Buying a home is one of the biggest financial decisions most people ever make. Whether it’s your first house or your fifth, you probably need a mortgage to help pay for it. When you’re shopping for a mortgage, one of the most important things to look for is the best mortgage rate. The lower the interest rate, the less money you’ll pay over time. But finding the best rate isn’t always easy.
There are many banks, lenders, and mortgage types to choose from. Rates also change all the time. That’s why it helps to understand how mortgage rates work, what affects them, and how you can get the lowest one possible.
In this article, we’ll walk you through everything you need to know about mortgage rates in a way that’s easy to understand. You don’t need to be an expert. You just need to know the basics—and we’re here to help with that.
What Is a Mortgage Rate?
Let’s start with the basics. When you borrow money from a bank or lender to buy a house, that loan is called a mortgage. The mortgage rate is the interest you pay on that loan.
For example, let’s say you borrow $200,000 to buy a home. If your interest rate is 6%, you’ll pay more than $70,000 in interest over 30 years. But if your rate is 5%, you’ll save tens of thousands of dollars. That’s why the mortgage rate is so important—it affects how much your home truly costs in the long run.
Types of Mortgage Rates
There are two main types of mortgage rates: fixed and adjustable. Each one has its pros and cons.
1. Fixed-Rate Mortgage
With a fixed-rate mortgage, your interest rate stays the same for the life of the loan. That means your monthly payment won’t change.
Pros:
- Stability: You know exactly what your payment will be every month.
- Easy to plan your budget.
Cons:
- Usually starts with a higher rate than adjustable loans.
Fixed-rate loans are popular because they’re simple and safe. Most people choose a 30-year fixed mortgage, but 15-year options are available too.
2. Adjustable-Rate Mortgage (ARM)
An adjustable-rate mortgage starts with a lower interest rate, but that rate can change over time. Usually, it stays fixed for the first few years (like 5, 7, or 10 years), then adjusts every year based on the market.
Pros:
- Lower starting rate.
- Good if you plan to sell or refinance before the rate goes up.
Cons:
- Your payment could rise in the future.
- Harder to plan your budget.
What Affects Mortgage Rates?
Mortgage rates change all the time. Some days they go up, other days they go down. So what causes these changes?
Here are some of the main things that affect mortgage rates:
1. The Economy
When the economy is doing well, mortgage rates usually go up. When the economy is struggling, rates tend to go down. This is because of how the Federal Reserve controls interest rates to keep inflation in check.
2. Inflation
Inflation is when prices go up over time. If inflation is high, lenders raise mortgage rates to make sure they still earn money on the loan.
3. Federal Reserve Policy
The Federal Reserve doesn’t set mortgage rates directly, but it does influence them. When the Fed raises or lowers its interest rate, mortgage rates usually move in the same direction.
4. Your Credit Score
Your credit score is one of the biggest personal factors in your mortgage rate. A higher credit score means you’re less risky to lenders, so they offer you a lower rate. A lower credit score means you may have to pay a higher rate.
5. Your Down Payment
The more money you put down on your home, the better your mortgage rate can be. Lenders like when you have more skin in the game.
6. Loan Type and Term
A 15-year mortgage usually has a lower rate than a 30-year one. Government-backed loans like FHA, VA, or USDA may also offer different rates than conventional loans.
How to Get the Best Mortgage Rate
Now that you know what affects mortgage rates, let’s talk about how you can get the best one. It takes a little effort, but it’s worth it. Even a 0.5% difference in your rate can save you thousands of dollars.
1. Check Your Credit Score
Before you apply for a mortgage, check your credit score. Most lenders use scores from 300 to 850. The higher, the better.
- 740 and up: Excellent
- 700–739: Good
- 620–699: Fair
- Below 620: Poor
If your score is low, try to improve it before applying. Pay off debt, don’t miss payments, and keep credit card balances low.
2. Save for a Bigger Down Payment
A 20% down payment is ideal. It helps you avoid private mortgage insurance (PMI) and gives you access to better rates.
Even if you can’t do 20%, putting down more than the minimum helps a lot.
3. Shop Around
Don’t take the first offer you get. Contact several lenders, including:
- Banks
- Credit unions
- Online mortgage lenders
- Mortgage brokers
Ask each one for a loan estimate, and compare rates, fees, and closing costs. Even a small rate difference can add up over time.
4. Compare APRs, Not Just Interest Rates
The APR (Annual Percentage Rate) includes the interest rate plus other costs like lender fees. It’s a better way to compare loans because it shows the true cost.
5. Choose the Right Loan Type
Think about your goals. If you’re staying in your home for a long time, a 30-year fixed loan might be best. If you plan to move soon, a lower-rate ARM could save money.
6. Lock In Your Rate
Once you find a good rate, you can lock it in. This protects you if rates go up before you close on the loan.
Should You Refinance for a Better Rate?
If you already have a mortgage, you might be able to save money by refinancing. This means you take out a new loan with a better rate and use it to pay off your old loan.
People usually refinance to:
- Get a lower rate
- Lower their monthly payment
- Pay off the loan faster
- Switch from an ARM to a fixed rate
Just make sure the savings are worth the cost. Refinancing can come with fees, so do the math first.
Where to Find the Best Mortgage Rates
Finding the best mortgage rate takes some research. Here are some good places to look:
1. Online Rate Comparison Tools
Websites like Bankrate, NerdWallet, LendingTree, and Zillow let you compare rates from different lenders. These tools are a great starting point.
2. Local Banks and Credit Unions
Sometimes, your local credit union or community bank can offer lower rates than big banks. It’s worth checking.
3. Mortgage Brokers
Mortgage brokers don’t lend money themselves, but they work with many lenders. They can help you find the best deal based on your situation.
4. Direct Lenders
Direct lenders are companies like Rocket Mortgage or LoanDepot. They offer loans directly to customers online or over the phone.
Tips to Avoid Common Mistakes
Getting a mortgage can be confusing, and it’s easy to make mistakes. Here are a few things to avoid:
1. Not Getting Preapproved
Before you start house hunting, get preapproved. It shows sellers you’re serious and gives you a clear budget.
2. Only Looking at One Lender
Always shop around. Rates can vary a lot from lender to lender.
3. Ignoring Closing Costs
These are the fees you pay when you close on the house. They can add up fast, so ask lenders for a full estimate.
4. Stretching Your Budget
Just because you’re approved for a certain amount doesn’t mean you should borrow it all. Leave room in your budget for repairs, taxes, and unexpected costs.
Mortgage Rate Trends – What’s Happening Now?
Mortgage rates go up and down based on the economy. In recent years, we’ve seen big changes:
- In 2020, rates hit record lows during the pandemic.
- In 2022–2023, rates went up because of inflation and Fed rate hikes.
- In 2024–2025, rates have started to settle, but they’re still higher than the pandemic lows.
Experts say rates may stay somewhat high for a while, but if inflation goes down, we could see better deals again.
Final Thoughts – Take Your Time and Do Your Homework
Finding the best mortgage rate isn’t just about numbers—it’s about knowing your options, being prepared, and asking the right questions. Whether you’re buying your first home or refinancing, the right mortgage can save you a lot of money over time.
Here’s a quick summary of what you can do:
- Keep your credit score strong.
- Save for a bigger down payment.
- Compare rates from many lenders.
- Understand the different loan types.
- Watch out for hidden fees.
- Lock in your rate when you’re ready.
Remember, this is a big step. Don’t rush it. The more you learn, the more confident you’ll feel—and the better deal you’re likely to get.