How to Get the Best Mortgage Rate [January 2025 Guide]

Mortgage rates are finally falling after years of increases, making early 2025 a promising time to lock in a lower rate. But getting the best loan isn’t just about timing—it’s about having a smart game plan.

These expert-backed tips will show you how to get the best mortgage rate possible. From improving your credit score to taking advantage of special programs, even small moves could save you big.

Table of Contents

1. 1. Boost your credit score before you apply
2. 2. Shop multiple lenders
3. 3. Consider paying discount points
4. 4. Make a bigger down payment
5. 5. Keep your job steady until closing
6. 6. Lower your debt-to-income ratio (DTI)
7. 7. Apply for special programs and lender discounts
8. 8. Negotiate closing costs and fees
9. 9. Watch the Federal Reserve’s moves
10. 10. Consider a shorter loan term
11. How to get the best mortgage interest rate

1. Boost your credit score before you apply

The first way to get the best mortgage rate is an obvious one—improve your credit. Lenders see a higher score as proof that you’re good at managing credit, which means less risk for them and better rates for you.

You can improve your credit score with these tips:

• Pay down credit card balances. Reducing your balances lowers your credit utilization, which can boost your score fast.
• Hold off on opening new accounts. New credit applications trigger hard inquiries that can lower your score by a few points.
• Fix credit report errors. Grab a free credit report from AnnualCreditReport and dispute any mistakes you find.

For example, imagine if you raised your score from 680 to 740, and it dropped your mortgage rate by 0.5% or more. On a $400,000 loan, this one move could save you over $40,000 in interest over the life of the loan and around $133 per month.

2. Shop multiple lenders

Another way to get the best mortgage rate is to shop around. Even if you’re short on time, don’t accept the first mortgage offer you receive. Compare rates from at least three lenders (ideally more). 

You should compare: 

• Annual percentage rates (APRs): As you saw with Tip 1, even a small rate difference can save you thousands.
• Loan terms: Look for the best combination of rates, terms, and fees.
• Closing costs: Ask for a loan estimate to spot projected closing costs and fees.

Our mortgage calculator can help you visualize how much you’ll pay in all for various loan offers.

Tip

⚡Use an online marketplace—LendingTree is our favorite—to compare multiple offers at once. This saves time by letting you submit your information once and review offers from several lenders side by side.

3. Consider paying discount points

Mortgage points let you “buy down” your interest rate in exchange for an upfront payment at closing. One point typically costs 1% of your loan amount and can reduce your rate by up to 0.25%.

For example, paying $4,000 for one point on a $400,000 mortgage could lower your monthly payment by $67 and save you $20,000 over 30 years.

Paying for points may make sense if you plan to stay in your home long enough to get past the breakeven point for paying more upfront. You’ll also want enough extra savings to cover the points without stretching your budget. 

Tip

Bonus: Mortgage points might also be tax-deductible.

There are several factors to consider when deciding between paying discount points and allocating that money to a larger down payment. Generally speaking, if you plan to stay in the home long enough to break even on your costs, buying down points could make sense.

Chloe Moore, CFP®

4. Make a bigger down payment

A larger down payment can also help you get a lower mortgage rate. Lenders see larger down payments as less risk since you have more “skin in the game.”

How much more you put down is up to you. At least 20% down is the sweet spot for avoiding private mortgage insurance (PMI), which could also save you hundreds per month. 

5. Keep your job steady until closing

Job stability can also help you lock in the best mortgage rate. Lenders want to see a steady income from the same employer for at least two years, ideally. 

A last-minute job switch could raise red flags and delay, or even derail, your loan approval. When you switch employers, your lenders will need to re-verify your income, which could stall your closing date or cause your rate lock to expire. 

Tip

If you’re thinking about a job change, try to hold off until after your mortgage closes. It could save you from extra hassles—and possibly a higher interest rate.

6. Lower your debt-to-income ratio (DTI)

Your DTI ratio compares your monthly debt payments to your gross income. Lenders use this number to decide how much house you can afford—and the lower your DTI, the better your chances of getting a great rate.

7. Apply for special programs and lender discounts

Many programs can help lower mortgage rates, offer down payment assistance, or assist with closing costs.

For example, if you’re researching how to get the best VA mortgage rate, look into VA loans for eligible military members, veterans, and spouses. Or if you’re looking at how to get the best mortgage rate for first-time buyers, look into FHA loans.

Here are other places to look: 

• Local housing authorities: Check for state or county programs.
• Lender-specific programs: Some lenders offer first-time buyer incentives or special benefits for teachers, first responders, or military members.
• Loyalty discounts: Already have a checking or savings account? Your bank may be able to offer the best mortgage rate. Just be sure to compare other offers too.
• Autopay discounts: Some lenders will knock 0.25% off your rate just for setting up automatic payments.

8. Negotiate closing costs and fees

Don’t assume lender fees are set in stone—many are negotiable. Reducing or eliminating certain fees can lower your overall loan cost, even if the interest rate stays the same.

Here’s what you might be able to negotiate:

• Origination fees: Ask whether application or processing fees can be reduced or waived.
• Rate lock fees: Does the lender offer free rate locks or extensions?
• Discount points: If you can’t afford to buy points, ask about smaller point options for incremental savings.

For example, negotiating $1,500 off closing costs could free up cash to make a larger down payment or cover moving expenses. If your lender won’t budge, you can try negotiating with the seller to cover some of these costs.

9. Watch the Federal Reserve’s moves

Mortgage rates often rise and fall based on Federal Reserve decisions about the federal funds rate. Keeping tabs on Fed announcements can help you time your mortgage application strategically.

• If rates are falling: You might get a better rate if you wait to lock in.
• If rates are rising: You may want to lock in sooner to avoid paying more. 

For example, the Fed announced rate cuts in September and November 2024, and mortgage rates started dropping. If rate cuts continue or hold steady, 2025 may be a promising time to refinance or get a good mortgage rate.

While a drop in interest rates could result in a lower monthly payment and less interest, I advise clients to consider their ability to afford a home in the current environment. If rates plunge in the future, we can evaluate whether it makes sense to refinance at that time. 

Chloe Moore, CFP®

10. Consider a shorter loan term

Shorter loan terms—such as a 15-year fixed mortgage—often come with much lower interest rates than standard 30-year loans. You’ll pay off the loan faster and save on interest, but monthly payments will be higher.

For example, say you need a $300,000 mortgage, and you’re deciding between a 15-year loan at 6% and a 30-year loan at 6.5%. 

• With the 30-year loan, you’d pay an extra $382,633 in interest, but your monthly payment would be just $1,900.
• With a 15-year loan, you’d pay $155,683 in interest (a savings of over $225,000), but your monthly payment would be higher, at $2,500. 

If you can afford higher monthly payments, a shorter term is a smart way to save.

How to get the best mortgage interest rate

Getting a great mortgage rate comes down to preparation and smart shopping. Compare offers from multiple lenders, keep your finances in top shape, and take advantage of discounts or special programs. 

Even small moves—like paying down debt or improving your credit score—can mean major savings.