How to Find the Best Mortgage Rates

Buying a home is one of the most significant financial decisions you'll ever make, and securing the best mortgage rate is crucial to saving money over the life of your loan. Even a slightly lower interest rate can translate into thousands of dollars in savings. But with various lenders, loan types, and rate terms, how do you find the best mortgage rates?

This guide breaks down the strategies, tools, and insights you need to effectively compare and secure the best mortgage rates in today’s competitive housing market.

1. Understand What Determines Mortgage Rates

Mortgage rates aren’t arbitrary—they’re influenced by several factors, including:

Federal Reserve Policies: While the Fed doesn’t set mortgage rates directly, its actions influence short-term interest rates and investor behavior in mortgage-backed securities, both of which affect mortgage rates.
Inflation: Higher inflation generally leads to higher mortgage rates.
Economic Indicators: Strong job reports and consumer confidence may push rates higher.
Credit Score: Borrowers with higher credit scores are considered less risky and are rewarded with lower rates.
Loan Amount and Term: Shorter-term loans usually have lower rates. Jumbo loans or those outside conforming limits might carry higher interest.
Down Payment: A larger down payment can reduce the lender’s risk and potentially lower your rate.
Debt-to-Income Ratio: The lower your debt compared to your income, the better your chances for a favorable rate.

2. Know Your Credit Score and Improve It

Your credit score is one of the most critical factors in determining your mortgage rate. Lenders typically use FICO scores to assess creditworthiness. Here’s how credit scores generally affect rates:

760–850: Excellent – qualifies for the best rates
700–759: Good – qualifies for competitive rates
650–699: Fair – higher interest, may qualify with conditions
600–649: Poor – likely higher rates, may need special programs
Below 600: Very poor – often requires government-backed loans or co-signers

To improve your score:

Pay down credit card balances
Avoid opening new credit accounts close to applying for a mortgage
Correct errors on your credit report
Pay bills on time consistently

3. Shop Around and Compare Offers

Don’t settle for the first quote. Mortgage rates can vary significantly between lenders for the same borrower. Here are some places to look:

Banks and Credit Unions: Traditional institutions may offer competitive rates to existing customers.
Mortgage Brokers: These intermediaries can access a variety of lenders and help you find favorable deals.
Online Lenders: Digital platforms often offer lower overhead and competitive rates.
Direct Lenders: Companies that underwrite and fund their own loans.

Tip: When shopping, try to get all quotes within a 45-day window. Credit bureaus typically treat multiple mortgage inquiries in this period as one, minimizing impact on your credit score.

4. Use Online Tools and Rate Comparison Sites

Several websites aggregate mortgage rate information and allow you to compare offers easily. Some of the most popular include:

Bankrate.com
NerdWallet
LendingTree
Zillow Mortgage Marketplace

These sites offer filters for loan type, credit score, loan amount, and location. However, remember that these are often estimates—rates can change and may differ once a lender evaluates your financial profile.

5. Consider the Loan Type and Terms

There are several mortgage types, each with different rate structures:

Fixed-Rate Mortgage (FRM): The interest rate stays the same for the life of the loan. Ideal for those seeking predictability.
Adjustable-Rate Mortgage (ARM): Typically starts with a lower fixed rate for a set period (e.g., 5 years), then adjusts annually. Useful if you plan to move or refinance before the rate adjusts.
FHA Loans: Backed by the government, designed for those with lower credit or small down payments.
VA Loans: For veterans and military families, often offering excellent rates with no down payment.
USDA Loans: For rural homebuyers meeting specific criteria, offering low rates and no down payment.

Choosing the right loan product is crucial. An ARM might look attractive upfront, but a fixed-rate loan may offer better long-term value if you plan to stay in your home for decades.

6. Lock In Your Rate at the Right Time

Mortgage rates fluctuate daily. Once you find a favorable rate, consider locking it in. A rate lock guarantees your rate for a set period (usually 30–60 days) while your loan is processed.

Some lenders offer a float-down option, which lets you lock in a lower rate if the market improves before closing. Always ask your lender about these options and any fees involved.

7. Pay Attention to Points and Fees

Sometimes lenders advertise low rates that come with points—fees paid upfront to reduce the interest rate. One point equals 1% of the loan amount.

Buying points can be a good idea if you plan to stay in your home long enough to recoup the cost through lower monthly payments.
APR vs. Interest Rate: Always look at the Annual Percentage Rate (APR), which includes the interest rate plus fees and closing costs. It gives a more accurate picture of the true cost.

8. Get Preapproved and Negotiate

Preapproval shows sellers you're a serious buyer and gives you a more accurate rate quote. Once preapproved, don't be afraid to negotiate. Some lenders may be willing to match or beat competitors' rates if you show them written offers.

9. Stay Informed About the Market

Follow economic trends and mortgage news. Rising inflation or rate hikes by the Federal Reserve can affect your timing. Subscribe to newsletters, set Google alerts for "mortgage rate trends," or talk regularly with a trusted mortgage professional.

Conclusion

Finding the best mortgage rate takes effort, preparation, and market awareness. It involves more than just picking the lowest advertised rate—you need to understand your financial profile, shop around, compare loan products, and be strategic about timing. Whether you're a first-time buyer or a seasoned homeowner, doing your homework can lead to thousands of dollars in savings over the life of your mortgage.

Take your time, consult professionals when needed, and approach the mortgage process with the same diligence you would any major investment—because that’s exactly what it is.

How To Find the Best Mortgage Rates