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Since 2003, Dan Green has been a leading mortgage lender and respected industry authority. His unwavering commitment to first-time home buyers and home buyer education has established him as a trusted voice among his colleagues, his peers, and the media. Dan founded Homebuyer.com to expand the American Dream of Homeownership to all who want it. Read more about Dan Green.
Homebuyer.com is your trusted guide to homeownership. Since 2003, our team has offered real-world expertise and advice to tens of millions of U.S. home buyers. Our content stands on its integrity: it's factual, unbiased, and free from outside influences. Read more about our governing editorial guidelines.
We also exist for profit and want our readers to understand how we make money.
Homebuyer.com is a mortgage-company-affiliated publisher. We earn compensation when you click specific links on the website, or apply for a mortgage with Homebuyer.com or partner listed in our comparison tables. Our partners compensate us differently, so we randomize our tables to protect our readers from steering. We may also earn compensation for advertisements on the site, which are indicated clearly. Note that limitations in our software, whether we originate mortgages in your area, and credit factors may affect the offers and comparison tables you see on various parts of this site. We do not include offers for every mortgage product available. Someday, we hope we will.
Your trust matters to us. This article was thoroughly checked for accuracy as of November 20, 2023. Homebuyer.com ensures every piece of information we share reflects the latest in mortgage standards. Learn more about our commitments to our reader in our editorial guidelines.
A basis point is a unit of measure in finance. One basis point equals 0.01%, or one-hundredth of a percent.
The basis point is an essential unit of measurement in finance, particularly in areas involving interest rates and investment returns, such as mortgages. Basis point measurement allows for a precise, standardized way to discuss changes in financial percentages.
Precision is critical because even small changes in interest rates have significant implications.
One basis point equals 0.01% or one-hundredth of one percent. 100 basis points, therefore, equal 1 percentage point. The term “basis point” helps avoid the confusion that can arise from saying “percent” or “percentage points.”
In real estate, mortgage professionals reference basis points when discussing changes in current mortgage rates. For instance, if mortgage rates drop from 6.25% to 6.00%, calling it a “25 basis point change” communicates the change in interest rates without ambiguity.
Imagine the average mortgage rate for a 30-year fixed-rate mortgage is currently 6.00 percent. Then, in a surprise announcement, the Federal Reserve says that inflation rates are expected to slow over the next 12 months, which triggers a surge in demand for mortgage-backed securities. As a result, mortgage rates drop 50 basis points overnight, lowering current 30-year fixed-rate mortgage rates to 5.50 percent.
For a first-time home buyer, this rate reduction is more than just a small percentage change; it’s a door to increased purchasing power. After the 50 basis point reduction, the home buyer can afford a more expensive home for the same monthly payment – potentially up to six percent more. This could mean moving to a larger house or adding desirable features they might not have afforded before.
One basis point equals 0.01% or one-hundredth of a percentage point.
100 basis points equals 1.00% or one percentage point.
Mortgage lenders use basis points to describe changes in interest rates because it’s unambiguous, and faster to say than “percentage points.”
The term “basis point” is used in most financial industries including mortgage, commercial real estate, investing, and lending.
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Mortgage Rate Assumptions
The Homebuyer.com mortgage rates shown on this page are based on assumptions about you, your home, and the state where you plan to purchase. The rate shown is accurate as of , but please remember that mortgage rates change without notice based on mortgage bond market activity.
The Homebuyer.com mortgage rates shown on this page are based on assumptions about you, your home, and the state where you plan to purchase. The rate shown is accurate as of {{ formatDate(rates[0].createdAt) }}, but please remember that mortgage rates change without notice based on mortgage bond market activity.
Our mortgage rate assumptions may differ from those made by the other mortgage lenders in the comparison table. Your actual mortgage rate, APR, points, and monthly payment are unlikely to match the table above unless you match the description below:
You are a first-time buyer purchasing a single-family home to be your primary residence in any state other than New York, Hawaii, and Alaska. You have a credit score of 660 or higher. You are making a down payment of twenty percent and using a 30-year conventional fixed-rate mortgage. You earn a low-to-moderate household income relative to your area.
The information provided is for informational purposes only and should not be confused for a mortgage rate commitment or a mortgage loan approval.
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