How to Get the Best Mortgage Rate
The factors that control your rate, the strategies that lower it, and how to use federal lending data to find competitive lenders.
Sources: CFPB HMDA 2024 · Freddie Mac · Consumer Financial Protection Bureau · 9 min read
Key Takeaway
On a $350,000 mortgage, the spread between the best and worst rate you could qualify for is often 1.5% or more, a difference of $90,000 to $120,000 in total interest over 30 years. Most of that gap is within your control: credit score, down payment size, loan type, and how many lenders you compare all move the needle. No single action saves more money than getting at least three to five competing quotes.
What Determines Your Mortgage Rate
Mortgage rates are not a single number, they are a price that lenders calculate for each borrower based on the probability that the loan will perform. Lenders consider two categories of risk factors: market conditions (outside your control) and loan-specific factors (largely within your control).
Market factors include the 10-year Treasury yield, Federal Reserve policy, mortgage-backed security spreads, and overall economic conditions. These set the floor for all rates on a given day. What differentiates your rate from the advertised headline rate are the loan-level factors below.
Rate Factors and Their Impact
The table below ranks the factors that affect your mortgage rate, from highest to lowest impact. The "Buyer-Controlled" tier highlights actions you can take before and during the mortgage process.
| Factor | Typical Rate Impact | Category |
|---|---|---|
| Credit Score (760+ vs 680) | 0.50%–1.25% rate reduction | High Impact |
| Down Payment (20%+ vs <20%) | Eliminates PMI + 0.25% better rate | High Impact |
| Loan Type (VA vs Conventional) | 0.25%–0.50% lower for VA/USDA | High Impact |
| Loan Term (15yr vs 30yr) | 0.50%–0.75% lower on 15-year | Medium Impact |
| Loan Size (Conforming vs Jumbo) | 0.25%–0.50% higher for jumbo | Medium Impact |
| Debt-to-Income Ratio (<36% vs 43%+) | 0.125%–0.375% impact at thresholds | Medium Impact |
| Property Type (SFR vs Condo/Investment) | 0.125%–0.75% higher for condos/investment | Medium Impact |
| Discount Points (1 point purchased) | ~0.25% rate reduction per point | Buyer-Controlled |
| Lock Period (30 days vs 60 days) | 0.125%–0.25% higher for longer lock | Buyer-Controlled |
| Rate Shopping (1 lender vs 5+) | Avg $3,000 savings per Freddie Mac | Buyer-Controlled |
Rate impacts are approximate ranges based on Fannie Mae loan-level pricing adjustments (LLPAs) and industry data. Actual impacts vary by lender and market conditions.
Credit Score: The Single Biggest Lever
Your credit score affects your rate through Fannie Mae and Freddie Mac's Loan-Level Price Adjustments (LLPAs) - risk-based fees that lenders pass on as rate adjustments. The jump from a 679 score to 680 can save 0.25% on the rate. The jump from 739 to 740 saves another 0.25%. Crossing 760 often unlocks the best tier.
Before applying, take these steps to maximize your score:
- Pay down revolving balances: Keeping credit card utilization below 10% is more powerful than staying below 30%. If you have room to pay down a balance, do it two billing cycles before applying so it reports correctly.
- Avoid new credit inquiries: Hard pulls from new credit applications lower your score. Don't apply for new credit cards, auto loans, or personal loans in the six months before applying for a mortgage.
- Fix errors on your credit report: Request free reports from all three bureaus at AnnualCreditReport.com. Disputing an incorrect derogatory mark can raise your score 20–50 points.
- Don't close old accounts: Account age contributes to your score. Closing a card you've had for 10 years typically lowers your score.
Down Payment Strategies
The 20% down payment threshold remains important for two reasons: it eliminates PMI (typically 0.5%–1.5% of the loan per year) and moves you into a better pricing tier. However, the math isn't always straightforward.
If you're choosing between 15% down (with PMI) and 20% down (without PMI), consider:
- PMI termination: Conventional PMI cancels automatically at 78% LTV, or you can request removal at 80% LTV. On a 30-year loan, this typically takes 5–8 years. PMI may be worthwhile if the alternative is waiting years to save more down payment while renting.
- Down payment assistance: Many state housing finance agencies offer grants or second mortgages for first-time buyers that can bridge the gap to 20% - without depleting your savings. These programs often have income limits.
- Beyond 20%: Putting 25% or 30% down provides marginal rate improvements in most markets. The returns diminish compared to the first 20%.
Shopping for Rates: The Most Underutilized Strategy
A 2018 Freddie Mac study found that borrowers who got five or more quotes saved an average of $3,000 compared to those who got only one quote. A CFPB study found that even comparing just two lenders saves money half the time. Yet most borrowers get only one or two quotes.
Effective rate shopping means:
- Comparing on the same day: Rates move daily. Get all your quotes within 24–48 hours so you're comparing apples to apples.
- Comparing APR, not just rate: The Annual Percentage Rate (APR) includes lender fees and points, making it a more accurate comparison than the stated interest rate alone.
- Comparing Loan Estimates: After submitting an application, lenders are required to provide a standardized Loan Estimate within 3 business days. Compare these forms line by line.
- Including non-bank lenders: Credit unions and independent mortgage companies often offer lower rates than big banks because they have lower overhead. Use HMDA data on PlainLender to see lender approval rates and loan volumes before applying.
Using HMDA Data to Evaluate Lenders
Before you apply anywhere, the HMDA database from 12.2 million mortgage applications gives you a data-based view of any lender's track record. PlainLender lets you check:
- Approval rate: What percentage of applications did this lender fund? Consistently low approval rates may indicate strict underwriting or a tendency to take on applications they'll ultimately decline.
