How to Shop for the Best Mortgage Rates
Want to save thousands on your home loan? Learn how to compare mortgage rates, understand lender fees, and negotiate better terms before you sign.
A lower mortgage rate can save you tens of thousands of dollars over the life of your loan. Yet many buyers don’t comparison shop — and leave money on the table.
Whether you’re a first-time homebuyer or refinancing an existing loan, this guide will show you exactly how to shop for the best mortgage rates — and avoid costly mistakes.
Why Mortgage Rates Matter So Much
Even a small rate difference can have a big impact:
- 4.5% vs. 6.5% on a $350,000 loan = over $150,000 in total interest difference over 30 years.
Your mortgage rate determines:
- Monthly payment
- Total interest paid
- How much home you can afford
Step 1: Know the Types of Mortgage Rates
Fixed-Rate Mortgages:
- Interest stays the same for life of loan
- Predictable monthly payments
Adjustable-Rate Mortgages (ARMs):
- Lower initial rate, but can change after 5, 7, or 10 years
- Higher risk of payment shock later
Choose based on how long you plan to stay in the home and your risk tolerance.
Step 2: Check Your Credit and Financial Profile
Before applying:
- Pull your credit report and fix errors
- Improve your credit score (740+ gets best rates)
- Pay down debts to lower your debt-to-income (DTI) ratio
- Save for a bigger down payment (20% or more = no PMI)
Better financials = better rate offers.
Step 3: Shop Multiple Lenders (At Least 3–5)
Don’t settle for the first offer.
Compare:
- Banks (Wells Fargo, Chase, etc.)
- Credit unions (often lower rates)
- Online lenders (Better.com, Rocket Mortgage)
- Mortgage brokers (who shop multiple lenders for you)
Request Loan Estimates from each so you can make apples-to-apples comparisons.
Step 4: Understand APR vs. Interest Rate
- Interest Rate: Just the cost to borrow
- APR (Annual Percentage Rate): Includes interest + lender fees (origination, underwriting, etc.)
APR gives you the true cost of the loan — use it for comparison.
Step 5: Ask About Discount Points and Fees
- Discount points: Pay upfront to reduce your interest rate
- 1 point = 1% of loan amount = ~0.25% rate reduction
- Can be worth it if you plan to stay long-term
Also ask:
- Are there prepayment penalties?
- What’s the lock-in rate period?
Step 6: Get Pre-Approved, Not Just Prequalified
- Prequalification is a quick estimate
- Preapproval is a formal review of your finances
Preapproval helps you:
- Know your budget
- Show sellers you’re serious
- Lock in a rate for 30–60 days
Step 7: Lock Your Rate at the Right Time
Rates fluctuate daily with market conditions.
- Lock when you’re under contract on a home
- Ask about float-down options if rates drop before closing
Final Tips for Getting the Best Rate
- Improve credit and DTI before applying
- Compare lenders carefully
- Use a mortgage calculator to test scenarios
- Don’t be afraid to negotiate
- Read the fine print before signing anything
Final Thoughts
Getting the best mortgage rate takes preparation, research, and comparison.
But it’s worth the effort — even a small rate reduction can save you thousands.
Start early, shop smart, and don’t settle. Your future financial self will thank you.