Your trusted source for current mortgage rates and expert guidance
Your trusted source for current mortgage rates and expert guidance
New to mortgages? This complete beginner's guide explains everything about mortgage rates in simple terms. Learn how rates work, what affects them, different mortgage types, and practical strategies to secure the best rate for your home purchase or refinance.
Understanding the basics of home loan interest
A mortgage rate is the interest rate lenders charge for borrowing money to purchase a home. Expressed as a percentage, it represents the annual cost of your loan and directly impacts your monthly payment and total interest paid over the life of your mortgage.
Example: On a $400,000 loan with a 6.5% mortgage rate, you'll pay approximately $2,528 monthly for principal and interest. Over 30 years, that's $510,080 in interest alone—more than the original loan amount!
This is why understanding mortgage rates and securing the best possible rate matters so much. Even a 0.5% difference can mean tens of thousands in savings.
Mortgage rates aren't set arbitrarily—they're influenced by multiple factors:
What determines the rate you'll be offered
The single biggest factor you control. Scores above 760 get the best rates, while each 20-point drop can cost you 0.25% in rate.
Larger down payments reduce lender risk and can secure better mortgage rates. 20% down also eliminates PMI.
Different mortgage products carry different rates based on terms and risk for the lender.
Jumbo loans (above conforming limits) typically have higher rates due to increased lender risk.
Primary residences get the best rates. Investment properties and second homes carry higher rates.
Full documentation loans get standard rates. Reduced documentation loans cost more.
Fixed, adjustable, and hybrid options
The interest rate remains constant for the entire loan term. Your monthly principal and interest payment never changes, providing predictability and stability.
Most popular option. Higher rates but lowest monthly payment. Best for long-term homeownership.
Middle ground. Moderate payment increase with significant interest savings over 30-year.
Lowest rates, highest payment. Build equity fast and save massive interest. Best if budget allows.
Rates start lower than fixed but can change after an initial period. Rate adjustments are based on an index plus a margin.
Fixed for 5 years, then adjusts annually. Popular for those planning to move in 5-7 years.
Fixed for 7 years before adjusting. Lower initial rate than 30-year fixed.
Fixed for 10 years. Good for those confident they'll refinance or sell before adjustment.
Understanding rate quotes and APR
| Product | Interest Rate | APR | Points | Payment |
|---|---|---|---|---|
| 30-Year Fixed | 6.500% | 6.625% | 0.5 | $2,528 |
The complete process from shopping to locking
Review your credit reports from all three bureaus. Dispute errors and pay down high balances. Even 20-30 point improvements can significantly lower your mortgage rate. Give yourself 3-6 months for optimal improvement.
Apply to at least 3-5 lenders within a 14-day window (counts as one credit inquiry). Compare banks, credit unions, and online lenders. Each lender may offer different rates and terms.
Review the Loan Estimate from each lender. Focus on APR, not just rate. Check closing costs, points, and monthly payments. Ask about rate lock options and float-down provisions.
Select the best overall offer, not just lowest rate. Lock your rate immediately once you decide—rates can change daily. Most locks are free for 30-60 days. Consider a longer lock if closing will take time.
Complete underwriting, provide requested documentation, and close on time. Your locked rate is guaranteed through the lock expiration. If rates drop significantly before closing, ask about a float-down option.
Glossary of essential terms
Now that you understand mortgage rates, put that knowledge to work. Compare current rates from top lenders and find the best deal for your situation.