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Best Mortgage Rates: How To Get The Lowest Rate

Patrick Chism8-minute read

July 05, 2022


If you’re buying or refinancing a house, you want to get the lowest mortgage rate possible. After all, it can be argued that mortgages are a commodity – you won’t get special benefits for paying more every month.

But how low do you need to go to get a “good” mortgage rate? Is there anything you can do to make sure you get the best mortgage rate possible? Looking at the factors that influence your rate can help.

What Is A Mortgage Rate?

Mortgage rates determine how much interest accrues on your home loan. The higher your rate, the more interest you'll compile and the more money you'll end up paying for your house.

From a financial perspective, one of the single most important things you should be aware of is whether you have a fixed-rate mortgage or adjustable-rate mortgage (ARM). Let’s take a look at what that means.

Fixed Rates

With a fixed-rate mortgage, the amount of your monthly payment that goes toward principal and interest usually stays the same for as long as you have the loan. Although over time you’ll eventually pay more toward principal than interest, the actual amount of the payment usually never changes.

The advantage of a fixed-rate mortgage is certainty. Your payment is going to stay fairly consistent. There are also a variety of options for your payoff term.

Adjustable Rates

ARMs work a bit differently. They typically start with a lower rate. This teaser rate remains fixed for the first several years of the loan – typically a period of 5, 7 or 10 years. After that, the rate will periodically adjust up or down according to the market.

ARMs may temporarily give you a lower rate, but they also come with a higher level of risk, so it’s best to use them only if you know you plan to move by the time the rate adjusts or if you’re totally comfortable with the possible fluctuation.

Factors Affecting Your Mortgage Rate

Let’s go over the factors that may affect what interest rate you can get on your mortgage.

The Mortgage Market

To understand how mortgage rates are set, it helps to know a little bit about the mortgage market. When you get a mortgage, it's usually purchased by a mortgage investor and made available on the bond market as part of a mortgage-backed security (MBS).

An MBS is generally considered a safe investment because it’s assumed borrowers are going to do their absolute best to make their mortgage payments every month. However, like most safe investments, the rate of return tends to be lower.

If people are feeling optimistic about the economic future of the country and the world, they tend to put more money in the stock market, which is riskier, but this also offers a greater potential reward. If people are feeling more pessimistic, on the other hand, they turn to safer assets in the bond market, including MBS.

Yields run inversely with demand in the MBS market. The higher the demand for MBS, the lower the yield needs to be to attract investors. Lower yields mean lower mortgage rates.

Type Of Loan

Certain loans are more likely to have higher rates. Generally, lower qualifications mean a higher rate.

Let's take a look at a few different classes of home loans:

  • Conventional loans typically have lower interest rates because they usually have higher credit score and down payment expectations.
  • FHA mortgages are easier to qualify for. You can have a lower credit score and higher debt-to-income ratio (DTI). Your mortgage rate might be higher than for other government-backed loans, but it should be competitive with conventional loan rates.
  • VA mortgages are for qualifying veterans and surviving spouses. Mortgage rates on VA loans may be slightly lower.
  • USDA mortgages may have lower interest rates, but you must live in a rural area to qualify for one.
  • Jumbo loans are riskier for lenders, so they can have higher interest rates. Depending on market conditions, you could have a jumbo loan with a competitive rate or even a lower-than-average rate.

Whether your loan is fixed-rate, adjustable or variable will also naturally affect your mortgage rate.

Primary Vs. Second Mortgages

Your mortgage rate will also be affected if you take out a second mortgage. Some homeowners take out a second mortgage to access their home equity, or the amount of the home they own. Because your first mortgage takes priority, your primary mortgage will be paid off first if you run into financial trouble.

Due to the increased risk associated with these loans, second mortgages have slightly higher rates than primary ones. By contrast, in a cash-out refinance, you take out equity based on your primary mortgage and you can get a lower rate. In addition, you can roll your second mortgage into your refinanced primary mortgage.


Your income and DTI have an impact on your mortgage rate as well. Higher incomes likely mean you’ll have more resources available. This doesn’t mean you have to be a millionaire to purchase a $250,000 house, but the lender wants to see that you can comfortably make your monthly payment. This is determined by looking at your DTI ratio.


Interest rates are all about risk. When you buy a house, you know what you can afford and plan to make the payments. If you fall on hard times, however, you’re likely to pay off certain expenses before others.

Interest rates are higher for second homes and investment properties because if something were to go wrong, you’d likely make the payment on your primary residence first.

Interest rates are also different based on whether it’s a single-family property or a multi-unit complex like condos.


Higher assets are another thing that can work in your favor. Assets are things not related to your annual income that could be used to help pay off your mortgage. This could be proceeds from the sale of property, stocks, bonds, mutual funds, etc.

Obviously, the more assets you have, the greater your ability to repay and the lower your interest rate will be.

