Mortgage Rates – Best Rates for Purchase and Refinance

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A good mortgage rate can save you thousands or even hundreds of thousands of dollars over the course of your home loan. That is why shopping around for good mortgage rates should be on your to-do list before applying for a new mortgage or refinancing your existing mortgage. Securing a low interest rate on a…

A good mortgage rate can save you thousands or even hundreds of thousands of dollars over the course of your home loan. That is why shopping around for good mortgage rates should be on your to-do list before applying for a new mortgage or refinancing your existing mortgage.

Securing a low interest rate on a home loan is important because it will dictate how much you have to pay monthly and how much you will need to pay in finance fees over the life of the loan. A high rate might mean you are paying more in interest for you home than you are on the actual purchase price. Getting a good interest rate will depend on many factors, many of which are within the borrower’s control.

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How Do You Find Good Mortgage Rates?

Mortgage Rates are constantly changing and are based on many variables, including the average interest rates, the duration of the loan, and more. Your personal situation may also affect interest rates, including your credit history and credit score, income, the amount of your down payment, participation in government programs, and other factors.

A Good Credit Score Can Save You Thousands

One of the first things a lender will do is pull a copy of your credit report and credit score. You should do the same before applying for a loan. Lenders are now looking for credit scores of 720 or higher in order to provide the best interest rates on loans. If your credit score is lacking or you have a history of late payments, you may not only get a high interest rate, you may be denied a mortgage loan.

On the flip side, having a mortgage can increase your credit score because it shows a regular payment history. You may be able to use this to your advantage to refinance to lock in a lower interest rate.

This table shows how a good credit score can affect your mortgage rates (example: 30-year fixed mortgage at $300,000):

FICO® scoreAPRMonthly Mortgage Payment

Get a copy of your credit score: You can check your credit score by following these instructions: FICO Credit Score.

Increase Your Down Payment

The more money you pay down, the less you have to borrow. Your interest rate can be reduced based on the amount of money you put up as a down payment. Ideally, lenders are looking for 20% or more down on the purchase price of the home. Making a down payment of 20% or greater can also help you avoid Private Mortgage Insurance (PMI), which generally costs several hundred dollars per year.

Length of the Mortgage Loan

If you opt to take a 15-year mortgage versus a 30-year mortgage, your lender may be able to provide a better interest rate. If you can afford to pay off a mortgage loan in a shorter period of time, take the option.

Borrower’s Income

Your lender will verify your income and calculate the amount of mortgage you can afford to pay based on your other financial obligations. Your ability to pay back the monthly mortgage payment will be affected by how much money you make. A lowered-interest rate may be possible if the ratio between your debts and income is balanced and you can prove you can afford monthly payments.

Type of Mortgage – Fixed or Adjustable

In recent years, many borrowers opted for an adjustable-rate mortgage because they paid smaller monthly payments for several years and then were responsible for making a larger ballooned payment later in the mortgage. This proved to be part of the reason many homes fell into foreclosure, as borrowers could not afford the lump sum payment.

A fixed-rate mortgage means all payments through the life of the mortgage are the same once an interest rate is locked in at the time of loan commitment. The amount of your mortgage interest rate will vary based on your financial history, the market, and the type of interest rate you are pursuing.

Qualifying for lower mortgage interest rates: To wrap it up, if you want to qualify for the lowest mortgage rates, then you need to have a good credit score, borrow less money in conjunction with a 20% or greater down payment, get a shorter loan period, provide proof of income, and get a fixed rate mortgage.

What You Need to Know About Mortgage Rates

The following articles may help you better understand how mortgages work and how to get the best rates on a mortgage or save money when you refinance your mortgage.

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About Ryan Guina

Ryan Guina is the founder and editor of Cash Money Life. He is a writer, small business owner, and entrepreneur. He served over 6 years on active duty in the USAF and is a current member of the IL Air National Guard.

Ryan started Cash Money Life in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about military money topics and military and veterans benefits at The Military Wallet.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free account here.

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