While there might only be one prime rate, one large secondary mortgage market and a handful of government agencies that eventually buy mortgages, the consumer mortgage market is filled with choices. A good interest rate comes from actions you take with your own finances. It also comes from the lender and the loan program that you choose.
Playing The Field
If you don't like the first offer you get, try another lender. Every lender you use is free to set its own rates and closing costs and some will work for a lower price than others. When comparing rates, look at both the closing costs and the interest rate. While APRs let you compare apples-to-apples, if you won't be holding on to your loan until you pay it off, you might do better to pay a slightly higher rate for lower closing costs. Shopping around is important regardless of what type of mortgage you are looking for, how much you want to borrow, or who you are.
Time After Time
If you always pay your bills on time and manage your credit well, you could benefit from a lower home mortgage rate. Conventional and jumbo lenders frequently tier the interest rates they offer based on your credit score. While score requirements vary between lenders, the higher your score is, the better your rate is likely to be.
With A Little Help From My Friends
If you qualify for one of the government's mortgage programs, you can also usually get a low interest rate. Programs like the Federal Housing Administration, Department of Veterans Affairs and the Department of Agriculture mortgages all income a government guarantee. The guarantee doesn't only make it easier for you to get many of these loans. It also makes it safer for the lender, giving you an opportunity to get a better interest rate. This is especially true if your credit won't qualify you for the lowest rates on a conventional mortgage.
I'm In a Hurry
Another way to lower your interest rate if you can afford to pay a bit more every month is to choose a shorter mortgage. The longer your mortgage's term, the more risk the lender takes. Shortening your term makes your payment go up, but it makes it a safer loan for the lender and many lenders will lower your rate because of it. For instance, as of September 2013, the national average rate for a 30-year fixed rate mortgage was 4.32 percent, but 15-year loans were 3.38 percent, according to Bankrate.com.
Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.