Our goal is to give you the tools and the confidence you need to improve your finances. While we do receive compensation from our partner lenders, whom we will always identify, all opinions are ours. Credible Operations, Inc. NMLS # 1681276, is referred to herein as “Credible”.

If you are wondering how to get the best mortgage rate, it depends on your credit score, your loan amount, the mortgage product, the location of your property, etc. Rates also vary from lender to lender, even for borrowers with the same credit rating.

But if you want the best rates for your situation, we’re here to help.

Here’s how to get the best mortgage rate:

  1. Give your credit score a boost
  2. Save a solid down payment
  3. Keep your income stable (or increase it)
  4. Consider an ARM or a 15-year mortgage
  5. Check out first-time home buying programs
  6. Consider paying points
  7. Compare several lenders

1. Give your credit score a boost

Improve your credit rating is one of the best things you can do to improve your interest rate. It can also increase your chances of getting a loan in the first place.

Even just a little boost your credit score can also make a big difference. Take a look at recent pricing data by FICO. If you had a score of 659 and could bring it down to 680, you could reduce your interest rate by over 0.60%.

Here are some quick and easy ways to improve your credit score:

  • Pull your credit report and alert the credit bureau of any errors.
  • Become an authorized user on another person’s account.
  • Ask for a credit limit increase (but don’t spend it).
  • If you don’t have a lot of credit, consider a secured card or credit builder loan.

To find: How to improve your credit score in 5 steps

2. Save a solid down payment

Another great way to get a better rate is to increase your down payment. While sometimes you can get by with a lower down payment, you usually want to save at least 20% of the cost of your home as a down payment.

The larger your down payment, the less your lender must lend you – and the lower your risk. And if you are a low risk borrower, you will likely get lower interest rates as a result.

Pro tip: However, don’t use up your savings to make a larger down payment. You will always have closing costs to cover, and these typically cost between 2% and 5% of the total loan amount. Plus, lenders like to see two months of mortgage payments in your account at the start and end of the loan process.

3. Keep your income stable (or increase it)

You want to sound like a safe bet to your lender, so keep your job and income stable before you apply for your loan. Don’t change jobs or quit yours too close to the time you apply for a mortgage. Ideally, lenders want to see that you work for the same employer for at least two years.

Even better if you can increase your income in the lead up to your loan application. Even a simple extra income from side work or part-time employment can be of great help.

4. Consider an ARM or a 15-year mortgage

Shorter term loans are less risky for a lender because they don’t have to lend money for that long. If you can consider an ARM mortgage or a 15-year mortgage instead of a 30-year mortgage, your rates could be much lower. But keep in mind that with a shorter term loan, your monthly payment will be higher, and with an ARM, there is a risk that rates will increase over the life of your loan.

Just look at recent rates for proof: The rates on 30-year fixed-rate loans were 3.71% in January 2020, but on 15-year loans it was only 3.19%, according to the Mortgage Bankers Association. ARM rates were equally low, reaching 3.23%.

To find:

5. Watch Homeownership Programs for the First Time

Many states and municipalities offer homeownership programs designed to encourage homeownership in their area. Some of these come in the form of low-interest mortgages, while others are grants that can help cover your closing costs or down payment. Either way, they can help shift the affordability needle considerably.

See: Tips for first-time homebuyers: 10 mistakes to avoid

6. Remember to pay points

If you have a little extra money to work, you can pay what is called points of call to your lender, which entitles you to a lower rate. This is sometimes called “lowering your rate”.

If you are considering doing this, just be sure to consider your long term plans first. You want to make sure you’ll stay home long enough to break even, otherwise it might not be worth doing. Your breakeven point is the point at which the savings you make from your lower interest rate outweigh the cost of your points.

7. Compare several lenders

The key to getting the best mortgage rate is getting quotes from multiple lenders. Rates can be very different from lender to lender, so it’s important to compare at least a few before deciding who will originate your loan.

Also make sure you know how much you can afford to pay per month. You can find out using our monthly mortgage payment calculator below.

Enter your loan information to calculate how much you could pay

Total payment
$

Total interest
$

Monthly payment
$

With a
$

mortgage, you will pay
$

monthly and a total of
$

interest over the life of your loan. You will pay a total of
$

over the term of the mortgage.


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Checking rates will not affect your credit score

Credibility can be a big help when you’re ready to compare mortgages. Check the interest rate first, but remember that the lowest rate is not always the best option. You should also take into account the fees charged by the lender, the APR (total annual cost of the loan), and more.

Pro tip: To get the best mortgage rate, you need to compare five loan estimates – and Credible lets you compare six! This can save you $ 3,000, depending on Freddie mac.

To find: 4 of the best mortgage lenders

Other ways to get the best mortgage rate

While the above strategies are the most effective, you can also consider buying a cheaper home, paying off debt to lower your debt ratio, or bringing in a co-borrower for your loan. If you go for the latter, just make sure that they have first-rate credit and a stable income first.

Finally, once you’ve found a rate and lender that’s right for you, apply for a mortgage pre-approval and consider locking in your rate. This is especially important if you are in a rising rate environment, as it will help you consolidate that low rate as you shop for the perfect home.

Usually, you will need to get a lot of pre-approvals, which can take too long. But with Credible, you can complete your mortgage pre-approval in minutes and easily update it if any of your conditions change, without having to fill out the entire form again. Plus, all of this uses soft credit, which won’t affect your credit.

Learn more: How to negotiate a better mortgage rate

Credible makes getting a mortgage easier
  • Actual personalized rates: In 3 minutes, get real prequalified rates without impacting your credit score
  • Smart technology: We streamline the questions you need to answer and automate the document upload process
  • End-to-end experience: Complete the entire process, from comparing rates to closing everything on Credible

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About the Author

Aly J. Yale

Aly J. Yale is a mortgage and real estate authority. His work has been published in Forbes, Fox Business, The Motley Fool, Bankrate, The Balance, etc.

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