Current mortgage rates: May 16, 2013

10 ways to get the best mortgage rates

Whether you’re a first-time homebuyer or a repeat homebuyer, whether you’re buying a home or refinancing into a new loan, locking in the lowest possible mortgage rate is always a top concern. Mortgage rates fluctuate daily and can vary for each mortgage customer depending on personal factors such as credit score.

This page features a list of mortgage lenders and their advertised mortgage interest rates. Below the advertised rates are our latest mortgage articles and tools that will help make your homebuying or refinancing experience as smooth as possible.

Mortgage rates have fallen to their lowest point in decades over the last few years, opening up additional buying and refinancing opportunities for millions of American borrowers. But low mortgage rates never last forever. Whether you’re buying or refinancing, have an interest rate or a range of rates in mind that best suit your budget. Once mortgage rates reach those levels, it’s time to lock in your rate. Remember: mortgage rates always rise faster than they fall.

Steps 1-2

No. 1: Establish a baseline. Get a referral from someone you trust and contact that lender to obtain your credit score and discuss your loan options. Your first lender can help you compare FHA and conventional financing, as well as various loan terms so you can make an informed decision on which loan program and term you want before you contact other lenders.

No. 2: Improve your credit score. Conventional lenders charge a higher interest rate for lower credit scores. The best mortgage rates are generally only reserved for those with credit scores above 740. "Most lenders will raise your interest rate incrementally if your score is below 740, 720, 680 and 660,” says Amy Tierce, regional vice president for Fairway Independent Mortgage in Needham, Mass.

There are several things you can to boost your credit score, but it still might take 30 to 90 days or even longer to improve your score significantly.

Steps 3-4

No. 3: Buy a single-family home. Condominiums are considered a riskier investment because they dropped in value more than other types of homes during the housing crisis, says Tierce, so mortgage rates are usually one-eighth percent higher than for a single-family home. However, if you make a larger down payment of at least 25 percent, that interest rate add-on will not be charged.

No. 4: Shorten your loan term. While the spread between mortgage rates for loan terms vary, Tierce says that generally, 20-year fixed mortgage rates are about one-eighth percent lower than interest rates for a 30-year fixed, and 15-year fixed-rate loans are one-quarter to three-eighths percent lower than 30-year fixed-rate loans.

"You can save thousands on interest payments with a shorter loan term, although you have to make sure you can handle the higher payments," says Mark Fowler of the Residential Finance Corp. in Charlotte, N.C.

Steps 5-6

No. 5: Increase your down payment. The larger your down payment, the deeper your initial equity stake, thus the less risk you pose to the lender.

While not all lenders have sizable or even distinct price breaks, you might be able to lower your rate by an eighth-percentage point with a 25 percent down payment, rather than just 20 percent. If you can come up with a more sizable equity stake--40 percent, for example--a lender might chop an additional eighth percentage point off the rate.

Of course, there may be better uses of that cash than plowing it into your home just to get a slightly lower interest rate.

No. 6: Ask about fees. The various fees associated with a loan are one reason why you shouldn’t comparison shop solely based on the best advertised rate. Sometimes an advertised rate can be lower than all the rest because of all the fees associated with it.

"Some lenders blend all their fees into a loan preparation fee, while others separate them out, so be sure to ask for the total amount it will cost to close the loan," says Brian Martucci, a mortgage lender with GetLoans.com in Washington, D.C. Generally, a mortgage with higher fees should have a lower interest rate, he says.

If you’re refinancing, use HSH.com's Tri-Refi Refinance Calculator to compare your options for paying closing costs.

Steps 7-8

No. 7: Pay points. You can use cash to pay discount points to reduce your mortgage rate. Points are considered a prepayment of interest, and each point is equal to one percent of the loan amount.

"Depending on the lender, paying one point will reduce your mortgage rate by one-quarter percent," says Mark Richards, a senior mortgage loan officer for TD Bank in Washington, D.C. "On a $200,000 loan, you'd pay $4,000 to bring down your rate 0.5 percent. You'd only save around $4,000 in the first 10 to11 years, but you'd save $40,000 over the life of the loan with that lower rate."

No. 8: Contact a mix of financial institutions on the same day. Interest rates fluctuate constantly for a variety of reasons, including the occasional promotion of a particular loan product by a particular financial institution. Sometimes a credit union or bank will introduce a new loan product and offer better mortgage rates in order to entice borrowers, says Craig March, a personal mortgage consultant with Inlanta Mortgage in Janesville, Wisc.

"It's best to diversify and try a mix of places such as a direct lender, a regional bank, a credit union, a community bank and a national bank," says March. Also, March says to call each institution within the same timeframe, because mortgage rates could drop dramatically from the morning to the afternoon.

Steps 9-10

No. 9: Shorten your loan lock-in period. "The longer the lock-in, the higher your interest rate," says Richards. "If you lock in your rate for 60 days, it will be one-eighth percent higher than a 30-day lock, and if you choose a 90-day lock, it will usually be one-third percent higher."

Richards says that most purchase loans take 30 days to close, while a refinance may need 45 to 60 days. If you choose to wait to lock in your rate, you're gambling that mortgage rates won't rise, says Tierce.

No. 10: Know when you want to close. The length of your lock-in period will impact your mortgage rate, so discuss your target close date with each lender and ask what they charge for different loan-lock periods.

"Make sure you tell the lender when you expect the closing to be, because you want to lock-in the interest rate for the right length of time," says Richards. "Many lenders charge one-eighth percent more if you must lock-in the loan for 60 days. If you need a 90-day loan lock your interest rate could be as much as one-third percent higher."

If you can’t follow each of these 10 steps, you may still be able to achieve the best mortgage rates by improving in a few areas. Lenders consider multiple factors to determine your mortgage rate.