8 Steps to Get the Best Mortgage Rate
1. Work on Improving Your Credit Score
Your credit score is one of the single most powerful levers you can pull when it comes to securing a favorable mortgage rate. Lenders use it as a primary indicator of how likely you are to repay what you borrow.
As Valerie Saunders, a past president of the National Association of Mortgage Brokers (NAMB), explains it: a credit score is always an important factor in determining risk. A lender uses that score as a benchmark for assessing a borrower's ability to repay the debt, and the higher the score, the lower the perceived likelihood of default.
For a conventional mortgage, you'll generally need a credit score of at least 620 to be considered. But if you want to qualify for the best rates available — not just an approval — you'll want to aim for a score of 740 or higher.
Getting there takes time and discipline, but the path is well established. Pay every bill on time, since payment history is the largest component of your score. Work to pay down or completely eliminate credit card balances. If carrying some balance is unavoidable, try to keep it below 20 to 30 percent of your total available credit limit, since high utilization is a significant drag on your score. Additionally, make a habit of checking your credit report regularly for errors. Mistakes do appear, and even a minor inaccuracy — a wrongly reported late payment, an account that isn't yours — can suppress your score. Identify and dispute any errors well before you submit a mortgage application.
2. Demonstrate a Stable Employment History
Lenders aren't just looking at where you are financially today; they want confidence that your income will remain steady enough to support your mortgage payments over time. As a general rule, lenders prefer to see at least two continuous years of employment, ideally with the same employer, before you apply. Plan to provide recent pay stubs — typically covering at least the past 30 days — as well as W-2 forms from the prior two years. If a significant portion of your income comes from commissions or bonuses, you'll need documentation of those as well.
Being self-employed or working multiple part-time positions doesn't automatically disqualify you, but it does make the process more complex. Self-employed borrowers typically need to furnish additional materials such as business profit and loss statements alongside their tax returns to give lenders a complete picture of their income.
If you're a recent graduate entering the workforce, or someone returning to employment after a gap, don't assume you're out of luck. Many lenders can confirm employment eligibility based on a formal offer letter, provided it clearly states your expected income. Similarly, if you're currently employed but transitioning to a new position, a signed offer letter may satisfy the requirement — though switching to an entirely different industry can raise additional questions.
Gaps in employment history aren't necessarily disqualifying, but context matters. A brief period of unemployment caused by illness or caregiving is generally easier for a lender to accept than an extended gap of six months or more without a clear explanation.
3. Save as Much as You Can for a Down Payment
The size of your down payment has a direct relationship with your mortgage rate and your overall borrowing costs. Putting down at least 20 percent of the purchase price is the threshold that unlocks the most favorable terms for most borrowers.
Lenders will certainly accept smaller down payments — many loan programs allow 3 to 5 percent — but the trade-offs are real. A down payment of less than 20 percent on a conventional loan will typically mean you're required to carry private mortgage insurance, or PMI. According to Freddie Mac, PMI costs roughly $30 to $70 per month for every $100,000 borrowed, and it adds up fast. That expense doesn't disappear until your loan balance drops below 80 percent of the home's value, at which point you can request to have PMI removed. The faster you can reach that threshold — either through your regular payments, additional principal payments, or appreciation in the home's value — the sooner you eliminate that added cost from your monthly budget.
Beyond avoiding PMI, a larger down payment also signals financial strength to lenders, which can translate into a more competitive interest rate offer.
4. Get a Clear Picture of Your Debt-to-Income Ratio
Your debt-to-income ratio, commonly abbreviated as DTI, is a comparison of your total monthly debt obligations to your gross monthly income. It's one of the key metrics lenders use to evaluate whether you can comfortably take on a mortgage payment in addition to your existing financial commitments.
As a general benchmark, most lenders prefer to see your projected mortgage payment represent no more than 28 percent of your gross monthly income. When you add your mortgage to all other recurring debt payments — things like car loans, student loans, and minimum credit card payments — lenders typically want that combined number to stay below 36 percent of your income. For conventional loans, many lenders will approve applications with DTI ratios as high as 45 percent, particularly if the borrower has strong compensating factors like substantial savings or an otherwise excellent financial profile.
To put it in concrete terms: if your gross monthly income is $5,000, your ideal mortgage payment would be no more than $1,400 per month. Your total monthly debt payments, including the mortgage, should ideally stay below $1,800.
If your current DTI is higher than lenders would like, you have two paths to improvement: increase your income or reduce your existing debt obligations. Paying off a car loan or eliminating a credit card balance before applying can meaningfully shift this ratio in your favor.
5. Explore Different Loan Types and Term Lengths
Not all mortgages are created equal, and the type and term of the loan you choose can have a significant impact on your interest rate.
