How to Find the Best Mortgage Rates

Buying a home is one of the biggest financial decisions most people will ever make—and the mortgage rate you secure can significantly impact how much you pay over the life of the loan. Even a small difference in interest rates can translate to thousands of dollars in savings or added costs. Finding the best mortgage rates requires more than luck—it takes research, financial preparation, and strategic timing. In this guide, we’ll explain what determines mortgage rates, where to find them, and the key steps you can take to lock in the most competitive deal.

1. Understand What Determines Mortgage Rates

Before you begin shopping, it’s essential to understand what affects mortgage rates. Several key factors determine how lenders set your interest rate:

Credit Score:
Your credit score is one of the most significant factors influencing your mortgage rate. Borrowers with high credit scores (typically above 740) qualify for the lowest rates. A lower score signals higher risk to lenders, resulting in higher interest rates or stricter loan terms.
Down Payment:
A larger down payment reduces the lender’s risk because you’re borrowing less relative to the home’s value. Putting down 20% or more often leads to better rates and eliminates the need for private mortgage insurance (PMI).
Loan Type and Term:
Fixed-rate mortgages usually have slightly higher rates than adjustable-rate mortgages (ARMs) but offer stability. Shorter loan terms, such as 15 years, generally have lower rates compared to 30-year mortgages because they’re less risky for lenders.
Economic Factors:
Mortgage rates are influenced by broader economic conditions, including inflation, the Federal Reserve’s interest rate policies, and the bond market. When inflation rises or the Fed increases rates, mortgage rates tend to follow.
Loan Amount and Location:
Jumbo loans (those exceeding conforming loan limits) often carry higher rates. Additionally, rates may vary by state or region based on local housing demand and competition among lenders.

2. Check and Improve Your Credit Score

Before applying for a mortgage, review your credit report from all three major bureaus—Equifax, Experian, and TransUnion. You can get a free report annually from AnnualCreditReport.com.

Here’s how to improve your credit score before applying:

Pay all bills on time.
Pay down credit card balances to reduce your credit utilization ratio (aim for below 30%).
Avoid opening new credit accounts before applying for a mortgage.
Dispute any errors or inaccuracies on your credit report.

Even a small credit score improvement can lower your interest rate, saving you thousands over time.

3. Compare Rates from Multiple Lenders

One of the most effective ways to find the best mortgage rate is to shop around. Rates can vary significantly between lenders, even for borrowers with similar profiles.

You should get quotes from at least three to five lenders, including:

Traditional Banks: Offer stability and personal service, but may have stricter requirements.
Credit Unions: Typically provide lower rates and fees for members.
Online Lenders: Often have lower overhead costs, which can translate into better rates.
Mortgage Brokers: Compare multiple lenders for you and may find exclusive deals.

When requesting quotes, ask for a Loan Estimate (LE) form, which breaks down the interest rate, annual percentage rate (APR), fees, and total costs. Use this to make an apples-to-apples comparison.

4. Consider Different Mortgage Options

Not all mortgages are the same, and choosing the right one can affect the rate you get:

Fixed-Rate Mortgages:
The rate remains constant throughout the loan term, offering predictable payments—ideal for long-term homeowners.
Adjustable-Rate Mortgages (ARMs):
These start with a lower rate for an initial period (e.g., 5, 7, or 10 years) before adjusting based on market conditions. Suitable for those who plan to sell or refinance before the rate resets.
Government-Backed Loans:
FHA, VA, and USDA loans often offer competitive rates and lower down payment options, especially for first-time buyers or those with lower credit scores.

Understanding which type of loan fits your needs can help you secure a lower rate and more favorable terms.

5. Lock In Your Rate at the Right Time

Mortgage rates fluctuate daily, influenced by market forces. Once you’ve found a favorable rate, consider asking your lender for a rate lock, which guarantees that rate for a set period (typically 30–60 days).

If rates rise during that time, you’re protected. However, if they drop, you may miss out on potential savings—unless your lender offers a “float-down” option, allowing one adjustment if rates decrease before closing.

Timing your rate lock strategically—especially during periods of market volatility—can make a big difference in your final loan costs.

6. Optimize Your Down Payment and Loan-to-Value Ratio (LTV)

The loan-to-value ratio (LTV) compares your loan amount to the home’s value. A lower LTV means less risk to the lender and often results in better rates.

For example:

A 20% down payment (80% LTV) typically yields the best rates.
With less than 20%, you may pay higher rates and be required to carry PMI.

If possible, save for a larger down payment to improve your LTV and reduce your overall interest costs.

7. Factor in All Loan Costs

A low mortgage rate doesn’t always mean the cheapest loan. Pay close attention to:

Origination Fees
Discount Points (optional upfront fees that lower your interest rate)
Appraisal, Underwriting, and Closing Costs

Calculate the Annual Percentage Rate (APR)—it reflects the total cost of borrowing, including interest and fees. Comparing APRs across lenders gives a clearer picture of the true cost of your mortgage.

8. Use Online Tools and Resources

Several online tools can help you compare and estimate mortgage rates:

Bankrate.com and NerdWallet provide daily rate comparisons.
Mortgage calculators estimate monthly payments based on loan amount, interest rate, and term.
Rate trend trackers help you monitor whether rates are rising or falling.

These tools make it easier to stay informed and identify the best time to apply.

9. Get Preapproved

Getting preapproved by a lender not only shows sellers you’re a serious buyer but also gives you a clearer idea of what rate you qualify for. During preapproval, the lender reviews your income, credit, and financial documents to determine your borrowing capacity.

Preapproval doesn’t lock in your rate, but it provides leverage when negotiating both the home price and mortgage terms.

10. Negotiate and Reassess Before Closing

Don’t hesitate to negotiate your rate or closing costs with your lender. If you’ve received better offers from competitors, present them as leverage. Many lenders are willing to match or beat rates to secure your business.

Before closing, review your final Closing Disclosure form carefully. Make sure the terms, rate, and fees match what was initially promised.

11. Refinance When Opportunities Arise

Even after closing, keep an eye on interest rate trends. If rates drop significantly in the future, refinancing your mortgage could lower your monthly payments or reduce your loan term. However, consider refinancing costs and break-even points before deciding.

Conclusion

Finding the best mortgage rates isn’t just about comparing numbers—it’s about understanding how lenders evaluate risk, improving your financial profile, and making well-timed, informed decisions. By maintaining a strong credit score, shopping multiple lenders, exploring various loan options, and locking in rates strategically, you can secure a mortgage that saves you tens of thousands over its lifetime.

Buying a home is a long-term commitment, but with preparation and smart rate shopping, you can ensure your mortgage works in your favor, not against you.

How To Find the Best Mortgage Rates