The average 30-year mortgage interest rate recently hit nearly 8% according to the St. Louis Federal Reserve Bank, after hovering around 3% just in 2021. Mortgage News Daily, which records rate changes every day, echoes this data and reported an average rate of 8.03% on Oct. 19, 2023. In other words, borrowing money for a home purchase continues to become even more expensive.
While interest charges are an inevitable part of any form of credit or loan — including credit cards, personal loans and car loans — there are still a few steps you can take to make sure you're getting the lowest rate available and saving as much money as possible.
How to get the best mortgage interest rate
- Improve your credit score
- Shop around for the best rate in your area
- Consider a shorter loan term
- Bottom line
Improve your credit score
When applying for any new line of credit with alower credit score, you're likely going to receive a higher interest rate, which will make it more costly for you to borrow money. The same idea also rings true when it comes to applying for mortgages.
Remember that your credit score can provide lenders with clues as to how likely you are to repay borrowed money on time and in full — that's why lenders see individuals with lower credit scores as being riskier borrowers and offer interest rates that are toward the higher end of the lender's range.
Conversely, when you apply for a home loan with a higher credit score, you'll be seen as a less risky borrower who is likely to repay the loan amount on time and in full. Lenders will then feel more comfortable offering alower interest rate and it'll be cheaper for you to borrow the money.
Paying your bills on time is themost important thing you can do to help raise your credit score. You should also try to keep your debt balance low and check your credit report regularly so you can dispute any potential inaccuracies that might be bringing your score down — credit monitoring services like Experian and IdentityForce® can help with this.
Experian Dark Web Scan + Credit Monitoring
On Experian's secure site
Cost
Free
Credit bureaus monitored
Experian
Credit scoring model used
FICO®
Dark web scan
Yes, one-time only
Identity insurance
No
Terms apply.
IdentityForce®
On IdentityForce®'s secure site.
Cost
UltraSecure Individual: $19.90 per month or $199.90 per year; UltraSecure+Credit Individual: $34.90 per month or $349.90 per year; UltraSecure Family: $24.90 per month or $249.90 per year; UltraSecure+Credit Family: $39.90 per month or $399.90 per year
Credit bureaus monitored
3-bureau credit monitoring, alerts and reports: Experian, Equifax and TransUnion®, with UltraSecure+Credit Individual and UltraSecure+Credit Family plans only
Credit scoring model used
VantageScore®3.0, with UltraSecure+Credit Individual and UltraSecure+Credit Family plans only
Dark web scan
Yes, with all plans
Identity theft insurance
Yes, at least $1 million with all plans
Terms apply.
Shop around for the best rate in your area
Mortgage interest rates can fluctuate depending on the market and national rates can provide a good ballpark estimate as to where your rate might lie. Keep in mind that the rate you're likely to receive will depend more heavily on factors such as your specific location,credit scoreandcredit report. While you can take a look at each lender's website to get an idea of what interest rates they charge, the best way to get a solid idea of whatyou'll have to pay is to provide the necessary information and check your rate.
That said, it's important to submit your information and check your rate with more than one lender so you can have a better chance at securing the lowest rate possible. Don't worry about your credit score getting dinged multiple times — when you apply for a mortgage, you can submit your information for a hard inquiry as often as you need to within a 45-day window without your credit score suffering for it.
While you may not always get a drastically low rate between lenders, even a small distinction can make a big difference in how much you end up owing in interest each month.
Consider a shorter loan term
15-year terms and 30-year terms are common for mortgage loans, meaning you'd have 15 years and 30 years, respectively, to repay the money you borrowed to buy your house. A 30-year loan typically gives you a longer time horizon to make payments, along with smaller monthly payments. Note that shorter loan terms typically carry slightly lower interest rates since you are agreeing to repay the loan over a shorter period of time.
Rocket Mortgage offers home loans with terms as short as eight years and as long as 29 years —this lender also offers Federal Housing Administration, or FHA loans, with down payments as low as 3.5%.
Rocket Mortgage Refinance
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Conventional loans, FHA loans, VA Interest Rate Reduction Refinance Loan (IRRRL) and jumbo loans
Fixed-rate Terms
8 – 29 years
Adjustable-rate Terms
Not disclosed
Credit needed
580 if opting for FHA loan refinance or VA IRRRL; 620 for a conventional loan refinance
Already have a mortgage through Rocket Mortgage or looking to start one? Check out the Rocket Visa Signature Card to learn how you can earn rewards
Other lenders, such as SoFi and PNC Bank, offer terms between 10 years and 30 years. SoFi also offers a number of lending benefits — a $500 discount for SoFi members and up to $9,500 in cash back when you purchase a home through the SoFi Real Estate Center — that could potentially offset at least some of the interest you would pay even if you decide to go with a longer loan term.
SoFi Mortgage Refinance
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Conventional loans and jumbo loans
Fixed-rate Terms
10 – 30 years
Adjustable-rate Terms
Not disclosed
Credit needed
620
Terms apply.
Picking your term is an extremely important decision since there are advantages and disadvantages to going with a shorter term over a longer term. If you end up going with a shorter term, make sure the larger monthly payments that would inevitably come with it can fit into your budget.
Compare offers to find the best loan
Bottom line
As mortgage rates continue to rise, borrowers can potentially save thousands by applying with a higher credit score and shopping around for the best rate before signing on the dotted line. Keep in mind that you can always refinance later for a potentially even lower rate when interest rates finally come back down.
Subscribe to the CNBC Select Newsletter!
Money matters —so make the most of it. Get expert tips, strategies, news and everything else you need to maximize your money, right to your inbox.Sign up here.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every mortgage guide is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of mortgage products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
Catch up on CNBC Select's in-depth coverage ofcredit cards,bankingandmoney, and follow us onTikTok,Facebook,InstagramandTwitterto stay up to date.
Read more
5 of the best mortgage lenders to consider if you're buying a home in 2022
If you have a bad credit score and still want to buy a house, consider these lenders
What is a mortgage and how does it work?
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.