Written by Denny Ceizyk | Edited by Kurt Adams | Updated May 31, 2023
Current average rates are calculated using all conditional loan offers presented to consumers nationwide by LendingTree’s network partners on the previous day for each combination of loan program, loan term and loan amount. Rates and other loan terms are subject to lender approval and not guaranteed. Not all consumers may qualify. See LendingTree’s Terms of Use for more details.
Getting a conventional cash-out refinance may be more expensive in 2023. The Federal Housing Finance Agency (FHFA) announced additional pricing adjustments for factors ranging from credit scores to the type of property you’re buying. The changes don’t go into effect until May 1, but many lenders have begun implementing them. Look for the sign below for more information about the changes and how they might affect the mortgage rate you’re quoted. There are seven steps you can take to get your lowest rate:
The previous “best” conventional loan credit score benchmark of 740 has been replaced by this new higher standard under the upcoming pricing changes. Keep your credit balances low and pay everything on time. Take on a side hustle to pay off debt faster. You’ll snag the best rate if you have a 780 credit score and a 25% down payment for a conventional loan. However, there is some good news for lower-credit-score borrowers: If your loan-to-value (LTV) ratio — which is a measure of how much of your home’s price you borrow — is 70% to 80% and your credit scores are between 620 and 700, you may get a better rate when the new changes kick in. Cash-out refinance rates will be much more expensive, so only borrow what you need to avoid a big mark up to your interest rate. Lenders measure your debt-to-income (DTI) ratio by dividing your total monthly debt, including your mortgage payment by your before-tax income, and generally prefer a DTI ratio of 43% of less. Some bad news: The Fannie Mae and Freddie Mac changes may assess an extra charge if your DTI ratio exceeds 40%. The silver lining: The change has been delayed until August 1, so you have some time to clear out those small credit card balances or reduce your debt if you don’t plan to buy until then.
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You should choose a mortgage lender that best suits your financial needs, which is why it’s crucial to shop around. Make sure the lenders you’re choosing from offer the mortgage program you’re interested in, and ask questions to better understand what to expect from your potential relationship with each lender.
As mentioned above, compare interest rates and closing costs before making a decision.
The main reason to compare mortgage rates is to save money. A recent LendingTree study found that homebuyers in the nation’s largest metro areas saved an average of $63,151 over the lifetime of their loans by comparing offers from different lenders.
Lenders periodically offer special pricing for specific loan programs, but you might not learn about those programs if you only contact one or two mortgage lenders.
It’s possible to negotiate a lower interest rate. Use your mortgage offers as leverage and ask each lender about matching your lowest-quoted rate. You should also consider making a larger down payment and paying for mortgage points.
There are nine primary factors that determine your mortgage rate:
If you’re thinking of buying or refinancing a rental home there’s good news: The upcoming rate changes reduce the adjustments for investment property mortgage rates, which could save you money and help increase your rental income cashflow. That said, conventional loan pricing for multifamily homes will be cheaper, which could leave more rental income in your pocket each month.
A mortgage is a loan from a bank or another lending institution that helps you refinance or buy a home. The lender provides funds on your behalf secured by a lien on your home, and you agree to repay the loan plus interest. If you stop making monthly payments, your lender can repossess your home through the foreclosure process and sell it to recover their money.
You’ll need to apply for mortgage preapproval to get an estimated loan amount you could qualify for. Lenders use the preapproval process to review your overall financial picture — including your assets, credit history, debt and income — to calculate how much they’d be willing to lend you for a mortgage.
You can use the loan amount printed on your preapproval letter as a guide for your house hunting journey. But, be careful not to stretch your budget too thin and borrow to the maximum. That’s because your preapproval amount doesn’t factor in recurring bills that aren’t regularly reported to the credit bureaus — including gas, cellphones and other utilities — so you’ll need to retain enough disposable income to comfortably cover these monthly bills, plus your new mortgage payment.
A discount point — also called a mortgage point — is an upfront fee paid at closing to reduce your mortgage rate. One point is equal to 1% of your loan amount. So if you’re borrowing $300,000 for example, one point would cost you $3,000.
Each mortgage point can usually lower your rate by 12.5 to 25 basis points, which equals 0.125% to 0.25%. However, to get the exact cost of your mortgage point buydown, check Page 2, Section A of your loan estimate.
Senior Writer, Mortgages
Denny Ceizyk has been a senior writer covering LendingTree’s mortgage content since 2019; he has covered the mortgage industry since 2007. Besides writing home loan articles for LendingTree, Denny contributes expert commentary for national publications including MarketWatch, the New York Post, AARP, Realtor.com and Money magazine.
Before joining LendingTree, Denny spent 25 years in the mortgage industry advocating for and educating homeowners to help them make the best mortgage decisions. He has worked in the institutional mortgage banking world, having owned and operated a mortgage brokerage company for 18 years.
Denny earned a bachelor’s degree in media arts from the University of Arizona and has advocated for financial literacy initiatives at both the state and local government level over the past 30 years.