The main levers that move your rate are your credit score, down payment size, loan type, and how long you lock the rate

Mortgage rates are set partly by the market — lenders follow the bond market and adjust their rates daily — and partly by your personal finances. You cannot control the market, but you can control what you bring to the lender. A higher credit score, a larger down payment, a shorter loan term, and a willingness to pay points (prepaid interest) all lower the rate a lender will offer you. The order matters: credit score moves the needle most, then down payment size, then loan term.

The rate you see advertised is the rate for a borrower with excellent credit, a 20 percent down payment, and a 30-year fixed loan. If you have a 680 credit score instead of 760, or a 10 percent down payment instead of 20 percent, your rate will be higher. Knowing this before you shop means you will not mistake a higher quote for a bad offer — it is the rate for your actual situation, not the advertised one.

Key Takeaways

  • Your credit score is the single largest factor lenders use to set your rate; a 40-point increase can lower your rate by 0.25 to 0.5 percent.
  • Putting down 20 percent instead of 10 percent typically saves 0.25 to 0.5 percent on your rate, and also eliminates mortgage insurance.
  • Paying points (1 point = 1 percent of the loan amount) upfront can lower your rate by 0.25 percent per point, but only makes sense if you plan to stay in the home at least five to seven years.
  • Locking your rate freezes it for a set number of days (usually 30 to 60); locking early protects you if rates rise, but costs you if rates fall during the lock period.
  • Shopping with multiple lenders and comparing their Loan Estimates side by side is the fastest way to find the lowest rate for your situation.

How credit score affects the rate you are offered

Lenders pull your credit score when you submit a mortgage application, and they use it to assign you a risk tier. A score of 760 or higher typically gets the lowest rate. A score between 700 and 759 usually costs 0.25 to 0.5 percent more. A score between 660 and 699 costs another 0.5 to 1 percent more. Below 660, rates jump sharply and some lenders will not lend at all.

If your score is below 740, you have time to improve it before you apply. Pay down credit card balances (aim for under 30 percent of your limit on each card), make all payments on time for at least three months, and do not open new accounts. These moves can raise your score 20 to 50 points in three to six months. A 40-point increase can save you 0.25 to 0.5 percent on your rate — on a $300,000 loan, that is $75 to $150 per month.

Do not apply for new credit in the months before you apply for a mortgage. Each application triggers a hard inquiry, which lowers your score by a few points and signals to lenders that you are taking on new debt. Multiple inquiries in a short window (within 14 to 45 days, depending on the scoring model) count as one inquiry, so if you are shopping for a mortgage, do all your applications within two weeks.

Why down payment size changes your rate and what 20 percent means

A larger down payment lowers your rate because it lowers the lender's risk. If you put down 20 percent, you have skin in the game and the lender's loss is smaller if you default. If you put down 5 percent, the lender is exposed to more loss, so they charge a higher rate to compensate.

The jump happens at 20 percent. Below 20 percent down, you must pay private mortgage insurance (PMI), which is an extra monthly fee (usually 0.5 to 1.5 percent of the loan amount per year) that protects the lender if you stop paying. This fee is separate from your rate, but it adds up: on a $300,000 loan with 10 percent down, PMI can cost $125 to $375 per month. At 20 percent down, PMI disappears and your rate is also lower — typically 0.25 to 0.5 percent lower.

If you cannot reach 20 percent, putting down 15 percent instead of 10 percent still saves you money. The rate improvement is smaller (usually 0.1 to 0.25 percent), but PMI is also lower. Run the math with your lender: sometimes a slightly higher rate with a smaller down payment costs less per month than a lower rate with a larger down payment, because you avoid PMI sooner.

Loan term: 15-year versus 30-year and what it costs

A 15-year mortgage has a lower rate than a 30-year mortgage on the same loan amount, usually by 0.3 to 0.5 percent. The reason is simple: the lender gets their money back faster and takes less risk. But your monthly payment is roughly double, because you are paying off the loan in half the time.

On a $300,000 loan at 7 percent, a 30-year mortgage costs about $2,000 per month (principal and interest only). A 15-year mortgage on the same loan at 6.5 percent costs about $3,100 per month. The 15-year loan saves you roughly $200,000 in interest over the life of the loan, but you need the monthly cash flow to support the higher payment.

If you cannot comfortably afford a 15-year payment, do not stretch for it. A 30-year mortgage at a slightly higher rate is better than a 15-year mortgage you cannot sustain. You can always make extra principal payments on a 30-year loan to pay it off faster, and you keep the flexibility to stop if your income drops.

