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How Does LendingTree Get Paid?

LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

How to Get the Best Mortgage Rate

Updated on:
Content was accurate at the time of publication.

To qualify for the best mortgage rates, your credit score should be at least 780, you’ll need a 25% down payment, and a DTI ratio under 40% in most cases. You’ll get a break on rates for investment homes and multifamily homes, however, and the changes don’t affect government-backed mortgages.

Before you consider buying or refinancing your home, read up on how to get the best mortgage rate.

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1. Increase your credit score

Your credit score has the greatest impact on the mortgage interest rate you’re offered. Generally, a higher credit score entitles you to a lower rate. Recently, the Federal Housing Finance Agency (FHFA) increased the score requirement for the lowest rates from 740 to 780. That’s a 40-point jump from the standard that has been in place for several years, leaving borrowers with scores between 680 and 779 facing higher rates.

It’s not all bad news, though: The markups for scores ranging from 620 to 679 are dropping, which may mean slightly better rates than you could get before the changes. The table below shows you the new credit ranges — ranges in red will likely see higher rates, while ranges shaded in green may potentially see lower rates after the new standards are effective.

Credit score rangeHigher rates likely/Lower rates likely
780 and higherLower rates likely
760 to 779Higher rates likely
740 to 759Higher rates likely
720 to 739Higher rates likely
700 to 719Higher rates likely
680 to 699Higher rates likely
660 to 679Lower rates likely
640 to 659Lower rates likely
Less than 639Lower rates likely


Higher credit scores still get the lowest rates

On the surface, the changes above make it look like a lower score gets you a better rate than a higher credit score, but that’s not the case. When all of the new adjustments are taken into consideration:

  1. You’ll still get a lower rate for a higher credit score, but not as low as before the changes took effect.
  2. You’ll still be offered a higher rate for a lower credit score, but not as high as before the changes took effect.

2. Make a smaller down payment — but watch your PMI costs

A larger down payment always results in a lower monthly payment, but it won’t lead to a lower interest rate when conventional loan pricing adjustments change. In fact, your interest rate may actually be slightly higher with a 20% down payment versus a maximum 5% down payment.

However, the lower rate savings will likely be eaten up by the cost of your monthly private mortgage insurance (PMI) premium, which is required with a down payment of less than 20%. The bottom line: It’s almost always better to increase your down payment to minimize or avoid the cost of monthly PMI premiums, even if it results in a slightly higher mortgage rate.

3. Lower your debt-to-income ratio

Lenders calculate your debt-to-income (DTI) ratio by dividing your total debt by your pretax income. Although conventional lenders may approve you with a DTI ratio as high as 50%, you’ll pay a higher rate or have slightly higher closing costs for a DTI ratio above 40%. Some ways you can lower your DTI ratio include:

  • Paying off or consolidating debt. Start with small credit card balances to clear out random minimum payments. Consider a debt consolidation loan if you have a lot of credit cards. You can also refinance your car loan to lower the payment.
  • Finding a cosigner. If you have a parent, close friend or relative with high income and little debt who is willing to cosign on a mortgage with you, their income can be used to help lower your DTI ratio. Just remember, if you fall behind on payments, it will affect both their credit score and yours.
  • Avoiding new self-employment or commission jobs. Right before you buy a home is not the time to ditch your 9-to-5 salaried job for self-employment or straight-commission employment. If you do make a change to this type of income, you’ll need to wait until you have a year or two of filed tax returns showing enough income to qualify for a mortgage.
  • Getting a second job. More income helps lower your DTI ratio, but you’ll need to stay at it for a year or two and document the income on a tax return before lenders will qualify you with side-hustle income.

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4. Buy a single-family home that you’ll live in full time

Lenders typically offer the lowest rates if you purchase a single-family, site-built home as your primary residence. You’ll pay more if you’re buying a manufactured home, condominium or two- to four-unit home.

If you’re buying a vacation home or rental property, your rate will be higher than for a primary residence. However, there’s good news for real estate investors and multifamily homebuyers: The adjustments will be reduced for both investment properties and two- to four-unit homes, which could lead to better interest rates.

5. Check out different loan types

Since 30-year mortgage rates typically give you the lowest monthly payment they’re often the popular choice, but you may get a lower rate by considering a shorter-term loan or an adjustable-rate mortgage (ARM).

Shorter term. If you can afford a higher monthly payment, choosing a 15-year term versus a 30-year term will likely result in a lower interest rate. In addition, you’ll pay off your loan faster, save thousands of dollars in interest over the life of the loan and build equity in your home much quicker.

