🎯 In 30 seconds: Two forces set your mortgage rate: the market (long-term bond yields, which move daily) and you (credit score, down payment, loan type and more). You cannot control the first. The second can move your rate a lot, and so can getting quotes from several lenders on the same day. On a $350,000 loan, a 1 percentage point gap costs about $235 a month and about $85,000 over 30 years.
The market part: why rates change daily
Many fixed-rate mortgages are pooled and sold to investors as mortgage-backed securities. What investors will pay for them tracks long-term interest rates, so mortgage rates tend to move with the 10-year Treasury yield, not with the Fed’s overnight rate. How the Fed moves your rates explains why a Fed cut and rising mortgage rates can happen in the same month.
For a weekly benchmark, Freddie Mac publishes its Primary Mortgage Market Survey on Thursdays at noon Eastern time. It covers 30-year and 15-year fixed loans for home buyers with good or excellent credit who put 20% down on a conventional loan. If your situation differs, so will your rate. The CFPB’s interest rate explorer lets you see rates for different loan options where you live.
The personal part: what lenders price you on
The CFPB lists seven factors that shape the rate you are offered:
| Factor | How it moves the rate | What you can do |
|---|---|---|
| Credit score | Higher scores usually get lower rates | Check reports months ahead and pay card balances down |
| Down payment | More down usually lowers the rate; under 20% usually adds mortgage insurance | Ask for quotes at 10%, 15% and 20% down |
| Loan type | Conventional, FHA, VA and USDA loans price differently | Get quotes for each type you qualify for |
| Loan term | Shorter loans usually have lower rates and higher payments | Compare total cost, not just the payment |
| Rate type | Adjustable rates may start lower and can rise later | Learn the reset dates and caps before choosing |
| Home price and loan amount | Very small or very large loans can cost more | Ask whether a slightly different amount changes the rate |
| Location | Rates can vary by state, and sometimes by county | Include local lenders and credit unions in your search |
Worked example: what 1 percentage point costs
Same house, same $350,000 30-year fixed loan, two illustrative rates (not today’s):
| 6.5% | 7.5% | Difference | |
|---|---|---|---|
| Monthly principal and interest | $2,212 | $2,447 | $235 |
| Interest paid in the first 5 years | $110,373 | $127,996 | $17,623 |
| Total interest over 30 years | $446,406 | $531,010 | $84,604 |
The 5-year row matters because many people sell or refinance long before year 30. Even over five years, the higher rate cost about $17,600 more in interest. That is the kind of money a better credit score, a bigger down payment or one more lender quote can be worth.
Points or lender credits: decide by how long you will keep the loan
A discount point costs 1% of the loan and buys a lower rate. A lender credit works the other way: you accept a higher rate and the lender covers part of your closing costs. How much rate a point buys varies by lender, so these offers on $350,000 are made up, but built the way real quotes are:
| Option | Rate | Upfront | Monthly | Paid by year 3 | By year 7 | By year 30 |
|---|---|---|---|---|---|---|
| Lender credit | 7.000% | −$1,750 | $2,328.56 | $82,078 | $193,849 | $836,531 |
| No points | 6.875% | $0 | $2,299.25 | $82,773 | $193,137 | $827,730 |
| One point | 6.625% | $3,500 | $2,241.09 | $84,179 | $191,751 | $810,292 |
“Paid” is the upfront amount plus monthly principal and interest. (A lower rate also pays the balance down slightly faster, which this leaves out.) If the loan ends within about five years, the credit costs least. Keep it longer and the point wins; here it breaks even in month 61. The CFPB notes points appear on page 2, Section A of the Loan Estimate, and lender credits in Section J as a negative number. Ask every lender to quote the same number of points so the offers line up.
Rate locks
A rate lock holds your rate from the offer to closing, as long as you close in time and nothing in your application changes. Locks commonly run 30, 45 or 60 days. Page 1 of the Loan Estimate shows whether the rate is locked and until when.
- A locked rate can still change if the loan amount, loan type or down payment changes, the appraisal comes in higher or lower, your credit score changes, or the lender cannot document income it counted.
- Extending a lock that runs out can be expensive. Ask the price before closing gets close.
- If rates fall after you lock, you may miss the lower rate. Some lenders offer a “float-down” feature; ask what it costs and how it works.
- Between lock and closing, avoid new credit, large purchases and job changes where you can.
- Which market rate do fixed mortgage rates tend to follow? Answer: Long-term rates such as the 10-year Treasury yield.
- On a $350,000 30-year loan, about what does 1 percentage point cost per month? Answer: About $235.
- You expect to sell in 3 years. In the example, which option costs least? Answer: The lender credit.
- Name two things that can change a locked rate. Answer: Any two of: loan amount or type, down payment, appraisal, credit score, undocumented income.