3 Things You Can Do to Snag a Lower Mortgage Rate

by Maurie Backman | Published on Sept. 25, 2021

Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
A couple meets with a financial advisor in an office.

Image source: Getty Images

Here's how to lock in as low a rate as possible on a home loan.

There's a reason so many people are clamoring to buy homes these days. Mortgage rates are sitting near historic lows, which means if you sign up for a home loan today, you might spend less money on interest than you normally would.

But just because rates have been trending lower doesn't mean you're guaranteed to qualify for a competitive rate. If you want to increase your chances of getting a great rate, here are three essential moves to make.

1. Have a high credit score

Your credit score speaks to how reliable a borrower you are. The higher your score, the more comfortable mortgage lenders will probably be working with you -- and the more likely they'll be to offer you an attractive interest rate on your home loan.

So how high does your credit score need to be to get the best rates out there? Ultimately, each lender has its own requirements. But as a general rule, once your score reaches the mid- to high-700s, you're in a good position to snag the lowest rate a given lender has to offer.

If your score could use some work, there are things you can do to improve it quickly. First, if you're able to, pay off some or all of your existing credit card debt, because the more of that debt you have, the more it can negatively impact your score. Next, check your credit report for errors. If there's a mistake on there that's bringing your score down, like a delinquent debt you've already paid off, getting that error corrected could bring your score up.

2. Get a shorter-term loan

Mortgage lenders generally reward borrowers who take out shorter-term loans with lower interest rates. No matter your credit score, you're pretty much guaranteed to snag a lower mortgage rate with a 15- or 20-year loan vs. a 30-year loan.

That said, the downside to taking out a shorter-term loan is having higher monthly payments. If those don't fit into your budget, a 15- or 20-year loan may not be an option. But if you can swing a higher monthly payment, you may be rewarded in the form of a lower rate.

3. Make a higher down payment

Sometimes, lenders reward borrowers who put down more money at closing with lower interest rates. If your lender only requires a 10% down payment but you can come up with 20%, you might get a break on your loan's interest rate in the process. (Aside from that, it's a good idea to try to put down 20% on your home to avoid private mortgage insurance, a costly premium that can make your housing payments more expensive.)

The lower the interest rate on your mortgage, the lower your home loan payments will be each month. Plus, the lower that rate, the less money you'll spend on interest throughout the life of your mortgage. Make these moves if you want to increase your chances of ending up with a mortgage rate you're happy with.

About the Author