June 2024

5 ways to help you get the best mortgage rate

If you're thinking about buying a home this year, rates matter. And while home loan rates have been trending downward after the highs of 2023, that doesn't mean you shouldn't do your best to find a good deal.

Start with some perspective

While it's true that rates are still higher than the historically low rates of 2020 and 2021, if you look at the bigger picture, you'll see that current rates are not so unusual. In fact, the average 30-year mortgage rate between 1971 and 2024 was 7.74%, and current rates are lower than that.Footnote1

However, it still pays to do what you can to get the best possible rate, because your monthly payment as well as your overall interest costs are affected by it. The following tips can help.

Clean up your credit history and pay off debt

This one is key. A big part of a lender's decision is based on your credit score, which is affected by your payment history and how much debt you have, among other factors. Since higher scores usually translate to better interest rates, it’s a good idea to check your credit history and correct any inaccuracies before you apply for a mortgage.

Tip: If your credit score is low, you can improve it by paying off debts and making sure you can show at least six months of on-time payments.

Maximize your down payment

Loans with lower down payments can be perceived as riskier, so rates may be higher. Plus, a lower down payment means your loan amount — and your monthly mortgage payments — will be larger. If you don't have much saved for a down payment, there are a number of programs that may be able to help. Visit the Bank of America Down Payment Center to search for programs in your area.

Tip: If you need or want to buy a home sooner, a lower down payment is a reasonable choice, as long as your monthly mortgage payment is affordable.

Choose a shorter loan term

Most mortgages are paid over a term of 30, 20 or 15 years. Your rate may be higher or lower depending on the loan term you choose. Shorter terms usually get a lower rate, but keep in mind that monthly payments are higher with a shorter term. You may find it’s worth paying a higher rate so you can spread payments out over a longer term and have smaller monthly payments.

Tip: Consider your budget when you choose a loan term and balance the amount of interest you may pay against the size of your monthly payment.

Remember to shop around

Rates vary from lender to lender, so try to get more than one rate quote. One way to do that is to get prequalifiedFootnote2 with several different lenders so you have a personalized estimate of how much you can borrow and what the rate may be. Once you choose a lender, you can usually apply and lock in your rate for 30 to 60 days while you search for a home.

Tip: Avoid locking in your rate too soon. If rates go up before you find a home, you may need to pay an additional fee to keep the lower rate.

Consider paying discount points

Mortgage discount points are an upfront fee that you pay to lower your mortgage rate. Typically, one point equals 1% of the mortgage total and will lower the rate by 0.25%. With a lower rate, your monthly mortgage payments will be lower. However, it may take several years for the monthly savings to equal the amount you paid for the points.

Tip: Paying discount points can be worth the cost if you plan to keep the loan for a long time and you don't plan to refinance.

Rates are just part of the picture

When buying a home, your primary goal should be to make sure your monthly payment will be affordable for you now and in the future. Talk to a lending specialist to explore loan types and down payment options that fit within your budget. And while you may be able to refinance if rates go down after your purchase, consider that a bonus, not a guarantee.

A note from your lending specialist

I'll be happy to discuss your options and help you find a home loan that works for your situation.

1 Mortgage rates chart: Historical and current rate trends, Peter Miller, updated by Aleksandra Kadzielawski, The Mortgage Reports, February 9, 2024. Accessed March 2024.

2 Prequalification is neither preapproval nor a commitment to lend; you must submit additional information for review and approval.

MAP6561726 | 04/2024