How to get the best mortgage rate

A mortgage rate is the percentage of interest a lender charges you for taking out a home loan.

You may choose a fixed-rate mortgage, with a rate that stays the same for the duration of the loan, or an adjustable-rate mortgage, with a rate that fluctuates after several years.

Mortgage rates are governed by economic conditions, but the specific rate you're offered depends on your credit score, income and other financial factors. These tips will help ensure you get the best possible rate.

Lenders see your credit score as an indication of how likely you are to repay the loan in full and on time. A low credit score will get you a higher mortgage rate — or even turned down for a home loan. A 620 will get you approved for a conventional mortgage, but a 760 will ensure you get the best rate.

Spending six months to improve your score could save you thousands over the life of your mortgage. Here are some key strategies:

Make on-time payments: Payment history is worth 35% of your credit score. Paying your bills on time and in full is the fastest way to raise your number.  

Don't use too much available credit: Your credit utilization rate (CUR) is the amount of credit you're using compared to your total credit limit — and it accounts for 30% of your FICO credit score. Most experts recommend a utilization rate below 30%, but some suggest keeping it under 10%. You can improve your CUR is by asking your credit card for a limit increase. So long as you don't spend the additional credit, your rate will drop.

Don't close old accounts: The length of your credit history is 15% of your score. If you close your oldest credit card, the average age of your accounts could take a nosedive.

Check your credit report for errors: More than a quarter of Americans have found at least one error in their report, according to the FTC. Some mistakes are clerical errors, but others are signs of identity theft or fraud.

You can get free copies of your credit reports from all three major credit bureaus once a year by going to Annualcreditreport.com. For more help, credit monitoring services like IdentityForce® will review public records to make sure your identity isn't compromised.

A shorter loan term often means a lower mortgage rate — by as much as a full percentage point, according to the Consumer Financial Protection Bureau (CFPB). Instead of automatically going with a 30-year mortgage — the most popular option — see what you're offered on a 15-year or 10-year term mortgage (assuming you cn handle the higher monthly payments).

SoFi has a 10-year-term mortgage and Rocket Mortgage has terms as short as eight years.

The size of your down payment may affect your interest rate, according to the CFPB. Lenders view a borrower with a bigger stake in their investment as less of a risk.

Putting more money down means less principal to pay interest on and it will also allow you to drop private mortgage insurance faster.

You can boost your savings by opening a high-yield savings account or a CD, which have higher interest rates than traditional savings accounts.

Many lenders offer several ways to pay for a lower rate. Here are the most common methods.

Mortgage rates can fluctuate daily, so consider a lender that lets you lock in your mortgage rate while you shop or go through the underwriting process.

If rates drop during your lock period, most lenders will allow you to take the lower rate.

Many lenders will allow you to lock your rate in for 30 or 60 days for free, but charge for a longer lock or additional locks.

Adjustable-rate mortgages (ARM) start with a fixed rate for a certain period of years, after which the rate adjusts periodically based on the market.

During the fixed-rate period, rates are typically lower than on a conventional mortgage. If you anticipate rates to decline, an ARM could be a great option for getting the best rate.

However, rate predictions are not always reliable: You could end up paying more if rates increase when the variable period begins.

Because they're guaranteed by the federal government, FHA loans, USDA loans and VA loans tend to have lower mortgage rates.

There are specific requirements for each, however, so make sure you qualify.

Lenders calculate your creditworthiness differently, so it's worth getting prequalified by three or four providers to see who offers you the lowest rate.

A 2023 Freddie Mac study found that borrowers who went to two lenders could save up to $600 a year in interest. If they went to four lenders, the savings rose to $1,200 a year.

Each application will require a hard credit pull, but all the reports requested by mortgage companies in a 45-day window are treated as a single inquiry.

When you're getting quotes, make sure to consider online mortgage lenders. Because they don't have the same overhead as brick-and-mortar banks, they tend to have lower rates.

Also, see if your bank has a relationship discount: If you're a Citibank customer, for example, you could qualify for between 1/8% and 5/8% off your mortgage rate, depending on your account balance.

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.

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