Your mortgage rate is not random — it is calculated based on specific factors about you and your loan. Understanding them gives you the power to get a better rate.
Your credit score is one of the most influential factors in your mortgage rate. Lenders price loans in score tiers, and the top tiers get the lowest rates, while scores below 620 may struggle to qualify at all. Even a 40-point improvement in your score can save you 0.25% to 0.5% on your rate. On a $350,000 30-year loan at an example rate of 6.75%, a drop to 6.50% saves about $20,800 in total interest over the full term, and a drop to 6.25% saves about $41,400.
A larger down payment reduces the lender risk, which typically results in a lower rate. Putting down 20% or more also eliminates PMI, saving an additional 0.4% to 0.8% of your loan amount annually for many borrowers (more with lower credit scores or smaller down payments). If you are between 10% and 20% down, consider whether a brief delay to save more could meaningfully reduce your long-term costs.
Conventional, FHA, VA, and USDA loans all carry different rate structures. VA loans often have the lowest rates but are only available to veterans and service members. FHA loans are accessible with lower credit scores but require mortgage insurance. Conventional loans offer the most flexibility for borrowers with strong credit.
15-year mortgages come with lower interest rates than 30-year mortgages — typically 0.5% to 0.75% lower. The tradeoff is higher monthly payments. If you can comfortably afford the higher payment, the interest savings over the life of a 15-year loan are substantial.
Loans that exceed the conforming loan limit, which the FHFA sets annually, are called jumbo loans and typically carry higher rates because they cannot be sold to Fannie Mae or Freddie Mac. If you are near the threshold, a slightly larger down payment to stay under the limit can help.
Primary residences receive the lowest rates. Investment properties and second homes are considered higher risk and carry rates that are typically 0.5% to 1% higher. Condos may also have slightly higher rates than single-family homes due to lender risk assessment policies.
Mortgage rates broadly follow the 10-year Treasury yield and are influenced by Federal Reserve policy, inflation, and the overall economy. When the Fed raises the federal funds rate to combat inflation, mortgage rates tend to rise as well. These factors are beyond your control, but timing your application during periods of relative stability can help.
One of the biggest factors within your control is simply shopping around. Studies show that getting quotes from at least 3 to 5 lenders can save borrowers $1,500 or more over the life of the loan. Multiple mortgage credit inquiries within a 45-day window are treated as a single inquiry, so your credit score will not be penalized for comparison shopping.
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Why do mortgage rates change daily? What can you actually control? This guide explains what drives rates and gives you a practical playbook for securing the lowest rate possible.
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