In contrast, a 15-year fixed mortgage comes with higher monthly payments but significantly reduces total interest paid. Some lenders also offer 20-year or 10-year options, which balance affordability and interest savings.

Adjustable-rate mortgages (ARMs) introduce another layer of complexity. These loans typically start with a lower fixed rate for an initial period—often 5, 7, or 10 years—before adjusting periodically based on a benchmark index, such as the Secured Overnight Financing Rate (SOFR). While the initial rate can be lower than a fixed mortgage, the risk lies in future rate adjustments, which can increase monthly payments if interest rates rise. Borrowers who plan to sell or refinance before the adjustment period may benefit from an ARM, but those seeking long-term stability often prefer fixed-rate options.

Evaluating Recent Housing Market Conditions

Home prices, inventory levels, and buyer demand all influence whether a given mortgage rate represents a good deal. Over the past year, affordability concerns stemming from elevated borrowing costs have slowed home price growth in many markets, but supply shortages continue to prop up values in high-demand areas. The National Association of Realtors (NAR) reported that median home prices remained stable despite fluctuating mortgage rates, largely due to limited housing stock.

Many homeowners who locked in ultra-low mortgage rates during 2020 and 2021 have been reluctant to sell, leading to fewer listings and tighter inventory. This “lock-in effect” has constrained supply and kept prices from falling significantly. Prospective buyers should assess whether current market conditions in their area favor purchasing now or waiting for a potential shift in supply dynamics.

Estimating Monthly Mortgage Payment Impacts

A 3.625% mortgage rate directly affects monthly payments, but the total cost depends on loan amount, term, and additional expenses. For a $300,000 loan on a 30-year fixed mortgage, the principal and interest payment would be approximately $1,368 per month. In contrast, a 15-year loan at the same rate would result in a significantly higher payment of around $2,160 but reduce overall interest paid over time.

Beyond principal and interest, homeowners must account for property taxes, homeowners insurance, and, if applicable, PMI. Property taxes vary by location, with states like New Jersey and Illinois having some of the highest rates, while others, such as Hawaii, impose lower tax burdens. Homeowners insurance costs depend on factors like home value and regional risks, such as hurricanes or wildfires. PMI, typically required for down payments under 20%, can add 0.5% to 1.5% of the loan amount annually, further increasing monthly costs.

Points and Other Closing Cost Considerations

While the interest rate is a major factor in mortgage affordability, closing costs and discount points also influence the overall expense of a home loan. Lenders often allow borrowers to pay points—upfront fees that reduce the interest rate over the life of the loan. One point typically costs 1% of the loan amount and lowers the rate by about 0.25%. For example, on a $300,000 mortgage, paying one point ($3,000) could reduce a 3.625% rate to 3.375%, potentially saving thousands in interest over time. However, this strategy only benefits those who plan to stay in the home long enough to recoup the upfront cost.

Other closing costs include lender fees, title insurance, appraisal costs, and prepaid expenses like homeowner’s insurance and property taxes. These typically range from 2% to 5% of the loan amount, meaning a $300,000 mortgage could come with $6,000 to $15,000 in closing costs. Some lenders offer no-closing-cost loans, where fees are rolled into the interest rate, but this results in higher long-term payments. Buyers should compare loan estimates from multiple lenders to determine the most cost-effective option.