The three things that move your rate: your credit score, your down payment, and the lender you choose

Your mortgage rate depends on three factors you can actually control. A lender will quote you a rate based on your credit score (typically 620 or higher), how much you put down (20 percent down gets a better rate than 5 percent), and which lender you use—because the same borrower gets different quotes from different banks. You cannot change the Federal Reserve's decisions, but you can move each of these three levers before you lock in.

The most direct path is to shop multiple lenders. A mortgage broker can pull quotes from 5 to 10 banks in a single day, and the difference between the highest and lowest quote on the same loan is often 0.25 to 0.5 percentage points. Over 30 years, that difference costs you tens of thousands of dollars. Most lenders let you lock a rate for 30 to 60 days while you finish the home search and inspection, so you can shop without pressure.

If your credit score is below 740, raising it before you apply will lower your rate. Paying down existing debt, correcting errors on your credit report, and waiting for old negative marks to age all move your score upward. Even a 20-point jump can shift your rate down by 0.125 percentage points. The cost of waiting three months to improve your score is worth calculating against the cost of a higher rate for 30 years.

Key Takeaways

  • Shop at least three lenders—a bank, a credit union, and a mortgage broker—because the same loan gets quoted at different rates depending on who underwrites it.
  • A credit score above 740 unlocks the best rates; if yours is lower, paying down debt or disputing errors on your credit report before applying can save you thousands over the life of the loan.
  • Putting down 20 percent or more eliminates private mortgage insurance and typically lowers your rate by 0.25 to 0.5 percentage points compared to a 5 percent down payment.
  • Lock your rate in writing once you find the best quote, and confirm the lock period covers your expected closing date plus a buffer for inspections and appraisals.

How your credit score determines the rate you see

Lenders use your credit score to decide how much risk you pose. A score of 760 or higher typically gets the advertised "best" rate. Scores between 700 and 759 see a small bump upward. Below 700, the rate climbs noticeably, and below 660, many conventional lenders stop lending altogether.

Check your credit report at annualcreditreport.com (the only free source mandated by federal law) before you talk to any lender. Look for errors—accounts that are not yours, missed payments that were actually on time, or duplicate entries. Dispute any errors in writing with the credit bureau; corrections can take 30 days but often raise your score by 10 to 50 points. If your score is low because of recent missed payments, waiting six months to a year lets those marks age and your score recover naturally.

If you have time before you buy, paying down credit card balances lowers your credit utilization ratio (the amount you owe divided by your credit limit). Dropping from 50 percent utilization to 10 percent can raise your score 30 to 50 points. This is one of the fastest moves you can make if you have cash available.

Why your down payment size changes your rate and monthly cost

A 20 percent down payment is the threshold where private mortgage insurance (PMI) disappears. Below 20 percent, lenders charge PMI—an insurance premium added to your monthly payment that protects the lender if you default. PMI typically costs 0.5 to 1.5 percent of your loan amount per year, split into monthly payments.

Lenders also quote a higher interest rate for loans with less than 20 percent down because the risk is higher. The difference is usually 0.25 to 0.5 percentage points. A borrower putting down 5 percent might see a rate of 6.75 percent, while the same borrower with 20 percent down sees 6.25 percent. Combined with PMI, the monthly cost difference is substantial.

If you are close to 20 percent down, the math often favors waiting or finding extra cash. If you have 15 percent saved and can add 5 percent more in three months, the rate reduction and PMI elimination usually outweigh the cost of renting longer. Use a mortgage calculator to compare: plug in your loan amount at both down payment levels and see the monthly difference.

Shopping multiple lenders to find the lowest quote

The fastest way to shop is to contact a mortgage broker. Brokers work with 10 to 20 lenders and can pull quotes from most of them in a single day. You provide your financial information once, and the broker sends it to multiple banks. Each bank quotes you a rate and closing costs for the same loan terms.

You should also contact at least one bank directly and one credit union. Banks have different pricing than brokers, and credit unions sometimes offer lower rates to members. A typical shopping session takes three to five days and involves talking to four to six lenders.