Adjustable-rate mortgage. Borrowers who plan to live in their home for a short time may benefit from an adjustable-rate mortgage (ARM), such as a 5/1 ARM. With a 5/1 ARM loan, the initial rate is fixed for the first five years at a rate that’s usually lower than current 30-year fixed rates. After that, it can adjust annually, based on the terms of your chosen ARM loan.

6. Pick the best loan program

Conventional loans are the most popular, but you may actually get a better rate if you qualify for government-backed loan programs. There’s a catch: Government loan programs come with extra fees and mortgage insurance that can add to the overall cost of your loan.

Here’s an overview of standard loan programs.

Conventional loans. Most homeowners choose conventional loans if they have good credit and stable employment. Fannie Mae and Freddie Mac are government-sponsored enterprises that set guidelines for conventional mortgages and have programs available with down payments as low as 3%. Borrowers with at least a 20% down payment often choose conventional loans to avoid mortgage insurance.

FHA loans. Backed by the Federal Housing Administration (FHA), FHA loans allow borrowers with scores as low as 580 to purchase homes with a 3.5% down payment. That’s significantly lower than the 620 minimum set by conventional lending guidelines. One other advantage of FHA loans is that FHA mortgage insurance premiums are the same regardless of down payment or credit score. FHA mortgage insurance is expensive, though — you’ll pay an upfront premium worth 1.75% of your loan amount and an annual mortgage insurance premium (MIP) that’s divided by 12 and added to your monthly payment.

VA loans. If you’ve served in the military long enough, you may be eligible for a loan backed by the U.S. Department of Veterans Affairs (VA). Most VA loans don’t require a down payment and there’s no minimum credit score (although many lenders set their minimum at 620). You may have to pay a VA funding fee unless you’re exempt, due to a disability related to your military service.

Use the table below for a quick overview of how to match your finances to the lowest-rate loan program:

Loan programBest for the lowest rate if:
ConventionalYou have high credit scores and less than a 20% down payment
FHAYou have credit scores below 620 or don’t qualify for conventional or VA financing
VAYou’re eligible for VA home loan benefits and either don’t want to or can’t make a down payment

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FHA mortgage insurance is required for all FHA loans

Unlike PMI, you’ll pay FHA mortgage insurance regardless of your down payment amount or how much equity you have in your home. However, the annual FHA mortgage insurance premium (MIP) will be slightly cheaper, thanks to the FHA’s recent decision to lower the premiums by 30 basis points. That means for every $100,000 you borrow, you’ll spend $300 less per year on the annual FHA mortgage insurance premium.

7. Consider paying points

You can negotiate a lower mortgage rate by offering to pay mortgage points. Each point is equal to 1% of your loan amount. If you’re getting a $400,000 mortgage, one point would cost you $4,000. Your mortgage rate could drop by as much as 0.25 percentage points for every mortgage point you buy.


Calculate your break-even point before deciding to pay points

Always calculate your break-even point if you’re thinking about paying points. Simply divide the total cost of the buydown by the monthly savings. For example, if you’re offered a rate that saves you an extra $100 each month and with $8,000 worth of discount points, your break-even point is 80 months (8,000 divided by 100 = 80). Unless you plan to stay in your current home for the 6.7 years or so it will take to break even, paying points wouldn’t make sense in this scenario.

8. Compare offers from multiple lenders

With all of the changes to conventional mortgages on the horizon, it’s more important than ever to compare current rate offers from multiple lenders. Mortgage companies may choose to absorb some of the adjustments to earn customers’ business, while others may pass them on to borrowers in the form of higher rates.

LendingTree research shows that mortgage borrowers who compared rates saved money. Gather loan estimates from three to five lenders and haggle for the best deal. Make sure all the quotes are from the same day — like stock prices, interest rates change daily.

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9. Lock in your mortgage rate

Once you’ve chosen the best lender, lock in your mortgage rate. Interest rates have been extremely volatile the past year, and a rate lock is a commitment from the lender to deliver the interest rate you’ve been quoted. The rate shouldn’t change unless your credit score, down payment — and now, your DTI ratio — change.

If you’re refinancing, a low appraisal could result in a higher rate. Track your lock expiration date to avoid costly lock extension fees.

10. Don’t rock the financial boat before closing

Your finances are vetted up until your closing day. Job changes, new credit accounts or new monthly debts are examples of homebuying mistakes that could not only result in a higher interest rate, but flip your loan approval to a denial.

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