If you’re looking to buy a home, you’re probably thinking about how you can get the lowest mortgage rate possible.
While you can’t influence the broader market forces that have kept mortgage rates high in recent years, there are some things in your control.
The mortgage rates you see online are just averages. Lenders determine your personal rate is based on your credit score, how much debt you have and the size of your down payment. If you can prioritize paying down debt and putting more money toward savings before applying, you’re more likely to get a better rate. Second, make sure you’re comparing loan offers from various mortgage lenders. Experts agree it is one of the best ways to negotiate for lower rates and fees.
We’ll walk you through what you need to know about mortgages, the outlook for interest rates in 2025 and tips on how to save on your home loan.
Recent mortgage rate trends
Mortgage rates have been on a wild ride. In response to peak inflation in early 2022, the Federal Reserve raised borrowing rates, indirectly driving up mortgage rates. After having peaked at 8% in October 2023, mortgage rates dropped to 6% near the end of last year. The Fed made three benchmark interest rate cuts in 2024, but homebuyers didn't get much relief.
That’s because the central bank doesn’t directly set mortgage rates. Instead, monetary policy decisions influence bond yields, the key driver for rates. Currently, uncertainty surrounding President Donald Trump’s economic plans -- especially tariffs and government spending -- is making the Fed hesitant about further rate cuts.
Initial forecasts suggested we might see average 30-year mortgage rates drift to 5.5% over the course of 2025. However, those predictions have been complicated by the economic policies of the Trump administration and their potential to reignite inflation. Now, most experts anticipate mortgage rates will stay above 6.5% for a good part of the year.
While rates look set to stay higher for now, nothing is set in stone. The ultimate direction will depend on how strong or weak the economy proves to be and how investors interpret that data. Stronger economic news could push mortgage rates up, while weaker data, like rising unemployment or cooling inflation, could contribute to them falling.
Current mortgage rates
| Product | Interest rate |
|---|---|
| 30-year fixed-rate | 6.83% |
| 30-year fixed-rate FHA | 6.82% |
| 30-year fixed-rate VA | 6.86% |
| 30-year fixed-rate jumbo | 6.89% |
| 20-year fixed-rate | 6.52% |
| 15-year fixed-rate | 6.04% |
| 15-year fixed-rate jumbo | 6.27% |
| 5/1 ARM | 6.08% |
| 5/1 ARM jumbo | 5.96% |
| 7/1 ARM | 6.28% |
| 7/1 ARM jumbo | 6.16% |
| 10/1 ARM | 6.68% |
| 10-year fixed-rate | 6.00% |
| 30-year fixed-rate refinance | 6.82% |
| 30-year fixed-rate FHA refinance | 7.03% |
| 30-year fixed-rate VA refinance | 7.59% |
| 30-year fixed-rate jumbo refinance | 6.87% |
| 20-year fixed-rate refinance | 6.58% |
| 15-year fixed-rate refinance | 6.11% |
| 15-year fixed-rate jumbo refinance | 6.40% |
| 5/1 ARM refinance | 6.33% |
| 5/1 ARM jumbo refinance | 6.20% |
| 7/1 ARM refinance | 6.40% |
| 7/1 ARM jumbo refinance | 6.41% |
| 10/1 ARM refinance | 6.80% |
How to get the best mortgage rate
You can't control the broader macroeconomic factors driving mortgage rates, but there are some ways to get a lower personal rate. Even a difference of a few tenths of a percentage point can shave off thousands of dollars from what you'll pay for your home loan.
- Build your credit score: A higher credit score can help you qualify for a lower interest rate. Aim to pay bills on time, and keep your credit card balances below 30% of your credit limit. Check your credit report regularly for errors.
- Save for a bigger down payment: A larger down payment lowers the loan amount you need to borrow, making you less risky to the lender, which could help you become eligible for a lower interest rate.
- Consider a shorter-term loan: Shorter home loan terms (like a 10- or 15-year mortgage) typically come with lower interest rates than longer-term loans (like 30-year mortgages). However, the monthly payments will be higher.