When you compare quotes, look at the interest rate, the annual percentage rate (APR), and the closing costs. The APR includes the interest rate plus fees, so it is a more complete picture. A lender quoting 6.5 percent with $2,000 in closing costs is not the same as one quoting 6.5 percent with $5,000 in closing costs. Ask each lender for a Loan Estimate form—this is a standardized document that shows the rate, APR, and all costs side by side.

Locking your rate and understanding the lock period

Once you find the best quote, ask the lender to lock your rate in writing. A rate lock guarantees that your interest rate will not change for a set period, usually 30, 45, or 60 days. The lock period should cover your expected closing date plus at least two weeks as a buffer for inspections, appraisals, and underwriting delays.

Some lenders offer a "float-down" option, which lets you lower your rate if rates drop during the lock period. This costs extra (usually 0.125 to 0.25 percentage points added to your rate) but protects you if the market moves in your favor. Whether it is worth paying depends on how volatile rates are at the time you lock.

If your lock period expires before closing, the lender can extend it, but usually at a higher rate. Confirm the lock period in writing and ask what happens if you need to extend. Some lenders extend for free; others charge a fee or raise the rate.

Points and fees: when paying upfront saves you money

A mortgage point is a fee equal to 1 percent of your loan amount that you pay upfront to lower your interest rate. One point typically reduces your rate by 0.25 percentage points. If your loan is $300,000, one point costs $3,000 and might lower your rate from 6.5 percent to 6.25 percent.

Points make sense if you plan to stay in the home for at least five to seven years. The monthly savings from the lower rate eventually add up to more than the upfront cost. If you are buying a starter home and might move in three years, paying points is usually a waste. Use an online calculator to find your break-even point: the number of months it takes for the monthly savings to equal the upfront cost.

Closing costs beyond points (title insurance, appraisal, underwriting) vary by lender and location. Some lenders charge $1,500 to $2,000 total; others charge $4,000 or more. This is another reason to shop multiple lenders—the variation is real and worth capturing.

Timing your application to avoid rate changes

Mortgage rates move daily based on bond market conditions and Federal Reserve policy. You cannot predict the direction, but you can control when you lock. If rates are rising, lock as soon as you have a quote you can live with. If rates are falling, you might wait a few days, but waiting more than a week usually costs you—the risk of a bigger jump outweighs the chance of a small drop.

The best time to apply is when you are ready to search for homes seriously. Lenders pull your credit when you apply, and multiple hard inquiries in a short window (within 14 to 45 days, depending on the credit bureau) count as a single inquiry for scoring purposes. So you can shop multiple lenders without damage to your score, but you should do it all within a week or two, not spread over a month.

Avoid applying for new credit cards, car loans, or other debt while you are in the mortgage process. Each new account lowers your score and can change your rate quote. Wait until after closing to open new accounts.

Frequently Asked Questions

Can I get a better rate by paying a higher down payment after I lock?

No. Your rate is locked based on the down payment you stated when you locked. If you increase your down payment later, you would need to unlock and re-lock at the new terms, which means a new rate quote. Ask your lender whether re-locking is worth it before you commit to a larger down payment mid-process.

What is the difference between a fixed rate and an adjustable rate mortgage?

A fixed-rate mortgage keeps the same interest rate for the entire loan term (usually 15 or 30 years). An adjustable-rate mortgage (ARM) starts with a lower rate for a set period (often 3, 5, or 7 years), then adjusts annually based on market conditions. ARMs are riskier because your payment can jump significantly after the initial period. Most borrowers choose fixed rates to avoid payment surprises.

Should I use a mortgage broker or apply directly to a bank?

Use both. A broker can show you multiple lenders quickly, but banks sometimes offer better rates to direct applicants. Brokers are free to you (the lender pays them), so there is no downside to getting a broker quote. Then contact one or two banks directly to compare. The best rate wins, regardless of the source.

What happens if I lock my rate and rates drop before closing?

Your rate stays locked at the higher level unless you paid for a float-down option. If you did not, you are stuck with the locked rate. This is why some borrowers pay extra for float-down protection—it lets you lower your rate if the market moves in your favor during the lock period.

How long does a rate lock last?

Standard locks are 30, 45, or 60 days. You choose the length when you lock. A longer lock costs slightly more (the lender charges a higher rate) but gives you more time to close. If you close before the lock expires, the lock still applies. If you close after it expires, the lender can extend it, usually at a new rate.