7 Easy Steps to Finding the Best Mortgage Rate

Buying a home is one of the biggest investments you’ll ever make, and finding the right mortgage rate can make all the difference. But, how do you know you’re getting the best deal? How can you navigate the complicated world of mortgage rates and find one that works for you?

In this blog, we will guide you through seven easy steps that will help you find the best mortgage rate. We will cover everything from getting a fixed-rate mortgage or an ARM to deciding if you should pay points or the size of the down payment. We have also included some tools to help calculate mortgage APR and forecast interest rates. So, whether you’re a first-time homebuyer or a seasoned investor, this blog will help you make educated decisions to find the best mortgage rate possible.

1. Get a fixed-rate mortgage or ARM?

When it comes to choosing a mortgage, you have two main options – a fixed rate or an ARM. With a fixed-rate mortgage, you’ll be locked into a consistent interest rate for the entire term of the loan. An ARM, on the other hand, offers lower introductory rates, but those interest rates can rise after the introductory period, resulting in higher monthly payments. ARMs may be a good option if you plan to own your home for a short time, or if conventional mortgage rates are high. Subprime mortgages are also an option, but they’re designed for people with lower credit ratings and high risk and often carry higher interest rates, including adjustable rates.

If you prefer consistency and predictability, a fixed-rate mortgage is a better option. But if your financial situation allows for more risk-taking, an ARM might be worth considering. Ultimately, the best mortgage rate for you will depend on your personal situation and long-term financial goals.

2. Should I pay points?

When searching for the best mortgage rate, you may also want to consider paying points to lower your interest rate. Points are fees paid upfront when taking out a mortgage, which can help to lower the interest rate. These points can be worth it for those who plan on staying in their home for a long time, as these individuals will often save more money than they would have spent on the points in the first place.

However, if you plan on moving in a few years, then buying points may not be worth it as it would take several years to break even. The reduction in your interest rate varies by lender and loan type, but generally, buying one point can lower your mortgage rate by a one-quarter percentage point for every 1% of the loan’s total value paid upfront. Make sure to consider this option when searching for the best mortgage rate for your needs.

3. What are the closing costs?

As a homeowner, closing costs are an important aspect to consider when looking for the best mortgage rates. These fees, typically approximately 3% of the home purchase price, are paid at the time of closing. Mortgage lenders should provide a loan estimate, including an itemized list of estimated closing costs, within three days of application submission.

Closing costs typically range from 2% to 5% of the sale price, so it’s essential to shop around for the best deals. Closed mortgages usually have lower rates than open mortgages, but they come with prepayment penalties, so it’s crucial to research before making a decision. You may also be able to negotiate lower costs on certain services outlined in your loan estimate form. Keep in mind, however, that while lower closing costs may be tempting, they can also mean higher interest rates.

4. Any first-time home buyer programs?

First-time homebuyers often struggle with finding the best mortgage rate. Fortunately, there are several programs available to help them achieve their dream of homeownership. Many states offer special programs like down payment assistance, low-interest mortgage loans, and grants to help with closing costs. These programs are designed to attract new residents and make homeownership more affordable.

When shopping for a mortgage, it’s crucial to compare offers from multiple lenders, understand the details of the loan, and ask why rates are higher than expected. Finding first-time homebuyer programs in your state can be a significant factor in moving the affordability needle. With these steps, you can find the best mortgage rate and make your dream of owning a home a reality.

5. Down payment size?

When finding the best mortgage rate, one of the main factors to consider is the down payment size. A larger down payment means a lower loan-to-value ratio, which can result in a lower interest rate. In addition, different loan types may have different requirements for down payment sizes. Other factors to consider are discount points, closed mortgages with prepayment penalties, loan amount, and the borrower’s financial profile.

Lenders often look for a front-end ratio no higher than 28% and a back-end ratio of 36% or lower. Having a strong financial profile can increase the chances of approval and help secure a lower interest rate. Every individual’s financial situation is different, so it is important to shop around and compare rates from different lenders to find the best mortgage rate.

6. How do I compare?

To find the best mortgage rate, you need to compare quotes from different lenders. Mortgage rates vary depending on several factors, such as your credit profile, down payment, debt burden, and income. Lenders also consider the broader economic conditions outside of your control when determining your mortgage rate. It is vital to compare Loan Estimates from at least three lenders to find the best rate and lowest monthly payment.

Borrowers with good credit scores, low debt-to-income ratios, and a significant down payment are more likely to receive lower mortgage rates than those who do not have these factors working in their favor. Therefore, it is essential to assess all personal factors as well as mortgage quotes to decide on the optimum solution for your household.

Mortgage APR Calculator

When it comes to comparing mortgage rates, it’s important to not only look at the interest rates but also at the APR (Annual Percentage Rate). One easy way to compare mortgage rates and APRs is by using a mortgage APR calculator. This tool can help you determine the true cost of a mortgage by taking into account the interest rate, lender fees, and other costs associated with the loan.

When comparing rates, make sure to look at both the interest rate and the APR, as they can vary significantly. It’s also important to compare current mortgage rates and APRs by loan type and to consider the lender fees for each mortgage. Additionally, increasing your down payment may lower the mortgage interest rate, which can further help you save money over time. By following these steps, you can ensure that you are getting the best mortgage rate for your unique financial situation.

Mortgage Interest Rates Forecast

When comparing mortgage rates, it’s important to consider factors such as economic conditions, your personal financial situation, and the lender’s risk assessment. To effectively compare mortgage rates, you can use online tools and obtain Loan Estimates from at least three different lenders. By adjusting the mortgage rate trend graph, you can see rates tailored to your loan program, credit score, down payment, and location.

It’s important to note that lenders base their mortgage rates on the benchmark interest rate and other factors. However, there are ways to get better rates, such as improving your credit score or choosing a shorter loan term. Additionally, it’s important to keep an eye on mortgage interest rate forecasts, which can help you make informed decisions about when to lock in your rate.

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Finding the best mortgage rate can be a daunting task, but by following these seven easy steps, you’ll be well on your way to securing a mortgage that fits your needs. From deciding whether to get a fixed-rate mortgage or ARM to determining the size of your down payment, there are several factors to consider.

Don’t forget to compare rates through an APR calculator and keep an eye on the interest rate forecast. By taking your time and doing your research, you can ensure that you get the best mortgage rate possible. Ready to start your journey? Use our mortgage APR calculator and check the interest rate forecast to take the first step toward finding the best mortgage rate for you.