What Affects Your Mortgage Interest Rate (And How to Get a Lower One)

Your mortgage interest rate has a significant impact on what you'll pay for your home over time. Even a difference of half a percent can add up to thousands of dollars throughout the life of your loan. But what actually determines your rate? And what can you do to lower it? In this guide, we’ll walk you through the key factors that influence mortgage interest rates—and give you practical tips to help you secure a better one.

Why Your Mortgage Rate Matters

Your interest rate directly affects your monthly payment and the total amount you'll repay. For example, with a 30-year fixed loan, a small decrease in the rate could lead to substantial savings in interest over time. That’s why understanding how rates are set—and what influences them—is so important for any homebuyer or homeowner looking to refinance.

Key Factors That Influence Your Mortgage Rate

1. Your Credit Score

Your credit score is one of the most important factors lenders consider. Higher scores generally mean lower risk for lenders, which often results in a lower interest rate. If your credit score is strong, you're more likely to qualify for the best available rates. If it's lower, you might still qualify for a mortgage, but at a higher rate.

2. Your Down Payment

The more money you can put down on your home, the less risk the lender assumes. A larger down payment shows financial strength and can reduce the loan-to-value ratio (LTV), which often translates to better loan terms and lower interest rates. A down payment of 20% or more typically helps avoid additional costs like private mortgage insurance (PMI) as well.

3. The Type of Loan You Choose

Not all mortgages are created equal. Conventional loans, government-backed loans (like FHA or VA), and jumbo loans all come with different interest rate structures. The rate can vary based on the program and requirements, and some loans are more favorable depending on your credit profile and financial history.

4. The Term of Your Loan

Shorter loan terms, like 15-year fixed mortgages, usually have lower interest rates than 30-year options. While the monthly payment may be higher due to the shorter repayment period, the total interest paid over the life of the loan is often significantly less.

5. Your Debt-to-Income Ratio

Lenders evaluate your ability to manage monthly payments in relation to your income. This is known as your debt-to-income (DTI) ratio. A lower DTI indicates financial stability and can help you qualify for more favorable interest rates.

6. The Type of Property

The kind of property you're buying—such as a single-family home, condo, second home, or investment property—can also impact your rate. Lenders tend to offer better rates for primary residences compared to investment or vacation homes, which are considered riskier.

7. Current Market Conditions

Mortgage rates are also influenced by external market forces, such as inflation, economic growth, and decisions made by the Federal Reserve. These are factors you can’t control, but they explain why rates fluctuate over time. Staying informed about market trends can help you choose the best time to lock in your rate.

How to Improve Your Chances of Getting a Lower Rate

While you can’t control everything, you can take steps to strengthen your financial profile and qualify for better mortgage terms.

Improve Your Credit Score

Start by checking your credit report for any errors. Pay your bills on time, reduce outstanding credit card balances, and avoid opening new credit lines before applying for a mortgage. A higher credit score often means better loan offers.

Save for a Larger Down Payment

If possible, increase the amount you plan to put down. Not only can this lower your rate, but it may also eliminate the need for mortgage insurance and reduce your overall monthly payment.

Reduce Your Debt

Paying down credit cards, student loans, or car loans can help improve your debt-to-income ratio and strengthen your loan application. Lenders want to see that you can manage your debt responsibly.

Shop Around and Compare Lenders

Different lenders offer different interest rates—even for the same borrower profile. Get quotes from several mortgage lenders or brokers to ensure you're getting the best deal possible. This comparison can help you find the most competitive rate and loan terms available to you.

Consider Buying Mortgage Points

Mortgage points are upfront fees you can pay to reduce your interest rate. This can be a smart move if you plan to stay in the home long enough to recover the upfront cost through monthly savings. It's a strategy worth discussing with your lender.

Choose a Shorter Loan Term

If you can afford the higher monthly payments, choosing a 15-year loan instead of a 30-year loan can lead to a lower interest rate and big savings over time. You’ll pay less in total interest and own your home outright sooner.

Don’t Forget to Lock In Your Rate

Once you’ve found a favorable rate, ask your lender about locking it in. A rate lock ensures that your interest rate won’t change during the loan processing period—even if rates rise before closing. Be sure to ask how long the lock lasts and whether the lender offers a float-down option if rates drop further.

How SNMC Can Help

At Security National Mortgage Company, we believe in transparency and education. Our mortgage experts work with you to:

• Review your credit and finances

• Recommend steps to qualify for the best possible rate

• Explain loan options tailored to your goals

• Walk you through timing, rate locks, and market conditions

We’re here to make the mortgage process as smooth and stress-free as possible—so you can focus on building your future with confidence.

Final Thoughts

Your mortgage interest rate affects everything from your monthly payment to your total cost of homeownership. By understanding what impacts your rate and how to strengthen your loan profile, you can take control of your financial future.

Whether you're just starting to explore mortgage options or you're ready to lock in your rate, the team at SNMC is here to help you make smart, informed decisions every step of the way.