How to Shop for the Best Mortgage Rates

When you buy a home, shopping for mortgage rates can be as important as looking at homes. Getting the right rate could save you tens of thousands of dollars over the life of your home loan.

You might be tempted to choose the first lender you talk to or apply with your current bank, but it’s beneficial to shop around with a few lenders. Before you start checking mortgage rates, here are some tips to help you compare mortgage rates (and lenders) with confidence.

Why is it important to shop for mortgage rates?

When you finance a home purchase with a mortgage, your interest rate has a significant impact on your loan’s long-term affordability. While a slightly lower interest rate might not move the needle much on your monthly payments, the interest savings can add up.

Since the end of the COVID-19 pandemic in 2023, mortgage rates have stayed stubbornly high around the 6% to 7% mark — a trend expected to continue into 2025. Homebuyers who shop around with several lenders can save up to $1,200 per year on the mortgage payments, according to research from Urban Institute.

“Another way to look at the cost savings is from a cumulative perspective,” Genaro Villa, an economist with Freddie Mac, says. “Borrowers who received as many as five rate quotes during the second half of 2022 could have potentially saved more than $6,000 over the life of the loan, assuming the loan remains active for at least five years.” 

Mortgage rate comparison

If you take out a $400,000 home loan with a 30-year term and a fixed interest rate at 6.5% versus 7%, here’s how the rate difference breaks down over time:

Interest costs over the first 5 years

Over the first 5 years, an interest rate of 7% costs $10,059 more than a 6.5% interest rate.

Interest costs over 30 years

Over 30 years, an interest rate of 7% costs $47,858 more than an interest rate of 6.5%.

How to start shopping for mortgage rates

Before you begin comparing rates, you’ll want to get your finances in order. 

Here are a few steps to help you start shopping for mortgage rates: 

1. Check your credit. 

Pull your credit report to check for errors and to see what your credit score is. If you have a past-due credit card bill or an account that’s gone to collections, reach out to your creditors to see how you can bring your account back into good standing. You can check your credit score for free at AnnualCreditReport.com. 

2. Gather financial documentation

Lenders will need copies of several documents to get a picture of your financial situation. Here are the most common documents lenders will request:

• 30 days of pay stubs
• Two years of W-2 forms and federal tax returns
• P&L statement and business tax returns (if self-employed)
• 60 days of bank statements
• Investment and retirement account statements
• Rental history
• List of assets and liabilities (alimony, child support, etc.)
• Gift letters from gift donors, if applicable
• Government-issue ID and Social Security number

3. Explore different loan types

The lender you choose depends on the type of home loan you need. For instance, not all lenders offer government-backed loans. Conventional loans, which include any mortgage that’s not backed by the federal government, are widely available at most banks, credit unions and mortgage lenders. 

If you’re purchasing a home that exceeds conforming loan limits or is in a high-cost area, you’ll want to work with a jumbo lender. Once you have an idea of what kind of mortgage you need, you can better narrow down your search. 

4. Get quotes from at least three different lenders.

It’s a good idea to rate-shop with three to five different lenders rather than going with the first quote you get. Talk to national banks, credit unions, regional banks and online mortgage lenders. You can also consider working with a mortgage broker who shops with various lenders on your behalf, which can save you time and money. 

Make sure you work with a mortgage professional who puts you at ease and listens to your needs.

“I always recommend borrowers find a loan officer who will explain the rates, comparisons and options,” says Christina McCollum, a loan officer with Churchill Mortgage in Kennewick, Washington. 

“If they don't offer the best rate but you like working with them, it's probably in your interest to see if they can at least move the rate down slightly and go with them. When you are making an investment of this size that has such an outsized impact on your life, there just isn't a substitute for having a loan officer you trust.”

5. Shop for rates within a short window.

When you shop around for a mortgage, submit your loan applications within a 45-day window. This counts as a single credit inquiry on your credit report instead of multiple credit pulls, according to the Consumer Financial Protection Bureau (CFPB). 

6. Compare all loan terms (not just the mortgage rate)

It’s natural to want the lowest mortgage rate possible, but that’s not the only consideration. You also need to look at the total cost of the loan and the terms, including the loan’s duration, type, annual percentage rate (APR), lender application fees, origination fees, mortgage points and closing costs. 

