How To Get The Best Deal On A Home Loan
by Barsha Bhattacharya Loans & Credit 15 May 2025
How to get the best home loan deal? That’s the first thing that comes to mind whenever we think about owning a roof!
The average age of the first-time homebuyer in the U.S. has reached an all-time high. Rising home prices, lack of wage growth, and student loan debt have made it harder for younger adults to own their first property.
That said, rental is not exactly cheap either, and rental costs go nowhere in terms of investment.
So, if you are thinking of a long-term solution for your family, here is how you can find low mortgage rates and get the best deal on a home loan.
What Affects Mortgage Rates?
Before we think about “how to get the best home loan deal”, first, you must understand what determines the rate you are offered.
The Federal Reserve’s interest rate decisions, inflation trends, and the overall economic outlook are out of your control.
However, your credit score, income stability, debt-to-income (DTI) ratio, and down payment amount are within your grasp.
A borrower with outstanding credit and a substantial down payment will almost always get a better rate than someone with an inconsistent record.
How To Get The Best Home Loan Deal: Here’s An Easy Cheatsheet For You!
Owning a home can be the financial decision that one can ever make for themselves and their family.
But, for most of the first-time home buyers, availing the first home deal becomes the only way they can bring their aspiration of becoming a homeowner.
In this section, I have listed out a few strategies to get the best home loan deal! Read on…
Credit Rating is Critical
Your credit score plays a major role in your mortgage rate. Generally, a score of 740 and above will get you access to the best rates.
If you are not quite there yet, you should start to improve it. Start by pulling your credit report from the major bureaus and checking for any errors.
Pay off credit card balances, avoid borrowing more, and make all payments on time. Even raising your score by 20–40 points could shave thousands of dollars off your total mortgage interest.
Pre-Approval Pays Off
Getting a pre-approval for a mortgage is more than just a formality. The pre-approval helps you create a realistic budget. This can help you strengthen your position, especially when making an offer on a home.
The process of mortgage pre-approval mainly involves a lender verifying your financial status. It also includes your history, which can help you determine how much you can borrow.
This is not the same as a pre-qualification, which is basically a rough estimate. A pre-approval demonstrates to sellers that you are a credible and financially stable buyer.
Shop Around for the Best Deal
If you decide to buy a car, what is the first thing that you will do? Research right? You would not just choose the first car you see in an advertisement!
The same method applies when it comes to accepting your first mortgage. You will just have to shop around.
The mortgage rate can always vary from one lender to another. Who knows, even a small difference can save you thousands of dollars over a 30-year loan.
Look at traditional banks, credit unions, and online mortgage lenders. Gather at least three to five quotes and compare the annual percentage rate rather than just the advertised interest rate.
Choose the Right Loan Type
Once you decide to take out a mortgage loan, you will see many types of mortgage loans out there! So, choose the right one, that’s the only key to success.
A fixed-rate mortgage can always offer better predictability, since your rate stays the same for the life of the loan.
Hence, it is a better choice if you plan to stay in the home long-term. Meanwhile, an adjustable-rate mortgage starts with a lower rate that may increase later, which might work if you plan to sell or refinance within a few years.
Government-backed loans like FHA, VA, and USDA loans are also worth exploring. FHA loans are ideal for buyers with modest credit and smaller down payments.
USDA loans cater to rural buyers while VA loans are exclusive to military veterans and often require no down payment.
These programs can help you get a foot in the door if a conventional loan is out of reach.
Pay Attention to Fees
While everyone focuses on mortgage rates, the fees can quietly sneak up on you. These include application fees, appraisal fees, origination fees, underwriting costs, and title insurance—collectively called closing costs.
They can add up to a whopping 5% of your total loan amount! Ask each lender for a loan estimate form, which outlines all fees associated with the mortgage.
Some lenders may offer “no closing cost” loans, but those often come with a higher interest rate.
Buy Discount Points
Did you know that you can lower your mortgage rate by buying discount points? A discount pay is a certain percentage of the loan amount (in most cases, one percent) that a borrower pays upfront to lower the interest rate of their loan.
One point usually costs 1% of the mortgage amount and can lower your interest rate by approximately 0.25%.
This is a good idea if you have extra cash, as you can see that the lower mortgage rate will add up to a large sum of savings in the end.
Lock in Your Rate
When you apply for a mortgage, the interest rate you are quoted is based on current market conditions.
However, those rates can change daily. A rate lock is an agreement between you and the lender that freezes your mortgage interest rate for a set period while your loan is being processed.
This way, you are protected if rates suddenly jump. Note that rate locks have an expiration date and that you will need to request a lock in writing from your loan officer.
Homeownership As A Path To Real Wealth
Owning a home is not about having your own place. It is one of the smartest ways to build your real wealth over time.
When you are paying the rent, the money is gone forever. However, when you are paying a certain amount of mortgage, you are actually putting money into something that you own.
Over the years, your home value will increase, and the equity (mostly the part of your home that you own) keeps growing as well.
This equity amount can further help you later in your life, whether you are planning to sell your home for a profit, use the money as your retirement fund, or even take out a loan for another investment.
Simply put, the mortgage payment that you pay every month can bring you closer to a very long-term financial stability.
Make Smart Mortgage Choices That Can Help You Grow Wealth
Getting a home loan is not always about getting the approval! It is about choosing the right deal that can help you save money and further grow your wealth.
For instance, you are picking a loan that comes with a lower interest rate. Or maybe you are paying for the discount points. This way, you can save time and over a thousand dollars in the long run.
The same money can be used for other goals, such as starting a new business, investment, or saving for your child’s future.
Always remember that the better the mortgage deal you get, the more you will have left over to build the life that you want.
Think of it in this way: You are just making the smart choices that can ultimately help you to settle yourself for the bigger financial success in the future.
Conclusion
Finding a low mortgage rate takes some work. However, your efforts will pay off in the form of savings.
Do not let the rising median age of homebuyers discourage you! Take time to build your credit, research lenders, and understand the fine print.
With some discipline and diligence, you will soon be the proud holder of the keys to your new family home.
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