5 Effective Ways to Get the Best Mortgage Rates


Just a half a percentage point difference in the mortgage rate can add up to tens of thousands of dollars over the course of the loan.

So it’s important you are able to get the best rate possible on your mortgage loan.

This article shows you five things you can do to make sure you get the best mortgage rate possible on your loan.

Current Mortgage Rates (December 2020)

Loan Term

Interest rate

APR

30-year fixed-rate

3.05%

3.28%

15-year fixed-rate

2.91%

3.06%

5/1 adjustable-rate

3.05%

3.25%

1. Compare Rates with Multiple Lenders

By applying with multiple online mortgage lenders, you get to compare the different rates and fees lenders charge. Your interest rate and the fees involved will differ with each lender.

It’s a good idea to get at least 3 or 4 mortgage quotes. Some buyers avoid doing this because they believe too many will lower their credit score; however, this is not the case. FICO allows for multiple credit inquires when consumers are shopping for a loan. This is known as a rate shopping window. Consumers are allowed a 30-day window to have as many mortgage lenders pull their credit without negatively affecting their scores.

The lender’s quote is not set in stone. Often, the loan officer increases fees and rates to increase their commissions. Use the mortgage quotes you get to negotiate the best mortgage rates. Take a quote from one lender to another lender, asking them to beat it. Then take that quote to another lender, and so on. Do this until you squeeze every last bit of savings you can.

This is one of the most effective ways to make sure you’re getting the best mortgage rates available. You can not only get a lower rate; you can negotiate the closing costs and origination fees.

Use our loan comparison calculator to compare loan offers

2. Improve Your Credit Score

Your credit score is the most important factor in determining your interest rate. The higher your credit score, the lower your mortgage rate.

Make sure your credit scores are as high as they possibly can be before applying. You can pull your scores for free from Wallet Hub and Credit Karma.

Read More: Tips to increase your credit score in a short amount of time.

Pay down credit card debt

Your credit utilization ratio is the amount of available credit you're using; it accounts for 30% of your overall FICO score. Try to pay your balances to less than 10-15% of the card's limit.

Don't apply for credit

Do not apply for new lines of credit or loans. Too many credit inquiries can lower your credit score. You're also adding debt to your report, which can negatively affect your score.

Pay your bills on time

Your payment history accounts for 35% of your overall score. But when you're going to be applying for a mortgage soon. Don't miss a payment on any bills. Set up auto-pay with all your bills to ensure you don't have any late payments.

3. Put More Money Down

The more you put down the lower your rate will be. A borrower with a lower loan-to-value ratio means the mortgage is less risky for the lender so they will give you a lower mortgage rate.

4. Apply for a Government Loan

Government-backed mortgages are guaranteed by the government reducing the risk the lender faces allowing them to lower their loan requirements.

FHA Loans

FHA loans are one of the most used types of home loans today. This is mainly because of the flexible qualifying guidelines and low down payment requirements.

FHA home loans are available with just 3.5% down with a 580 credit score or higher. FHA loans also have better loan rates than conventional loans.

VA Loans

If you’re a veteran, then you should apply for a VA mortgage loan. VA loans have many benefits and are the cheapest mortgage there is.

These loans offer 100% financing, low mortgage rates, no PMI, and low closing costs.

Although a VA loan is the best deal on a mortgage, you still need to follow the tips in this article to get the best deal possible.

USDA Loans

A USDA loan is a rural housing program created by the U.S. Department of Agriculture. These loans are for people in rural areas of the country.

USDA mortgages also offer 100% financing, so no down payment is needed. Mortgage insurance and loan rates are also low for these types of loans.

Here you can read more about these rural development loans and check your USDA eligibility.

First-Time Homebuyer Grants and Programs

If you’re a first-time homebuyer, there may be special programs you can qualify for. Check the HUD website and entering your state.

You can also check your local Government website to see if there are any local programs available.

5. Look into an Adjustable-Rate Mortgage

If you’re planning on selling the home within 5 years, you should consider a 5/1 ARM loan. A 5/1 adjustable mortgage rate starts off low for the first five years.

Then the rate increases every year thereafter. If you’re really not sure how long you will be in the home, it’s probably best to lock in a fixed rate since current mortgage rates are at all-time lows now.

A 15 year fixed rate loan will have better rates, usually about half a mortgage point to a full point lower than a 30-year loan. Again, if the monthly payment is stretching it for you, stick to a 30 year fixed rate. You can always pay more each month to pay off your mortgage quicker.

Read more about 5-1 ARM vs. 30-year fixed-rate mortgages.

The Bottom Line

Getting the best mortgage rates on your loan can save you tens of thousands of dollars.

By comparing loan offers from multiple lenders and using the quotes to negotiate, you’ll get the best rates possible.

Make sure your credit score is as high as it possibly can be. Pay down the balances on your credit cards and try to get your collection accounts removed. The type of mortgage you get can affect your rate as well.

Get a quote on Government loans like FHA and VA before moving forward with a conforming loan. Using the tips in this article, you will get the best deal on your mortgage.

Speak to lenders and check current rates