When you apply for a mortgage, each lender will provide you with a loan estimate that lists all of your loan terms and fees. Make sure you’re comparing similar loan types and term lengths for an accurate estimate from each lender.

“Shopping for the best rate is understandable, but be careful of the fees you may incur to get the rate you want,” McCollum says. “This happens frequently through discount points or origination fees, so while the rate may be more attractive, you may be paying more in the ‘big picture’ through other channels.”

Key factors that affect mortgage rates

While you can’t control the macroeconomic factors that move mortgage rates, there are other items you can control that play a notable role in your rate offers. These include:

• Credit score: Your credit score plays an outsized role in your mortgage rate because it assesses how well you manage debt. The best mortgage rates tend to go to borrowers with “excellent” credit scores (740 or higher). While most conventional lenders require a 620 minimum credit score to qualify, a lower score can dramatically impact your rate to account for the lender’s higher risk.
• Down payment: How much money you put down on a home also impacts your rate offers. Putting 20% or more down can get you the best rates and help you avoid paying for private mortgage insurance (PMI), but it isn’t required. In fact, first-time homebuyers made a median 9% down payment on a home in 2024, according to data from the National Association of REALTORS®.
  Debt-to-income ratio (DTI): This measures how much of your gross (before-tax) monthly income goes to debt payments, including your new mortgage. Most lenders prefer to see a total DTI under 36%, but some lenders allow a DTI as high as 50% if you qualify. However, the higher your DTI, the higher your rates are likely to be because you have less room in your budget.
• Loan term: Mortgage rates are lower for shorter-term loans (15 years vs. 30, for instance) because you’re paying the debt off sooner. However, your monthly payment is also higher. A longer loan term has a higher rate, but lower monthly payments. That’s why 30-year fixed mortgages tend to be more popular among borrowers. 
• Interest type: If you opt for a fixed-rate mortgage, you’ll have a predictable principal and interest payment for the life of the loan. However, an adjustable-rate mortgage (ARM) typically has a low initial fixed rate for a few years before the loan switches to a variable rate for the remainder of the loan term. While this makes an ARM attractive in the initial years of homeownership, if rates move up and the loan adjusts, your payments could become unpredictable.
• Loan type: Some home loans, like conventional loans, have lower rates than others but may be harder to qualify for. FHA loans tend to have lower interest rates at first glance, but the APR is typically higher because of FHA mortgage insurance and other fees. Jumbo loans also have higher interest rates than conventional loans because loan amounts exceed conforming loan limits. They’re also harder to qualify for.
• Property location: Your rates also depend on the city and state you’re buying a home in. Typically, the more expensive the location and home prices, the higher the rates are. For instance, borrowers in California or New York (where home prices exceed the national average) tend to pay higher interest rates than borrowers in Alabama or Arkansas where homes are considerably less expensive.

Tools and resources for comparing mortgage rates

Financial comparison sites like Credible let you shop around with multiple lenders in one spot, or you can visit lenders’ websites individually and input some basic info about your income, home price and credit score to get ballpark rate quotes in seconds. 

You can also use a mortgage calculator to crunch numbers and see how differences in the interest rate can affect your monthly payment. Check out the CFPB’s rate comparison tool to run different loan scenarios.

Ultimately, the best way to compare interest rates is to request mortgage pre-approval from several lenders. Submitting financial and income documentation, along with consenting to a credit check, provides you with the most accurate mortgage rate quotes and APRs.

Tips for negotiating the best mortgage rate

Mortgage rate offers rely heavily on your credit and financial profile, but you might be able to get a lower rate by shopping around with multiple lenders. 

Once you have loan estimates from a few lenders, take a lower rate quote from a competitor to other lenders if you like the customer service or loan officer. They might be willing to match or beat the rate quote to win your business. That’s why shopping around pays off.

Another strategy to get a lower rate is to consider paying mortgage points. One mortgage point (also called a “discount” point) equals 1% of the loan amount and can lower your rate about 0.25 percentage points. If you’re buying a $400,000 home at 7% for 30 years but want to lower your rate to 6.5%, you’d pay $8,000 for two points, netting you nearly $40,000 in savings (minus the cost of points) over the life of the loan.