The rate you get depends on your credit score, down payment size, loan type, and how long you shop

The single biggest factor lenders use to set your rate is your credit score. A score of 740 or higher typically unlocks the lowest advertised rates; a score below 620 may mean you pay 1 to 3 percentage points more, or you may not be approved at all. Your down payment also moves the needle—putting down 20 percent usually costs less than 10 percent. The loan type matters too: a 15-year fixed mortgage carries a lower rate than a 30-year fixed, and both are lower than adjustable-rate mortgages. Finally, rates shift daily based on bond markets, so the rate you see today will not be the rate you lock in next week.

You cannot control the bond market, but you can control the first three. Before you shop with lenders, pull your credit report from annualcreditreport.com (the only free source authorized by federal law) and dispute any errors. If your score is below 740, paying down existing debt or waiting a few months to apply can save you thousands over the life of the loan. If you have less than 20 percent saved, understand that you will pay private mortgage insurance (PMI) on top of your rate—that cost varies by lender and loan amount, so ask for the total monthly payment, not just the interest rate.

Key Takeaways

  • Your credit score is the primary driver of your rate; scores of 740 and above get the best offers, while scores below 620 may add 1 to 3 percentage points to your rate.
  • Comparing offers from at least three lenders takes a few hours and can save tens of thousands of dollars over 15 or 30 years.
  • Asking each lender for a Loan Estimate (required by law within three business days) lets you compare apples to apples, because rates alone do not show the full cost.
  • Locking your rate freezes it for a set number of days (usually 30 to 60), but locking too early means you pay a higher rate if rates fall before closing.
  • Points (upfront fees you pay to lower your rate) make sense only if you stay in the home long enough to recoup the cost.

Shop with at least three lenders to see the real range

Rates vary between lenders even on the same day, sometimes by as much as 0.5 percentage points. A difference of 0.5 points on a $300,000 loan costs roughly $150 more per month, or $54,000 over 30 years. Most people call one bank and take whatever they offer, which is why shopping is one of the highest-return uses of your time.

Start with your own bank or credit union (they often offer member discounts), then add two online lenders and one mortgage broker. Online lenders like Rocket Mortgage, Better.com, and LoanDepot often have lower overhead and can undercut traditional banks. A mortgage broker works with multiple lenders and can show you options you would not find by calling banks one by one. When you contact each lender, say you are in the early stages and want to see what rate they would offer based on your credit score and down payment size. Do not let them pull your full credit report yet—a soft inquiry does not hurt your score, but multiple hard inquiries within two weeks count as one inquiry for scoring purposes, so you can shop without penalty.

Request a Loan Estimate from each lender and compare the full cost, not just the rate

By law, lenders must give you a Loan Estimate within three business days of your application. This document shows your interest rate, monthly payment, closing costs, and any fees. It is the only way to compare fairly, because two lenders quoting the same rate may charge different origination fees, appraisal fees, or title insurance costs.

When you receive Loan Estimates, line them up side by side and look at the "Loan Terms" section first—confirm the loan amount, type (15-year fixed, 30-year fixed, 7/1 ARM, etc.), and interest rate match what you discussed. Then look at "Closing Costs" and add them to the loan amount to see the true cost of borrowing. A lender with a 0.25 percent lower rate but $2,000 more in closing costs may not be the better deal if you plan to sell or refinance within five years. Ask each lender to explain any fee that seems high or unusual; some fees are negotiable, and some lenders will match a competitor's offer.

Lock your rate at the right time, not too early

Once you have chosen a lender and are ready to move forward, you will lock your rate—meaning the lender promises to hold that rate for a set number of days, usually 30, 45, or 60. Locking protects you if rates rise before closing, but it also locks you in if rates fall. If rates drop 0.5 points after you lock, you cannot take advantage of it (unless you pay to float down, which some lenders offer).

