Your mortgage rate is one of the most important factors when it comes to your monthly mortgage payment. This little number tells you how much interest you'll pay every month and even half of a percentage point can add tens of thousands of dollars to the overall cost of your mortgage.
Types of mortgage rates
In general, you'll need to choose between two main types of interest rates/mortgage types: fixed or adjustable rate. A fixed interest rate means your interest rate will always remain the same no matter what the market is doing. The only way to change a fixed interest rate is to refinance your loan. Typically, a fixed mortgage rate is the best choice when you're shopping for a mortgage when interest rates are low, because you can lock into that low rate for the life of your loan.
If you choose an adjustable rate, your rate won't change for a set number of years. Your mortgage loan will be described by these numbers. For example, if you had a 5/1 adjustable rate mortgage, your interest rate would remain the same for the first five years of your loan and then adjust every year after that for the remainder of the loan.
How to find your rate
Mortgage rate tools will tell you what the average rates are across the United States and in the state where you're buying your home. However, that doesn't mean that you'll be offered that mortgage rate. Lenders will take a close look at your overall financial profile and decide what your individual mortgage rate is. Your credit score, how much you have to put down on your home, your type of loan, and even where in the state your home is are all things that will have an impact on your personal mortgage rate.
How to get the best rate
It's important to try to get a good interest rate on your mortgage because that number will affect how much you pay during the entire life of your loan. Before you get preapproved, make sure your credit is healthy, you've saved for a 20 percent down payment, and you've spent time shopping around for the lender who's willing to give you the best terms. If you need help negotiating with your lender, we have some advice to get you started.