Want to get the best mortgage rate? Three tips for smart people

Buying and owning a home is a huge financial commitment, especially in a market where interest rates are relatively high. High interest rates are certainly a challenge for homebuyers, but there are strategies that can help you get a better rate in a market like this.

1. Improve your credit score

If you’re planning to buy a home, having a good credit score will greatly improve your chances of getting a low-interest loan. The minimum FICO score required for conventional loans is 620, but if your score is higher, you’ll have a better chance of getting a better rate. To improve your credit score, you may want to consider paying off some debt, checking and correcting errors on your credit report, and avoiding applying for new credit cards before applying for a mortgage.

2. Prepare sufficient down payment

When buying a home, the down payment is usually the largest cash expense. To avoid additional fees (like PMI), a 20% down payment is usually recommended. This not only helps build equity in your home, but also allows you to get better terms on your loan interest rate. However, based on fourth quarter 2023 data, the median home price in the United States is $417,700, which means you’ll need to prepare a down payment of closer to $84,000.

3. Explore different loan options

Shopping around is a critical step in getting the best rate. Different lenders offer different rates and terms, and some lenders may require you to pay “mortgage points” to get a lower rate, while others may offer higher rates at no extra cost. Even if the current interest rate environment is not ideal, you may still be able to find a loan solution that works for you by carefully comparing.