The timing depends on your situation. If you are buying in a hot market and closing in 30 days, lock immediately so the rate does not slip away. If you are still house-hunting and closing is 60 days away, wait until you have an offer accepted and a closing date set, because locking too early means paying a higher rate if the market moves in your favor. Ask your lender what happens if you need to extend the lock—some allow one free extension, others charge a fee. If your closing date slips, you may need to re-lock at a new rate.

Understand points and whether they make financial sense for you

Points are upfront fees you pay to the lender to lower your interest rate. One point costs 1 percent of the loan amount (so $3,000 on a $300,000 loan) and typically lowers your rate by 0.25 to 0.5 percentage points. The math works only if you stay in the home long enough to recoup the cost through lower monthly payments.

For example, if one point costs $3,000 and saves you $75 per month, you break even after 40 months (about 3.3 years). If you plan to sell or refinance within five years, paying points usually makes sense. If you might move within three years, skip them and take the higher rate instead. Ask your lender to show you the "break-even" point for each option—they are required to provide this on your Loan Estimate.

Improve your credit score before you apply if you have time

If your credit score is below 740, spending a few months improving it before you apply can save more than any shopping strategy. The most effective moves are paying down credit card balances (aim to use less than 30 percent of your available credit) and making all payments on time. Authorized user status on someone else's account with a long history and low balance can help, though the effect varies by scoring model.

Do not open new credit cards or take out new loans in the months before applying—each hard inquiry drops your score by a few points, and new accounts lower your average account age. If you are planning to buy within six months, focus on paying down debt and making on-time payments rather than chasing other improvements. Even a 20-point increase in your score can lower your rate by 0.25 to 0.5 points, which is worth thousands over the life of the loan.

Consider an adjustable-rate mortgage only if rates are high and you plan to sell or refinance soon

An adjustable-rate mortgage (ARM) starts with a lower rate than a fixed mortgage, but the rate rises after an initial period (often 3, 5, 7, or 10 years). A 7/1 ARM, for example, has a fixed rate for seven years, then adjusts annually. ARMs make sense only in specific situations: when fixed rates are historically high, when you plan to sell or refinance before the adjustment period ends, or when you can afford the payment if rates rise to the cap.

If you choose an ARM, ask the lender for the rate cap (the maximum your rate can rise) and calculate what your payment would be at that cap. If you cannot afford it, do not take the ARM. Most buyers are better off with a fixed rate, because it removes the guessing game and protects you if you stay longer than expected.

Frequently Asked Questions

How much does my down payment size affect my rate?

A 20 percent down payment typically gets the best rate. Putting down 10 percent usually costs 0.25 to 0.5 percentage points more. Below 10 percent, the cost rises further, and you also pay private mortgage insurance (PMI) until you reach 20 percent equity. Ask your lender for the rate difference between 10 and 20 percent down so you can decide whether saving longer is worth it.

Should I pay off debt before applying for a mortgage?

Yes, if you have time. Paying down credit card balances lowers your debt-to-income ratio and raises your credit score, both of which improve your rate. If you are closing in 30 days, do not open new accounts or make large purchases, because lenders pull a fresh credit report before closing and changes can affect your approval.

What is the difference between a rate quote and a locked rate?

A rate quote is an estimate based on your information and is not binding. A locked rate is a promise from the lender to hold that rate for a set number of days (usually 30 to 60). Once you lock, the lender cannot raise your rate, but you also cannot benefit if rates fall unless you pay to float down.

Can I negotiate my closing costs?

Yes. Some fees are set by third parties (appraisal, title insurance, recording fees), but lender fees like origination and processing fees are often negotiable, especially if you have a strong credit score or are bringing a large down payment. Ask your lender which fees they can reduce or waive.

What if my rate locks but my closing date moves?

If your closing date slips beyond your lock period, you will need to re-lock at the current market rate, which may be higher or lower. Some lenders allow one free extension of your lock; others charge a fee. Ask about this before you lock so you understand the cost if your timeline changes.