Current Mortgage Rates in Alaska

Mortgage rates in Alaska depend on current market conditions — just like they do in every other state. But are there special factors you should consider when you live in the Land of the Midnight Sun? Here’s what you need to know.

Best Mortgage Lenders in Alaska

Some of the best mortgage companies do business in Alaska. Here are a few of the top contenders.

What is a Mortgage Rate?

Simply put, your mortgage rate refers to the interest rate you pay on the money a bank lends you to buy a house. This is expressed as a percentage of the loan amount, known as the principal. If you buy a house for $300,000 with a $30,000 down payment, your principal will be $270,000. A 3% interest rate will be applied to that principal.

Interest is paid based on an amortization schedule. Amortization means that much more of your monthly payment will go toward interest in the early years of your loan.

As time goes on, that percentage will decrease so that more of your payment is applied to the principal. Your lender can provide an amortization schedule so you can see exactly how interest will be applied to your loan.

What Factors Impact Your Mortgage Rate?

Shop multiple lenders and get a purchase quote that you can use to compare various options before you buy a home in Alaska. There are a variety of factors that will affect the interest you’ll pay on a mortgage.

Economic Conditions

Lenders base their interest rates on the overall market. The market is influenced by a variety of economic conditions, including:

• The laws of supply and demand. Is your Alaska neighborhood filled with borrowers who are interested in buying homes? If so, lenders can afford to up the rates and drive up rates across the state.
• General economic conditions also have a domino effect on the housing market. On the other hand, a drop in demand for mortgages will force lenders to try to entice buyers with lower interest rates.
• The overall level of inflation drives prices up across the board.
• The prime rate, set by individual banks, is an influencer. The Federal Reserve reports the prime rate charged by the top 25 banks, and many lenders base their interest rates on what other banks charge.

Location

Where you’re buying also plays a role in interest rates. Interest rates could be different in Juneau compared to Barrow.

Your Credit Score

Your lender’s top priority is to reduce its risk as it hands over hundreds of thousands of dollars on a home purchase. A lender can get a look at your past payment history.

You’ll need a good score to qualify, but a stellar credit score can earn you a lower interest rate. Try to have as high a credit score as possible. They’re categorized like this:

• Excellent: 740+
• Good: 670–739
• Fair: 580–669
• Poor: 300–579

Fortunately, there’s a lot you can do to raise your credit score when you’re on the road to buying a home. You can pay down debt, pay your bills on time, apply and open new accounts only as needed and more.

Loan Type

Different loan types offer different interest rates. You may be able to get a better interest rate with a Federal Housing Authority (FHA) or Veterans Administration (VA) loan, depending on your income level and credit score.

FHA and VA loans are backed by the government, whereas a conventional loan isn’t. That means that if you default on an FHA or VA loan, the lender will have a level of protection that isn’t available with a conventional loan and your lender’s rates can be competitive.

• Your debt-to-income (DTI) ratio: Lenders rate you based on the income you earn and the debt level you have at the time of application. This is known as your DTI ratio and is expressed as a number. A lower number can get you a reduction in the interest rate you’ll pay.
• Type of lender: You have a variety of options when you borrow money. The more you shop around, the more likely you are to find the best deal based on your location and income. Here are some types of lenders you can include in your search:
  • Banks: You may want to approach your current financial institution for a loan. You might get a discount based on your existing relationship but it’s important to approach other banks as well, including large corporate banks and small local banks. Shop across all types to make sure you get the best deal.
  • Credit unions: Banks report to shareholders who usually expect to see a good profit but credit unions are nonprofit entities. They consider themselves accountable to their members. This means you can often find a competitive rate with local credit unions.
  • Mortgage lenders: Mortgage lenders specialize in financing real estate purchases. You may find the closing process is quicker with these lenders — they handle everything in house. Ask lots of questions and focus on the rates they can offer you.
  • Online lenders: Online lenders won’t give you any face-to-face interaction but you can often get quick, automated approval and competitive rates from online lenders.

What is a Mortgage Type?

Mortgage type can also impact the interest rate you’ll pay. There are 4 major types of mortgages:

• Conventional loan: A conventional loan is a private-sector loan directly given to you by the lender. Let’s say you stop paying on your loan. The lender has to go through the process to foreclose on the property and recoup its money.
• FHA loan: The Federal Housing Administration backs loans between lenders and borrowers. The FHA compensates the lender for the loss if you take an FHA loan and stop paying. The FHA also provides counseling to help consumers avoid foreclosure.
• USDA loan: The U.S. Department of Agriculture (USDA) offers assistance to consumers who live in rural areas. You can check your location on a map to determine whether your area is eligible. Some areas are classified as rural even though they’re relatively close to urban areas.
• VA loan: The VA provides backing to lenders specifically for loans to active-duty military members and veterans. The VA provides up to 25% backing for home loans of $144,000 or more. You also won’t have to worry about coming up with a down payment for a VA loan.

What is a Mortgage Term?

You commit to repay a loan to buy a house within a certain time frame, known as the mortgage term. There are 3 major mortgage terms available:

• 30-year fixed: You’ll get the lowest monthly payment with this option, as repayment is stretched over 3 full decades. However, this option comes with a higher interest rate than shorter-term mortgages.
• 15-year fixed: This loan requires repayment within 15 years, which means your monthly payment will be higher — but you’ll save on interest.
• 5/1 ARM: You can save money on the front end with a 5/1 adjustable-rate mortgage. This option locks you in for the first 5 years at a fixed rate, then kicks into an adjustable-rate based on the current interest rate.

Current Mortgage Rates in Alaska

We update our mortgage rates frequently to account for the many changes we see over the course of a month. Each lender has its own policy when it sets rates, which fluctuate based on market conditions. If the federal funds rate changes, lenders may choose to adjust their interest rates accordingly.

Calculating Interest in Alaska

A lender takes a look at the number of payments you’ll be making to calculate interest. The formula used looks like this:

Interest Rate / Number of Payments x Loan Principal

Take a look at the chart to see how big an impact the purchase amount makes on the total interest you’ll pay.

Lender Credit Score Minimums in Alaska

A bank will pull a report to determine your repayment history before issuing you a loan. This score, expressed as a 3-digit number, determines whether a lender will agree to lend you money. Here are some minimum credit scores required by popular Alaskan lenders.

Choose the Best Mortgage Rates in Alaska

You can find a lender that can help put you in the home you want, whether you plan to settle in a large city like Anchorage or a more rural area of the state. Consider online lenders, small credit unions and large financial institutions to make sure you get the best rate available.