3 Tips for Getting an Affordable Mortgage as Rates Climb

Here's how to score some savings when financing a home today.

Right now, mortgage rates are pretty competitive from a historical perspective. But they're considerably higher than they were at any point in 2021. And there's reason to believe rates will continue to climb in the course of 2022.

For one thing, rates have been sitting at or near record lows since mid-2020. They were apt to rise sooner or later. Also, the Federal Reserve has plans to raise its interest rates. While the Fed doesn't set consumer interest rates, its actions can influence them.

If you're looking to buy a home this year and want to keep your borrowing costs to a minimum, there are steps you can take to lock in a lower mortgage rate. Here are three to start with.

1. Boost your credit score

Your credit score paints a picture of how risky a borrower you are. The higher your score, the less worried a mortgage lender might be about loaning you a large sum of money to buy a home with. But the lower your score, the more risk your lender takes on.

If you want to snag an affordable rate on a mortgage, it pays to work on boosting your credit score. This doesn't mean you need to achieve perfect credit -- that's really hard to do. Instead, aim to get your score at least into the mid- or upper-700s. Once your score gets into that range, it opens the door to lower rates.

There are different steps you can take to raise your credit score. First, pay all bills on time. Next, whittle down existing credit card balances so you're using less of your total credit limit. Finally, inspect your credit report for errors -- and correct those that could be dragging your score down needlessly.

2. Look into different financing options

When it comes to borrowing for a home, you're not limited to a conventional mortgage. There are other loan programs you can look into that could lead the way to a more affordable mortgage.

An FHA loan, for example, could be an option if you're limited in the amount of money you can fork over for a down payment. Similarly, if you're a military member or veteran, you can look into taking out a VA loan, which allows you to buy a home with no money down.

3. Shop around with different lenders

Though mortgage rates have been rising on a national level, ultimately, lenders set their own rates based on different criteria. If you're in the market for a mortgage, it pays to seek out quotes from several lenders rather than go with the first offer you receive -- even if it seems very attractive. You never know when one lender might surprise you with a better deal.

Keep in mind that interest rates aren't the only thing to look at when exploring your borrowing options. You'll also want to keep closing costs in mind, which are the fees you're charged to finalize a mortgage. Ideally, you should aim to find an offer that includes not just the lowest mortgage rate, but also the lowest closing costs.

For the past year and a half, mortgage borrowers have enjoyed record-low rates. Unfortunately, those days may be behind us. But that doesn't mean you can't snag yourself an affordable home loan, even with rates being higher than they've been in a while.