The 30-year fixed-rate mortgage is the most common product on the market, but it's not the only option worth considering. If you're confident you've found a long-term home and you have the cash flow to handle higher monthly payments, a 15-year fixed-rate mortgage may serve you better. The monthly payment will be larger, but the interest rate on a 15-year loan is typically lower than on a 30-year loan, and you'll pay off your home in half the time — which means dramatically less interest paid over the life of the loan. The 15-year term is also available when refinancing an existing mortgage.
An adjustable-rate mortgage (ARM) is another avenue worth exploring, depending on your circumstances. ARMs generally start with a fixed rate for an introductory period — often five or seven years — that is typically lower than a fixed-rate mortgage of the same term. After that period expires, the rate adjusts periodically based on prevailing market conditions. For borrowers who plan to sell or refinance before the initial fixed period ends, an ARM can offer meaningful savings. If rates fall during the adjustable phase, refinancing into a fixed-rate mortgage is also always an option.
Government-backed loan programs represent a third category worth investigating, and they often come with rates that undercut what's available through conventional lending. The main options include:
FHA loans, which are insured by the Federal Housing Administration. FHA loans are particularly popular among first-time homebuyers because of their more flexible qualification requirements, including lower minimum credit scores and smaller required down payments.
VA loans, which are guaranteed by the U.S. Department of Veterans Affairs. VA loans are available to eligible veterans, active-duty service members, and their qualifying spouses. One of the most attractive features is that they typically require no down payment at all.
USDA loans, which are guaranteed by the U.S. Department of Agriculture. The USDA program is designed to support homeownership for low- and moderate-income buyers in eligible rural and suburban areas. Like VA loans, USDA loans require no down payment, though the property must be located within an eligible geographic area and the borrower's income must fall below a certain threshold that varies by location and household size.
Beyond federal programs, many state and local governments operate their own assistance programs for first-time buyers that feature below-market interest rates or other financial incentives. It's worth researching what's available in your area before settling on a loan type.
6. Consider Buying Down Your Rate with Mortgage Points
If you have extra cash available at closing and you plan to stay in the home for a meaningful period of time, purchasing mortgage points is a strategy worth evaluating. Each mortgage point costs 1 percent of the total loan amount and typically reduces your interest rate by 0.25 percentage points. Mortgage points are essentially a form of prepaid interest — you're paying money upfront now in exchange for a lower rate over the life of the loan.
Consider this example: on a $400,000 loan with a 7 percent interest rate, purchasing one mortgage point would cost $4,000 and would reduce your rate to 6.75 percent. That quarter-point reduction translates into a lower monthly payment and meaningful savings over the full loan term.
That said, this strategy isn't the right move for everyone. The key variable is how long you plan to stay in the home. Recouping the upfront cost of a point typically takes around five years, meaning if you sell or refinance before that break-even point, you'll have paid more than you saved. The math changes depending on your specific loan amount, rate reduction, and timeline, so it's worth running the numbers carefully before committing.
7. Get Quotes from Multiple Lenders and Compare Them Carefully
One of the most impactful things you can do to secure a better mortgage rate is also one of the simplest: shop around. Accepting the first rate you're quoted — whether you're buying or refinancing — is a common and costly mistake.
Valerie Saunders of NAMB frames it this way: you should shop and compare based on the loan estimates you receive. Just as you wouldn't buy a car without test-driving it first, you should test-drive your loan before committing to it. Getting quotes from at least three lenders — ideally including your current bank or credit union, a mortgage-focused lender, and at least one online lender — gives you both leverage and perspective.
Even when interest rates across offers appear similar, the total cost of those loans can vary substantially once you factor in closing costs, origination fees, private mortgage insurance premiums, and other charges. A loan with a slightly higher interest rate but significantly lower closing costs might actually cost you less over the period you plan to hold the mortgage. Only by comparing complete loan estimates — the standardized document that lenders are required to provide within three business days of your application — can you make a truly apples-to-apples comparison.
Beyond the numbers, it's also worth reading lender reviews and researching the experience of other borrowers before making a final choice. Responsiveness, transparency, and the overall quality of the customer experience matter, especially during what can be a stressful and time-sensitive process.
8. Lock in Your Rate Once You've Found the Right Offer
After you've signed a purchase agreement and chosen a lender, don't assume your quoted rate will hold indefinitely. The closing process frequently takes several weeks, and mortgage rates can shift — sometimes significantly — during that window. Once you've settled on an offer and are moving forward, ask your lender to lock in your interest rate.
A rate lock is an agreement from the lender that your interest rate will remain at the agreed-upon level for a defined period, typically 30 to 60 days, while your loan is being processed and closed. Some lenders offer rate locks at no charge; others may assess a fee. In environments where rates are volatile or trending upward, paying a modest fee for that certainty is usually well worth it. Just be mindful of the lock's expiration date, and work closely with your lender and other parties in the transaction to keep the process on schedule.
