Mortgage Rates Explained
Everything you need to know about mortgage interest rates
Understanding Mortgage Rates
Your mortgage interest rate significantly impacts your monthly payment and total loan cost. Understanding how rates work can help you make informed decisions.
Types of Mortgage Rates
Fixed-Rate Mortgages
Your interest rate stays the same for the entire loan term. Most common are 15-year and 30-year fixed-rate mortgages. Predictable payments make budgeting easier.
Adjustable-Rate Mortgages (ARMs)
Start with a fixed rate for an initial period (e.g., 5, 7, or 10 years), then adjust periodically. Lower initial rates but can increase over time. Rate caps protect against excessive increases.
Rate Lock
Once you lock your rate, it's protected from market fluctuations for a specified period (typically 30-60 days). Lock timing is important - too early and you might miss lower rates, too late and rates might rise.
How to Get the Best Rate
- • Improve your credit score - Pay bills on time, reduce debt, and check your credit report for errors
- • Save for a larger down payment - 20% down typically gets the best rates
- • Shop around - Compare rates from multiple lenders
- • Consider points - Paying discount points can lower your rate
- • Choose the right loan term - Shorter terms often have lower rates
- • Lock at the right time - Work with your lender to time your rate lock