- Median loan amount: Does this lender specialize in your price range, or do they mostly handle loans significantly larger or smaller than yours?
- Geographic concentration: Lenders who do heavy volume in your market often have better appraisal relationships and local expertise.
- Denial reasons: The top denial reasons at a specific lender tell you what they care most about in underwriting.
Use the lender directory to research lenders active in your state before soliciting quotes.
Loan Type Selection
The loan program you choose can affect your rate as much as your credit score. Key options:
- Conventional (Fannie/Freddie): The standard baseline. Requires at least 3% down, but 20% avoids PMI. Best pricing for borrowers with 740+ scores and 20%+ down.
- FHA: Government-backed, accepts 580+ scores with 3.5% down. Has both upfront (1.75%) and annual MIP. Good for borrowers with lower scores or limited down payment, but mortgage insurance is more expensive and harder to remove than conventional PMI.
- VA: Available to veterans and active-duty service members. No down payment required, no PMI, and rates are typically 0.25%–0.5% below conventional. The VA funding fee replaces PMI. If you're eligible, VA is almost always the best option.
- USDA: For rural and suburban properties. No down payment required, competitive rates. Has income and location restrictions. Check eligibility at the USDA website.
Check lending data by state to see the mix of loan types being originated in your area.
Points and Rate Buydowns
Paying discount points is a way to trade upfront cash for a permanently lower rate. The break-even calculation determines whether this makes sense:
Break-even months = Upfront cost ÷ Monthly savings
Example: On a $300,000 loan, one point costs $3,000 and reduces the rate by 0.25%. At 7% instead of 7.25%, the monthly payment difference is approximately $53/month. Break-even: $3,000 ÷ $53 = 57 months (about 4.7 years).
Points make sense if you plan to keep the loan longer than the break-even. They don't make sense if you expect to refinance or sell within that window. Note that temporary rate buydowns (seller-funded or lender-funded "2-1 buydowns") are different, they lower payments in years 1 and 2 but revert to the full rate in year 3.
Frequently Asked Questions
What credit score do I need for the best mortgage rate?
You generally need a credit score of 760 or higher to qualify for the best conventional mortgage rates. Scores between 720–759 receive slightly higher rates, and anything below 680 typically adds 0.5% or more to your rate. FHA loans accept scores as low as 580 with a 3.5% down payment, but the mortgage insurance premiums often offset any rate advantage. The difference between a 680 and 760 score on a $300,000 loan can easily exceed $50,000 in interest over 30 years.
How much does my down payment affect my mortgage rate?
Down payment affects your rate through loan-to-value ratio (LTV). Putting down 20% eliminates private mortgage insurance (PMI) and typically qualifies you for better pricing. Lenders often tier pricing at 80%, 75%, and 60% LTV thresholds, each tier can reduce your rate by 0.125% to 0.25%. A 25% or larger down payment on a conventional loan often unlocks the best available pricing, though the improvement beyond 20% is smaller than the jump from less than 20% to 20%.
What are mortgage points and are they worth buying?
Mortgage discount points are upfront fees paid to permanently reduce your interest rate. Each point costs 1% of the loan amount (so $3,000 on a $300,000 loan) and typically reduces the rate by 0.25%. Whether points are worth it depends on your break-even period: divide the upfront cost by the monthly savings to find the number of months until you recoup the cost. If you plan to keep the loan longer than the break-even (often 4–7 years), points are typically worth it. If you might refinance or sell sooner, skip the points.
How many lenders should I get quotes from?
Research from Freddie Mac shows that getting quotes from five or more lenders saves borrowers an average of $3,000 over the life of a loan compared to getting only one quote. The Consumer Financial Protection Bureau recommends at least three quotes. All mortgage inquiries within a 14-to-45-day window (depending on the scoring model) count as a single hard pull on your credit report, so shopping around does not meaningfully hurt your score. Get quotes from a mix of bank, credit union, and non-bank mortgage lenders.
Does the type of mortgage affect the rate?
Yes, significantly. VA loans (for veterans and service members) typically offer the lowest rates, often 0.25% to 0.5% below conventional. USDA loans for rural areas also offer competitive rates. FHA loans have lower credit requirements but add mortgage insurance. Conventional loans (Fannie Mae/Freddie Mac) are the baseline. Jumbo loans (above conforming limits, currently $766,550 in most areas) often price 0.25% to 0.5% higher than conforming loans, though this spread narrows during competitive periods.
When should I lock my mortgage rate?
Rate locks guarantee your quoted rate for a set period, typically 30, 45, or 60 days. Lock when you have a signed purchase contract and are confident the loan will close within the lock period. Longer lock periods cost more. Do not lock before you have a property under contract, rate locks cannot be transferred to a different property. If rates drop after you lock, ask your lender about "float-down" options, which some lenders offer to allow one rate reduction before closing.
Related Data on PlainLender
Sources
- Consumer Financial Protection Bureau, HMDA Data, 2024 (12.2M applications)
- Freddie Mac - "Determining the Benefits of Getting Multiple Mortgage Quotes" (2018)
- Fannie Mae, Loan-Level Price Adjustment (LLPA) Matrix
- Consumer Financial Protection Bureau - "Shop for a mortgage" guide
- U.S. Department of Veterans Affairs, VA Home Loan program
- U.S. Department of Agriculture, Single Family Housing Guaranteed Loan Program
This content is for informational purposes only and does not constitute financial advice. Mortgage products and pricing vary by lender, market conditions, and individual borrower profile. Consult a licensed mortgage professional for advice specific to your situation.
