Start by knowing what rate you may have access to for before you shop

Your actual mortgage rate depends on your credit score, down payment size, loan type, and the current market — not just what the lender advertises. A rate quoted to someone with a 750 credit score and 20% down will be lower than the same lender's rate to someone with a 620 score and 5% down. Before you contact lenders, pull your credit report from annualcreditreport.com (the only free source mandated by federal law) and know your score. This takes 15 minutes and saves you from wasting time on quotes you won't actually receive.

You also need to know your debt-to-income ratio — the percentage of your gross monthly income that goes to debt payments. Most lenders want this below 43%, though some go to 50%. Add up your monthly car payments, student loans, credit cards, and any other debts, then divide by your gross monthly income. If you earn $5,000 a month and owe $1,500 in debt payments, your ratio is 30%. This number matters because lenders use it to decide how much they'll lend you and what rate they'll charge.

Key Takeaways

  • Your credit score, down payment, and debt-to-income ratio determine what rate you actually may have access to for, not the advertised rate.
  • Get quotes from at least three lenders — a bank, a credit union, and a mortgage broker — because the same loan costs different amounts at each.
  • Compare the annual percentage rate (APR), not just the interest rate, because APR includes fees and shows the true cost.
  • Ask each lender for a Loan Estimate within three business days of applying; this document shows the exact rate, fees, and monthly payment you would receive.
  • Lock your rate in writing once you find the best deal, because rates change daily and a verbal promise is not binding.

Get quotes from at least three different types of lenders

Banks, credit unions, and mortgage brokers all offer mortgages, and they charge different rates for the same loan. A bank is a traditional lender with its own money; a credit union is a member-owned nonprofit that often charges less; a mortgage broker is a middleman who shops your application to multiple lenders behind the scenes. You need quotes from all three categories because one type is not inherently cheaper — it depends on the lender, your profile, and current market conditions.

Contact each lender and give them the same information: your credit score, down payment amount, loan amount, property location, and loan type (30-year fixed, 15-year fixed, or adjustable-rate). Ask them to provide a Loan Estimate within three business days. This is the document that matters. It shows the interest rate, APR, all fees, the monthly payment, and closing costs. Do not rely on a phone quote or a rate from their website — those are marketing numbers. The Loan Estimate is what you actually get.

Compare the APR, not just the interest rate

The interest rate is what you pay on the loan balance each month. The annual percentage rate (APR) includes the interest rate plus all lender fees, title insurance, appraisal costs, and other charges, expressed as a yearly percentage. A lender might quote you 6.5% interest but 6.8% APR because the APR folds in $3,000 in fees. When you compare Loan Estimates side by side, the APR tells you the true cost of borrowing from each lender.

Look at the APR column on each Loan Estimate and rank them from lowest to highest. The lowest APR is usually the best deal, but also check the total closing costs — sometimes a lender with a slightly higher APR charges less in upfront fees, which matters if you plan to sell or refinance within five years. If you are staying in the home for 10+ years, APR is the better metric because you will pay the fees once but the interest rate for the life of the loan.

Watch for rate locks and how long they last

Mortgage rates change daily, sometimes multiple times a day. Once you choose a lender and they give you a rate, you can lock that rate in writing so it does not change while your loan is being processed. A rate lock is a binding agreement — the lender cannot raise your rate, and you cannot shop for a better one without losing the lock and starting over.

Rate locks typically last 30, 45, or 60 days. If your loan closes in 35 days and you lock for 30 days, your rate will float (change) for the last five days. Ask each lender how long their standard lock period is and whether you can extend it if closing takes longer. Some lenders charge a fee to extend a lock; others do it free. This matters because if your loan is delayed and your lock expires, the lender can raise your rate, sometimes by a full percentage point or more.

Understand points and whether paying upfront makes sense

A point is a fee equal to 1% of the loan amount that you can pay upfront to lower your interest rate. On a $300,000 loan, one point costs $3,000 and typically lowers your rate by 0.25%. If you pay two points ($6,000), your rate might drop by 0.5%. This is called "buying down" the rate.

Whether points make sense depends on how long you stay in the home. If you plan to sell in five years, paying $6,000 upfront to save $50 a month in interest takes 120 months to break even — you lose money. If you plan to stay 15 years, the monthly savings add up and points pay for themselves. Ask each lender to show you the rate with zero points and the rate if you pay one or two points, then calculate the break-even timeline. Most people do not stay long enough for points to pay off, so the no-points option is often the better choice.

Decide between a fixed rate and an adjustable rate

A fixed-rate mortgage keeps the same interest rate for the entire loan — 30 years, 15 years, or whatever term you choose. Your monthly payment never changes. An adjustable-rate mortgage (ARM) has a low fixed rate for a set period (usually 3, 5, 7, or 10 years), then the rate adjusts annually based on market conditions. ARMs are cheaper upfront but risky because your payment can jump thousands of dollars per year once the fixed period ends.

Fixed rates are simpler and safer. ARMs make sense only if you plan to sell or refinance before the rate adjusts, or if you can afford the payment at the maximum possible rate (lenders cap how high an ARM can go). Most homebuyers should compare fixed-rate quotes because the rate is predictable and you avoid the risk of a payment shock later.

Check whether you need to pay for private mortgage insurance

If your down payment is less than 20%, lenders require private mortgage insurance (PMI) — a monthly fee that protects the lender if you default. PMI typically costs 0.5% to 1.5% of the loan amount per year, added to your monthly payment. On a $300,000 loan with 10% down, PMI might add $150 to $375 per month.

The Loan Estimate shows whether PMI is required and how much it costs. Some lenders offer slightly higher interest rates in exchange for no PMI; others let you pay PMI upfront as a lump sum instead of monthly. Compare the total cost of each option over five years — sometimes paying a higher rate to avoid PMI costs less overall. Once you have 20% equity in the home (through payments or appreciation), you can request PMI be removed, so the monthly cost is temporary.

Frequently Asked Questions

How many lenders should I get quotes from?

At least three — one bank, one credit union, and one mortgage broker. This takes a few hours but can save you thousands of dollars over the life of the loan. Each lender sees your application differently and prices it differently, so shopping is essential.

Does getting multiple quotes hurt my credit score?

Multiple mortgage inquiries within 14 days count as a single inquiry for credit scoring purposes, so getting three quotes in one week has minimal impact — usually a 5-point dip that recovers within months. Waiting weeks between quotes means each one hits separately and hurts more.

What if I find a better rate after I lock?

You cannot switch lenders without losing your lock and starting the process over, which costs time and may trigger a new appraisal fee. Some lenders offer a "rate match" or "price match" may provide if you find a lower rate elsewhere, but this is rare. Lock only after you are confident in your choice.

Should I get a 15-year or 30-year mortgage?

A 15-year mortgage has a lower interest rate and you pay off the home faster, but the monthly payment is much higher. A 30-year mortgage has a higher rate but lower monthly payments, giving you more flexibility. Compare the monthly payment and total interest paid over the life of each loan, then choose based on your budget and goals.

Can I negotiate the interest rate or fees?

Interest rates are set by the market and your profile, so there is little room to negotiate. Fees are sometimes negotiable — you can ask a lender to waive the application fee or reduce the origination fee, especially if you have good credit and a large down payment. It never hurts to ask, but do not expect a major discount.