Credit Score

All lenders look at your credit score and history to determine your mortgage eligibility. In general, the higher your FICO® Score, the lower your rate. You keep your credit score up by making timely payments for your house, car, credit card and so on.

Your credit report is also used to determine how much of your monthly income goes toward making debt payments. Let’s say you make $5,000 a month and you pay $1,250 of that toward your student loans, house and car payments. Your DTI is 25%. The lower this ratio is, the less risky you look for the lender – and your rate will be lower.

Ultimately, borrowers with the best credit often qualify for the best mortgage rate.

What Is A Good Mortgage Rate?

You know how your mortgage rate is determined, but what's the magic number? How low does your interest rate have to be to qualify as “good”?

Unfortunately, the answer isn't necessarily all that straightforward. After reviewing all the factors that influence them, you’ll see that interest rates are complicated. “Good” is usually a relative term when it comes to rates, so let's look at a few ways to level-set.

Current Market Rates

A “good” interest rate can mean a rate that is low relative to the current market. You can get a sense for this by looking at today's mortgage rates and seeing what typical rates look like right now.

If you're curious, you can also take a look at historical mortgage rates to see how much interest rates have changed over the years. What was good in the 1970s, for example, is going to be very different from what is considered good now.

Personal Finances

Beyond looking at current market factors like today’s interest and CMT rates, another way to talk about getting the best mortgage rate is to think about your financial situation. Your interest rate depends on your IPAC, or your income, property, assets and credit. Consider these areas of your finances and how they can influence your mortgage rate.

If you’d like to compare options, you can try shopping around to see what different lenders can offer you to get an idea of what your best interest rate is likely to be.

Today's Mortgage Rates


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Benefits Of A Low Mortgage Rate

There are several advantages to securing a lower interest rate on your mortgage. Review some of the most common benefits below:

  • Low mortgage rates can help lower your monthly payments.
  • Achieving a low rate means you’ll be paying less interest over time.

If and when mortgage rates drop, you may be able to afford more house than you would in a market with higher rates.

How To Get The Best Or Lowest Mortgage Rate

With mortgage rates, lower is better. So, how do you go about securing a low one? There are a few strategies you can employ to get the best mortgage rate possible.

Shorten Your Loan Term

You can save a lot of money if you shorten your term from 30 to 15 years. By shortening your loan term, you can get a lower interest rate and pay off your mortgage sooner. That way, investors don’t have to project inflation as far out.

Although your monthly payment will be higher, you could potentially save tens of thousands in interest over the life of the loan. Not only will you lower your interest rate, but you’ll pay more toward your mortgage balance faster than you would on a traditional 30-year loan.

Pay Off Debt

While you don’t want to close every account, it can be helpful to pay off certain debts. This can help decrease your DTI and free up more money to spend toward your monthly mortgage payment. Less debt can mean a lower mortgage rate.

Buy Prepaid Mortgage Points

You can buy your rate down by prepaying interest at closing. This prepaid interest comes in the form of mortgage points, or discount points. One point is equal to 1% of the loan amount (e.g., on a loan amount of $100,000, a single point is $1,000). You can purchase points in increments down to 0.125 points. Many of the interest rates you see advertised have a certain number of points attached to them.

Prepaying this interest will get you a lower rate. The trade-off here is that you have to stay in the home long enough to reach a position where you save money. If buying two points on a $250,000 mortgage (two points equals $5,000) saved you $300 per month on your mortgage payment, you’d have to stay in the home for 17 months to break even. If you plan on staying in the house for a while, though, buying mortgage points is a good way to save money.

Make A Higher Down Payment

A higher down payment at closing will get home buyers a lower rate. Putting down a significant portion of the purchase price lowers the relative risk for a lender. The lower your loan-to-value ratio (LTV), the more you’re considered a good investment. The higher your down payment, the less a lender has to give you so you can afford the home.

The Bottom Line

Understanding how external and personal factors influence mortgage rates only prepares you to get the best rate possible. There are also a few steps you can take to lower your interest rate – from paying off debt to shortening your loan term.

Securing a “good” or low mortgage rate sets you up for lower monthly payments and greater savings in the long run. Plus, it puts you in good standing with your mortgage lender because you’re seen as less of a risk.

Are you in the process of buying or refinancing your home? Try out our mortgage calculator to see how different interest rates might affect your monthly payment.

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Patrick Chism

Born and raised on a farm in the Ozarks, Patrick has a knack for making the best out of the worst situations. Where others see flooded farmland, he sees lakefront real estate. Where others see an infestation of bees, he sees free pollination and a upstart honey shop. Patrick’s articles will help you make the most out of the least, maximizing your returns while keeping a close eye on the wallet. When he’s not writing for Rocket Mortgage, Patrick likes hiking, gardening, reading and making healthy foods taste like unhealthy foods.