3 Secrets to Get the Best Mortgage Rate in 2025
Mortgage rates are sitting around 7% right now, making homes expensive for most people. The Federal Reserve might cut rates this year, but you can’t wait around for that to happen. After the home’s price, your interest rate affects your monthly payment more than anything else. A high rate means more of your money goes to interest instead of building equity in your home. The good news is that you don’t have to take the first rate a lender offers you. You can get a better rate and save thousands of dollars. Here are three ways to do it.
Secret #1: Know What Lenders Look For
Lenders consider specific factors when determining your rate. The better you look on paper, the better rate you’ll get. Hence, your Credit Score matters most, so aim for 740 or higher to get the best rates. Even a 20-point difference can change your monthly payment. Especially when you increase your Down Payment to 20%, if possible, as less than that means you’ll pay private mortgage insurance, which adds to your monthly cost. Also, the Lenders want to see a consistent job history that shows you’ve had the same job for at least two years. If you’re self-employed, have two years of tax returns ready, and lastly, keep your total monthly debt payments under 43% of your monthly income before taxes.
Secret #2: Shop Around
Don’t go with the first lender you talk to. Rates can differ by as much as half a percent between lenders. Hence, obtain multiple quotes from at least three to four lenders, including banks, credit unions, and online lenders. They all have different strengths. Additionally, get all your quotes within 14-45 days, since multiple mortgage checks in this period only count as one hit to your credit score. However, don’t just look at the interest rate but compare the total cost, including fees and closing costs. Sometimes, a higher rate with lower fees can save you money. Lastly, once you find a reasonable rate, lock it in while you finish your application.
Secret #3: Pay More Upfront When It Makes Sense
Sometimes, paying more at closing gets you a better rate for the whole loan. Hence, some buyers opt for buy points, as each point costs 1% of your loan amount and typically lowers your rate by 0.25%. However, do the math to see if you’ll break even before you move or refinance. Additionally, a bigger down payment than 20% can get rid of mortgage insurance and often gets you a better rate. Lastly, pay Closing Costs in Cash. Avoid rolling closing costs into your loan if possible to keep your loan amount lower.
The Bottom Line
Getting the best rate takes work, but it’s worth it. A rate that’s just 0.5% lower on a $400,000 loan saves you about $100 per month and $36,000 over 30 years. So start working on your credit score early, save for a reasonable down payment, and give yourself time to shop around. Your wallet will thank you.