10 Tips for Getting the Best Mortgage Rate

The U.S. mortgage market has been quite the volatile corner of the financial markets.

After venturing downward heading into the September Federal Reserve policy meeting, which resulted in a jumbo interest rate cut, yields on Treasury securities started rising. This, of course, created a situation of climbing mortgage rates.

According to Freddie Mac’s Primary Mortgage Market Survey (PMMS), the average 30-year fixed-rate mortgage is hovering around seven percent. Other alternative measurements, whether the Mortgage Bankers Association (MBA) or Mortgage Market News, show similar figures. The unexpected increase in mortgage rates has had little effect on demand. Both mortgage applications and sales for existing homes and new residential properties have been mixed.

That said, elevated mortgage rates, coupled with rising home prices, have had adverse effects on prospective homebuyers. A new survey by NerdWallet showed that just 28 percent of households that planned to buy a home last year did so. Sky-high home prices and interest rates were the chief reasons for the lack of homebuying.

What can families do since home prices are projected to climb four percent in 2025 and mortgage rates are anticipated to range between six and seven percent over the next 12 months? This is the $420,000 question – the median price for homes sold at the end of 2024 – but there are options, particularly when trying to find the best home mortgage rate.

Here are Ten Tips for Getting the Best Mortgage Interest Rate

1. Lower Debt-to-Income Ratio
   Of course, eliminating your consumer debt, from credit cards to auto loans, would be the best thing you can do. However, when this is not a feasible solution, you can try to lower your debt-to-income ratio to bolster your financial appearance to mortgage lenders. Industry experts present various numbers, but below 36 percent should be the target.

2. Save for a Larger Down Payment
   How much do you have for a down payment? Indeed, saving for a home in today’s economic climate can be difficult. Additionally, increasing home prices have juiced the down payment percentage. That said, the rule of thumb should be approximately 15 to 20 percent of the total sales price. For instance, if the home you are interested in purchasing costs $400,000, you should aim for $60,000 to $80,000.

3. Review Credit Report
   Experts recommend checking your credit report and score every other year. If you have not reviewed it in a long time and are actively pursuing a home purchase, you will need to look at it immediately. This is also true of anyone else you are buying a home with. Oftentimes, there can be mistakes that you can rectify or pay a debt that you may have forgotten. As a result, you will see what your potential mortgage lender will see.

4. Shop Around for the Best Mortgage Rate
   Prospective homebuyers will exhaust every avenue when determining how to get the mortgage rate. However, the most straightforward tactic will be just to shop around. Indeed, understanding the question of “How do I find the best mortgage rate?” can be done by assessing the mortgage market landscape, viewing comparison websites, and calling the big banks to see if they can rate match a competitor.

5. Avoid Big Ticket Purchases
   Have you been eyeing that truck your colleague purchased? Interested in taking your family on a Disney vacation? What about that boat you think is a steal? Before buying a home and trying to receive the best home mortgage rate, you need to wait it out. In other words, it is imperative to avoid executing any big-ticket purchases.

6. Inquire About Rate Reductions
   Will mortgage lenders offer reductions? It all depends. Industry experts say that homebuyers should inquire about possible rate reductions since banks or private lenders might make concessions on specific circumstances, such as if you make a large one-time payment toward your principal.

7. Don’t Make Major Financial Changes
   If there were one thing that every real estate professional and banking expert would say not to do, it would be making dramatic changes to your life that impact your finances. This could include shifting jobs, filing for divorce, starting a business, or modifying your financial profile.

8. Consider 15-Year FRM
   The 30-year fixed-rate mortgage is what a majority of homeowners have. But what about the 15-year fixed-rate mortgage? The 15-year FRM is about 80 basis points between the 30-year alternative. A 15-year mortgage has other benefits, including less interest paid over time, home ownership achieved in half the time, and improved financial discipline since you have higher monthly payments. In addition, your family will have built equity in the home at a faster pace.

9. Research Government-Backed Mortgages
   The U.S. government has facilitated an environment of homeownership. While Washington has introduced recent schemes to address the housing affordability crisis facing typical Americans, the United States has various programs from the Federal Housing Agency, Veterans Affairs, and even the U.S. Department of Agriculture. They provide loans with competitive interest rates.

10. Monitor the Mortgage Market
    Can you time the market? It is a challenging skill to obtain. However, by monitoring the mortgage market and listening to various opinions from a diverse array of experts, you can obtain a sense of where the market is heading. For instance, the Federal Reserve has signaled fewer rate cuts this year, meaning that the benchmark ten-year yield, which mortgage rates tack, could stay above four percent for the rest of the year.

Final Thoughts About Getting the Best Mortgage Rate

How do I find the best mortgage rate? Families beginning the road to homeownership will always ask this question. It requires due diligence, monitoring, and basic financial knowledge. While you will unlikely find pandemic-era mortgage rates, you can employ different methods to locate competitive mortgage rates. Remember, it is a tough housing market out there, so you will need to be equipped with the benefit of being able to snap up suitable offers, whether the best mortgage rate or an affordable house within your budget.