Shop multiple lenders before you commit to one

The lowest mortgage rate is not the same across lenders. A bank, credit union, mortgage broker, and online lender can all quote you different rates for the same loan amount and term on the same day. The difference between the highest and lowest quote you receive might be 0.25% to 0.75% — which translates to tens of thousands of dollars over the life of the loan.

You find the lowest rate by getting written quotes from at least three to five lenders. Each lender will ask for the same basic information: your credit score range, income, down payment amount, the property address, and the loan term you want (15 years, 30 years, etc.). You can do this in a single week without damaging your credit score, because multiple rate inquiries within 14 days count as one inquiry.

Request quotes in the same format from each lender so you can compare them directly. Ask for the interest rate, the annual percentage rate (APR), the loan origination fee, and any other closing costs. The APR includes both the rate and the fees, so it is the truest number to compare across lenders.

Key Takeaways

  • Get written rate quotes from at least three to five lenders within a two-week window so you can compare apples to apples without multiple credit inquiries.
  • Compare the annual percentage rate (APR), not just the interest rate, because APR includes both the rate and the lender's fees.
  • Your credit score, down payment size, loan term, and current market conditions all affect what rate you are offered, and you cannot change the market but you can improve the others before you shop.
  • Lenders offer different rates to different borrowers on the same day, so the lowest rate available is not the lowest rate you will be offered unless you shop.
  • Points (upfront fees you pay to lower your rate) make sense only if you plan to stay in the home long enough to break even on the cost.

Improve your credit score before you shop

Lenders use your credit score to decide what rate to offer you. A score of 740 or higher typically unlocks the best rates available that day. A score of 620 to 639 will be offered a higher rate — sometimes 0.5% to 1% higher. The difference compounds over 30 years.

If your score is below 740, spend two to three months paying down credit card balances and making all payments on time before you request quotes. Paying down a credit card from 80% of its limit to 30% or lower can raise your score by 20 to 50 points. Disputing errors on your credit report (which you can check free at annualcreditreport.com) can also help, though disputes take 30 to 45 days to resolve.

You do not need a perfect score to get a competitive rate, but every 20-point increase in your score typically lowers your rate by 0.125% to 0.25%. That is worth the wait if you have the time.

Increase your down payment if you can

Lenders offer lower rates to borrowers who put down more money upfront. A 20% down payment typically gets a better rate than a 10% down payment. A 10% down payment gets a better rate than a 5% down payment. The difference is usually 0.25% to 0.5% per 5% increase in down payment.

If you are planning to put down less than 20%, you will also pay for mortgage insurance (PMI), which is an additional monthly cost. The larger your down payment, the sooner you can stop paying PMI. Some lenders will remove PMI once you reach 20% equity in the home; others require you to request removal at that point.

If you have savings available and are deciding between a smaller down payment now or waiting to save more, run the numbers: compare the monthly payment and PMI cost at your current down payment amount against the monthly payment at a higher down payment, factoring in the rate difference you would receive. Sometimes waiting three to six months to save more money saves you more in interest and insurance than buying sooner.

Choose your loan term based on your budget and timeline

A 15-year mortgage carries a lower interest rate than a 30-year mortgage, but the monthly payment is higher because you are paying off the loan in half the time. A 30-year mortgage has a higher rate but a lower monthly payment. Some lenders also offer 10-year, 20-year, or 25-year terms.

The lowest rate available to you depends partly on which term you choose. If you are comparing rates across lenders, make sure you are comparing the same term at each lender. A 15-year rate from one lender is not comparable to a 30-year rate from another.

Choose the term based on what monthly payment fits your budget and how long you plan to stay in the home. If you plan to move or refinance within 10 years, a 30-year mortgage gives you flexibility. If you can afford the higher payment and want to build equity faster, a 15-year mortgage costs less in total interest.

Understand points and whether they make sense for you

A point is a fee you pay upfront (usually 1% of the loan amount) to lower your interest rate. One point typically lowers your rate by 0.25%. Two points lower it by 0.5%, and so on. The lender will show you a menu of options: you can take the base rate with no points, or pay points to get a lower rate.

Points make sense only if you plan to stay in the home long enough to break even on the cost. If one point costs $3,000 and saves you $50 per month in interest, you break even after 60 months (5 years). If you plan to sell or refinance before then, paying points costs you money. If you plan to stay longer than 5 years, the points pay for themselves and then continue to save you money.

When you are comparing quotes from different lenders, some will quote you a rate with points included and others without. Ask each lender to show you the same scenario — for example, the rate with zero points — so you can compare fairly.

Lock your rate at the right time

Once you have chosen a lender and received a quote, you can lock your rate, which means the lender guarantees that rate for a set period (usually 30, 45, or 60 days). If rates go up during that time, you keep your locked rate. If rates go down, you are stuck with the higher rate unless your lender offers a rate-lock extension or float-down option.

Lock your rate when you are ready to move forward with the loan and have chosen your lender. Locking too early (more than 60 days before closing) means you might have to re-lock if your closing is delayed. Locking too late means rates could rise before your lock period covers you.

Ask your lender whether they offer a float-down option, which lets you lock in a lower rate if rates drop during your lock period. Some lenders include this; others charge a fee for it. If rates are historically high when you are shopping, a float-down option can be worth the cost.

Compare banks, credit unions, mortgage brokers, and online lenders

Different types of lenders often quote different rates on the same day. Banks are traditional lenders with physical branches. Credit unions are member-owned and sometimes offer lower rates to members, but you have to be a member to borrow. Mortgage brokers work with multiple lenders and can shop your application to several at once, which saves you time but may cost you a fee. Online lenders have lower overhead and sometimes lower rates, but less face-to-face support.

There is no single type that always has the lowest rate. A credit union might beat a bank in one market, and an online lender might beat both in another. This is why shopping across types matters. When you request quotes, include at least one bank, one credit union (if you are a member), and one online lender or broker.

Ask each lender about their closing timeline. Some close in 15 days; others take 30 to 45 days. If you are on a tight timeline, a slower lender might not work for you even if their rate is slightly lower.

Frequently Asked Questions

Does shopping for rates hurt my credit score?

Multiple rate inquiries within 14 days count as a single inquiry, so shopping for rates in a two-week window has minimal impact on your score — usually a 5-point dip that recovers within a few months. Waiting longer between quotes means each one counts separately and can lower your score more.

What if I have bad credit or no credit history?

Lenders have different minimum credit score requirements, usually between 580 and 620. If your score is below 580, some lenders will still work with you but will charge a higher rate. FHA loans (backed by the Federal Housing Administration) have lower credit score requirements than conventional loans. Shop lenders that specialize in lower-credit borrowers, and expect your rate to be higher than what borrowers with excellent credit receive.

Can I negotiate my mortgage rate?

Rates are set by the lender based on market conditions and your financial profile, not by negotiation. However, you can negotiate the lender's fees and closing costs. Some lenders will waive or reduce origination fees, appraisal fees, or title fees if you ask. Always ask whether any fees are negotiable before you sign.

Should I get a pre-approval before I shop for rates?

A pre-approval letter from a lender shows sellers you are serious, but it does not lock in your rate. You can get pre-approved by one lender and then shop rates with others. Pre-approval is useful for making an offer on a home, but it should not stop you from shopping for the best rate once you have an offer accepted.

What if rates drop after I lock mine?

You are locked into your rate unless your lender offers a float-down option or you pay a fee to re-lock at the lower rate. Some lenders allow one free rate lock extension if your closing is delayed. Ask about these options before you lock so you know what flexibility you have.