How to get the best mortgage rates and save thousands.

Getting the lowest possible interest rate on your mortgage can save you tens of thousands of dollars in interest costs over the life of your loan. Here are some top tips for securing the best mortgage rates and slashing your payments:

Boost your credit score

Your credit score is one of the top factors lenders use to determine your mortgage interest rate. Prior to applying for a mortgage, work on improving your score paying down debts, correcting any errors on your report, and avoiding new hard inquiries on your credit. Aim for a score of 740 or higher to qualify for the best rates.

Shop multiple lenders

Applying with several lenders, including credit unions, banks, and online lenders, allows you to compare interest rate quotes. Avoid applying serially and instead apply within a condensed timeframe so additional hard credit inquiries don’t excessively ding your score. Leverage rate comparison tools to easily view multiple offers.

Lower your debt-to-income ratio

Lenders look at your total monthly debt payments in relation to your gross monthly income. To improve this back-end DTI, consider paying down debts like credit cards and auto loans. You can also try requesting a pay raise to boost your income. A DTI below 36% often secures the best rates.

Make a larger down payment

The higher your down payment, the lower risk you are to a lender. Putting down 20% or more for a conventional loan eliminates the need for private mortgage insurance and demonstrates you can cover upfront costs. This can lead to a lower interest rate.

Choose a shorter loan term

Opting for a 15 or 20 year fixed mortgage instead of a 30 year loan will score you a lower interest rate. The tradeoff is higher monthly payments, but you pay significantly less interest over the life of the shorter term loan.

Improve your debt-to-income ratio

Lenders also look at your front-end DTI measuring your projected monthly mortgage payment in relation to your income. To improve this, consider opting for a less expensive house that won’t stretch your budget and keep your payment manageable in relation to your earnings.

Lock your rate

During the mortgage process, a lender will guarantee or “lock in” the quoted interest rate for a period of time, often 60 days. Locking in quickly shields you from fluctuating market rates during the underwriting process. There may be a small upfront fee.

By taking steps to improve your credit, control your debt, and demonstrate fiscal responsibility, you can gain leverage to lock in the lowest rates and save a substantial amount over your loan repayment period. Even a difference of half a percentage point can equate to over $60,000 in savings over 30 years.