- Shop around for mortgage lenders: Compare rates, terms and loan estimates from at least three different mortgage lenders. If one lender offers you a lower interest rate and another offers a better deal on closing costs, you can use that to negotiate.
What to know about mortgages
Your mortgage rate is the percentage of interest a lender charges for providing the loan you need to buy a home. Multiple factors determine the rate you’re offered. Some are specific to you and your financial situation, and others are influenced by macro market conditions, such as inflation, the Fed’s monetary policy and the overall demand for loans.
The broader economy plays a key role in mortgage rates, some key factors under your control affect your rate:
- Your credit score: Lenders offer the lowest available rates to borrowers with excellent credit scores of 740 and above. Because lower credit scores are deemed riskier, lenders charge higher interest rates to compensate.
- The size of your loan: The size of your loan can impact the interest rate you qualify for.
- The loan term: The most common mortgage is a 30-year fixed-rate loan, which spreads your payments over three decades. Shorter loans, such as 15-year mortgages, typically have lower rates but larger monthly payments.
- The loan type: The type of mortgage you choose impacts your interest rate. Some loans have a fixed rate for the entire life of the loan. Others have an adjustable rate that have lower rates at the start of the loan but could result in higher payments down the road.
The annual percentage rate, or APR, is usually higher than your loan’s interest rate and represents the true cost of your loan. It includes the interest rate and other costs such as lender fees or prepaid points. So, while you might be tempted with an offer for “interest rates as low as 6.5%,” look at the APR instead to see how much you’re really paying.
Most mortgage loans are based on an amortization schedule: You’ll pay the same amount each month for the life of the loan, but the generated interest will be highest at the beginning and will taper as the principal (the amount you borrowed) decreases. Your amortization schedule will show how much of your monthly payment goes to interest and how much pays down the principal. Most borrowers find a fixed, predictable monthly payment more convenient.
Pros and cons of getting a mortgage
Pros
- You'll build equity in the property instead of paying rent with no ownership stake.
- You'll build your credit by making on-time payments.
- You'll be able to deduct the interest on the mortgage on your annual tax bill.
Cons
- You'll take on a sizable chunk of debt.
- You'll pay more than the list price due to interest charges; potentially a lot more over the course of a 30-year loan.
- You'll have to budget for closing costs to close the mortgage, which add up to tens of thousands of dollars in some states.
Shopping for mortgage rates
Mortgage lenders often publish their rates for different mortgage types, which can help you research and narrow down where you'll apply for preapproval. An advertised rate isn't always the rate you'll get. When shopping for a new mortgage, it's important to compare not just mortgage rates but also closing costs and any other fees associated with the loan. Experts recommend shopping around and reaching out to multiple lenders for quotes and not rushing the process.
How to refinance your mortgage
When you refinance your mortgage, you swap out your current home loan for a new one, ideally with better terms.
Determine whether you want to do a cash-out refinance or a rate-and-term refinance. With a cash-out refinance, you take out a new mortgage that's bigger than your existing one and pocket the difference as cash. With a basic rate-and-term refinance, you take out a loan the same size as your existing mortgage, just with a new interest rate and/or loan term.
The refinancing process will feel the same as securing your existing mortgage. You'll need to choose a lender, apply for the loan, wait for the underwriting process to conclude, have your home appraised and close on your new loan. Just like with your original mortgage, you'll need to pay another set of closing costs when you refinance.
FAQs
Most conventional loans require a credit score of 620 or higher, but Federal Housing Administration and other loan types may accommodate borrowers with scores as low as 500, depending on the lender.
Your credit score isn’t the only factor that impacts your mortgage rate. Lenders will also look at your debt-to-income ratio to assess your level of risk based on the other debts you’re paying back such as student loans, car payments and credit cards. Additionally, your loan-to-value ratio plays a key role in your mortgage rate.
A rate lock means your interest rate won’t change between the offer and the time you close on the house. For example, if you lock in a rate at 6.5% today and your lender’s rates climb to 7.25% over the next 30 days, you’ll get the lower rate. A common rate-lock period is 45 days, so you’re still on a tight timeline. Be sure to ask lenders about rate lock windows and the cost to secure your rate.
