States with Lowest Mortgage Rates as of July 25, 2025
In the current economic landscape, mortgage rates play a significant role in homeownership decisions. Here's a breakdown of the factors that influence mortgage rates across states in the United States.
Firstly, let's talk about the Adjustable-Rate Mortgage (ARM) with a rate hovering around 7.35%. However, it's essential to note that advertised rates that seem too good to be true often come with hidden costs such as points, credit score requirements, loan size limitations, or hypothetical borrowers.
The FHA 30-Year Fixed loan, popular among first-time homebuyers, has an average rate of 7.55%. On the other hand, the national average for a 30-year fixed-rate mortgage is currently around 6.89%. As of July 25, 2025, states with the lowest rates are New York, California, Pennsylvania, Massachusetts, New Jersey, Washington, and North Carolina, while Alaska, West Virginia, Mississippi, Washington, D.C., Kentucky, Iowa, Kansas, South Carolina, Wyoming have the highest rates.
The variation in mortgage rates by state reflects a mix of local lending market dynamics, regulatory environments, borrower risk profiles, and overarching national economic and monetary factors.
Lender presence and competition play a crucial role. States with more lenders competing typically see lower mortgage rates, while less competition can drive rates higher. Each state has different real estate laws and regulations that affect how expensive it is for lenders to operate. Stricter or more costly regulations can lead to higher mortgage rates in some states.
States where borrowers generally have higher average credit scores are seen as less risky, prompting lenders to offer lower rates. Similarly, larger average loan sizes, often linked with higher home prices, can influence rates through perceived risk or underwriting criteria.
Individual lenders' willingness to take on risk varies. Some lenders may offer lower rates by accepting more risk, while others compensate for higher perceived risk with higher rates.
Beyond state-specific factors, broader economic elements also affect mortgage rates. Inflation expectations, government borrowing, and national debt levels can push rates up or down. High demand for home loans tends to increase rates, while low demand can lead to rate reductions.
Changes in the federal funds rate and the Federal Reserve's actions on its balance sheet (especially involving mortgage-backed securities) indirectly influence mortgage rates nationally, though these impacts can vary regionally.
Other factors include operational costs particularly in rural or harder-to-serve areas, weather-related challenges that may increase lender costs, and real estate market growth rates.
It's important to note that different types of loans (e.g., conventional, FHA, VA) come with different rates and requirements. To get a sense of what you can afford, use a mortgage calculator to input your desired home price, down payment, loan term, and estimated interest rate. Most mortgage calculators also factor in property taxes and homeowners insurance, giving you a more complete picture of your total housing costs.
Remember, the higher your credit score, the lower the interest rate you'll likely qualify for. A larger down payment can reduce the amount you need to borrow and signal to lenders that you're a lower-risk borrower. Lenders will also look at your Debt-to-Income Ratio (DTI), with a lower DTI being generally more favorable.
As of now, national mortgage rates are still lower than the mid-May high of 7.15%. This year has seen fluctuations, with rates dipping as low as 6.50% in March and plunging to a two-year low of 5.89% in September 2024.
In conclusion, understanding the factors influencing mortgage rates can help potential homebuyers make informed decisions. It's always recommended to shop around and compare rates from different lenders to find the best deal.
[1] "Mortgage Rates by State." Bankrate.com. Accessed July 25, 2025. www.bankrate.com/mortgages/rates/mortgage-rates-by-state/
[2] "State-by-State Mortgage Rates." Zillow. Accessed July 25, 2025. www.zillow.com/mortgage-rates/state-by-state/
[3] "Federal Reserve Cuts Rates Three Times in Late 2024." The New York Times. December 16, 2024. www.nytimes.com/2024/12/16/business/economy/federal-reserve-rate-cut.html
[4] "What's Affecting Mortgage Rates in Your Area." Realtor.com. Accessed July 25, 2025. www.realtor.com/news/trends/whats-affecting-mortgage-rates-in-your-area/
- The Adjustable-Rate Mortgage (ARM) has a rate hovering around 7.35%, but hidden costs such as points, credit score requirements, loan size limitations, or hypothetical borrowers need to be considered.
- The FHA 30-Year Fixed loan, popular among first-time homebuyers, has an average rate of 7.55%, higher than the national average of 6.89%.
- States with more lenders competing often see lower mortgage rates, while less competition can drive rates higher, affecting the overall real estate market.
- Stricter regulations or higher costs for lenders can lead to higher mortgage rates in some states, making it more expensive for potential homebuyers.
- Borrowers with higher average credit scores are often perceived as less risky, leading lenders to offer lower rates. Similarly, larger average loan sizes may influence rates through perceived risk or underwriting criteria.
- Inflation expectations, government borrowing, national debt levels, and demand for home loans can impact mortgage rates on a broader scale. High demand for home loans tends to increase rates, while low demand can lead to rate reductions.
- To get a sense of what you can afford, it's recommended to use a mortgage calculator to input factors like your desired home price, down payment, loan term, and estimated interest rate, considering property taxes and homeowners insurance in your total housing costs.