Paying points to lower your rate: when it makes sense

One mortgage point costs 1 percent of your loan amount and lowers your rate by roughly 0.25 percent. On a $300,000 loan, one point costs $3,000 and saves you about $50 per month. Two points cost $6,000 and save you about $100 per month.

Points make sense only if you plan to stay in the home long enough to recoup the upfront cost. If one point costs $3,000 and saves $50 per month, you break even after 60 months (five years). If you sell or refinance before then, you lose money. If you plan to stay 10 years or longer, points usually pay for themselves and then some.

Points are optional. Your lender will show you the rate with zero points and the rate with one, two, or three points. Compare the monthly savings to the upfront cost and the number of years you plan to stay. If the math does not work, take the higher rate and keep the cash.

Rate locks: how long to lock and when to lock

Once you have a rate quote, you can lock it — freeze it for a set number of days while your loan is being processed. Lock periods are usually 30, 45, or 60 days. If rates rise during the lock, your rate stays the same. If rates fall, you are stuck with the higher rate (unless your lender offers a "float down" option, which is rare and usually costs extra).

Lock early if rates are rising and you expect them to keep rising. Lock late (or float) if rates are falling and you expect them to keep falling. In practice, most borrowers lock as soon as they have a rate they like, because predicting the direction of rates is difficult and the cost of being wrong is high.

A 60-day lock gives you more time to close, which is useful if your appraisal or underwriting takes longer than expected. A 30-day lock is cheaper (lenders charge a small fee for longer locks) and is fine if your lender has given you a clear closing date. Ask your lender what happens if you need to close after your lock expires — some will extend it for a fee, some will not.

Shopping multiple lenders and reading the Loan Estimate

The fastest way to find the lowest rate is to get quotes from at least three lenders. When you submit an application, the lender must send you a Loan Estimate within three business days. This document shows your rate, points, closing costs, and monthly payment side by side with the same loan terms. Compare the rates and the total closing costs across lenders.

Do not compare rates alone. One lender might offer a lower rate but charge $2,000 more in closing costs. Another might have a higher rate but lower costs. The Loan Estimate shows both, so you can see the true cost of each offer. Look at the "Loan Terms" section to confirm the loan amount, interest rate, and loan type are identical across all three estimates.

Shop within a two-week window. As mentioned earlier, multiple applications within 14 to 45 days count as one inquiry on your credit report. After two weeks, the inquiries start to age and have less impact on your score. Lenders also know you are shopping, so they are more likely to offer competitive rates during this window.

What you control and what you do not

You control your credit score, down payment size, loan term, and whether to pay points. You do not control the market rate that lenders are quoting. On any given day, the market rate for a 30-year fixed loan might be 6.8 percent or 7.2 percent depending on bond market movement. You cannot negotiate the market rate down, but you can negotiate the lender's margin — the amount they add on top of the market rate for profit.

This is why shopping matters. Lender A might quote 7.0 percent and Lender B might quote 6.85 percent on the same day, for the same borrower. The difference is the margin each lender is charging. Lender B is offering a better deal. The market rate is the same; the lender's profit is different.

Frequently Asked Questions

Can I get a better rate by paying my mortgage off early?

No. Your rate is locked when you close, and paying extra principal does not change it. Paying extra does reduce the amount of interest you pay over the life of the loan, because you owe less each month. But the rate itself stays the same.

What if my rate quote expires before I close?

Ask your lender to extend the lock. Most lenders will extend for a fee (usually $100 to $500 depending on how long you need). If your lender will not extend, you can shop for a new rate with a different lender, but you will need a new Loan Estimate and a new application, which takes time.

Does refinancing later let me get a better rate if I missed it the first time?

Yes, but refinancing costs money — closing costs are typically 2 to 5 percent of the loan amount. Refinancing makes sense only if the new rate is at least 0.5 to 1 percent lower than your current rate and you plan to stay in the home long enough to recoup the costs, usually three to five years.

Can I negotiate my rate directly with the lender?

Not really. Lenders set rates based on the market and your credit profile. What you can negotiate is the lender's margin and closing costs. If one lender quotes 7.0 percent and another quotes 6.85 percent, the second lender has already negotiated a better margin. You can ask a lender to match a competitor's offer, but they are not obligated to.

Does the type of property affect my rate?

Yes, slightly. A single-family home usually gets the lowest rate. A condo or townhouse might cost 0.1 to 0.25 percent more. An investment property (not your primary home) costs 0.5 to 1 percent more. Ask your lender what rate applies to your property type before you compare offers.