What is a good mortgage rate in today’s market?

What qualifies as a “good mortgage rate” is in the eye of the beholder. But certain types of home loans offer better interest rates than others. And there are steps you can take to nab a lower mortgage rate in today’s market.

Check your mortgage rates. Start here (Dec 21st, 2024)

Which mortgage types have the lowest interest rates?

Typically, 15-year fixed-rate mortgages offer lower interest rates than 30-year mortgages. Adjustable-rate mortgages are also typically a better deal than 30-year rates, at least in the short term.

Federal Housing Administration (FHA) and Veteran Affairs (VA) loans offer more attractive rates. The average rate of a 30-year fixed-rate FHA loan was 6.41% on December 28, 2023, according to the Federal Reserve Bank of St. Louis. The average 30-year fixed-rate VA loan measured 6.12% that day.

USDA loans — government-sponsored mortgages provided by the U.S. Department of Agriculture — are for borrowers purchasing homes in rural areas. They offer interest rates as low as 4.25% for low- and very low-income borrowers, according to USDA.gov.

Current mortgage rates

The interest rates reported below are from a weekly survey of 100+ lenders by Freddie Mac PMMS. These average rates are intended to give you a snapshot of overall market trends and may not reflect specific rates available for you.

Copyright 2025 Freddie Mac. Averages are based on conforming mortgages with 20% down.

What determines your mortgage rate?

Several factors affect what mortgage rate you can qualify for:

• Market conditions. Mortgage rates track with shifts in 10-year Treasury note yields — and those yields are partly influenced by changes in the Federal Reserve’s benchmark interest rate. A higher benchmark rate means higher borrowing costs for mortgages.
• Your finances. Mortgage lenders take several key factors into account when assessing a borrower’s application. Your credit score, loan amount, down payment, and debt-to-income ratio can all impact the rate that you qualify for.
• Mortgage lender. Rates can vary by lender, which is why it’s a good idea to shop around. Proof: Nearly half of borrowers who compared offers said the first mortgage offer they received was not the lowest rate, a recent LendingTree survey found.
• Loan type. As outlined above, the type of loan you get affects your mortgage rate.
• Loan term. Shorter-term loans typically offer lower mortgage rates. (At the same time, they also have higher monthly mortgage payments.)

Check your mortgage rates. Start here (Dec 21st, 2024)

When should you consider an ARM mortgage?

An adjustable-rate mortgage is a loan that offers a low-interest rate for a set number of years, typically anywhere from 3, 5, 7, or 10 years. When that period ends, the interest rate adjusts, usually once per year, based on market conditions — though in most cases, “adjusts” means the rate increases.

Whether an ARM makes sense for you often depends on your financial circumstances and your plans for the home.

An ARM might be a good option if:

• You plan to sell the home early
• You will be receiving a windfall
• You plan to retire soon

Read more: When does an ARM make sense?

9 tips to get a lower interest rate on your mortgage

1. Check your eligibility for a VA, FHA, or USDA loan

Because VA, FHA, and USDA loans are government-backed, and therefore somewhat less risky for lenders, they often offer lower interest rates than conventional loans.

VA loans are for active or retired military veterans who’ve served 90 days consecutively during wartime, 180 during peacetime, or six years in the reserves (or a veteran’s surviving spouse).

FHA loans are intended to help low- and moderate-income borrowers purchase homes. They are particularly popular with first-time home buyers.

USDA loans are for people purchasing a home in an eligible rural area, which the Department of Agriculture typically defines as a population of less than 20,000. To qualify, you can’t make more than 115% of the area median income.

2. Consider an ARM

An adjustable-rate mortgage has a lower interest rate than a fixed-rate loan — and, as a result, a lower mortgage payment — for a predetermined initial period. To be eligible for a conventional ARM, you typically must have at least a 5% down payment, a credit score of 620 or higher, a debt-to-income ratio of no more than 50%, and a loan-to-value ratio of no more than 95%.

An ARM isn’t right for everyone, but it could be a good fit if you’re a first-time buyer purchasing a starter home that you know you’re going to sell before the introductory rate ends, flipping a house, or feel comfortable with potentially absorbing higher rates and higher mortgage payments in the future.

3. Shop around

Mortgage rate offers can vary from one lender to the next. So, obtain multiple quotes before choosing a lender. According to a Freddie Mac study, borrowers save an average of $3,000 over the life of their loan by getting five quotes instead of just one.

4. Improve your credit score

Typically, the higher your credit score, the lower your mortgage interest rate. Generally, an excellent credit score is anything from 750 to 850; a good credit score is from 700 to 749; a fair credit score is from 650 to 699; and any credit score lower than 650 is deemed poor.

If your credit history has some black marks, taking steps to raise your credit score can help you qualify for a better rate. Reviewing your credit reports for errors and paying down credit card debts are good places to start.

5. Choose your loan term carefully

A 15-year fixed-rate mortgage offers a lower mortgage rate than a 30-year fixed-rate mortgage, but take a close look at your finances to make sure you’d be comfortable taking on the higher monthly mortgage payments that come with a shorter-term loan.

6. Make a larger down payment

Jumbo loans — mortgages that exceed the loan limit of conforming loans set by Freddie Mac and Fannie Mae — typically have higher interest rates. Therefore, making a larger down payment could potentially lower your mortgage rate if it enables you to qualify for a conforming loan instead of a jumbo loan.

In 2023, the conforming loan limit in most areas of the country is $726,200, with some high-cost areas allowing for conforming loans as high as $1,089,300.

7. Buy mortgage points

Mortgage points, also known as discount points, are extra funds paid upfront at closing. Purchasing them can lower your loan’s interest rate and, as a result, reduce your housing payments. Generally, one point costs 1% of your loan amount (so, one point on a $300,000 mortgage would cost $3,000), and each point trims your interest rate by a small amount, typically 0.25 percent per point.

Under the right circumstances, discount points can help you save money over the life of the loan.

8. Get a rate lock

If you’ve been pre-approved for a loan and qualified for a good interest rate, getting a mortgage rate lock would allow you to lock in that low rate for a set period of time — typically 30, 45, or 60 days, protecting you from rate hikes in the near term.

Most lenders offer borrowers free 60-day rate locks upon request; longer rate locks typically cost money, usually a few hundred dollars.

9. Negotiate with lenders

Some lenders may be willing to offer a lower mortgage rate, especially if you’ve received competitive offers from a few different lenders. This is part of the reason that it’s important to shop around for the best rate.

Pro tip: If you can’t get a lender to budge on the interest rate, see if they’re willing to reduce certain closing costs, such as title insurance, loan origination, or underwriting fees.

Low-rate mortgages FAQ

What type of mortgage has the lowest interest rate?

VA loans typically have the lowest interest rates, narrowly beating FHA loans. But only active or retired military veterans (or a surviving spouse) are eligible for VA mortgages.

How can I get a 3% mortgage rate?

Sorry to be the bearer of bad news, but 3% mortgage rates are no longer available (at least for now). That’s because mortgage rates more than doubled in 2022, with the average rate for a 30-year fixed-rate mortgage closing out the year at 6.42%.

How are ARMs calculated?

To set ARM interest rates, lenders determine the loan’s fully indexed rate — the highest possible interest rate that you’d pay when your ARM’s introductory rate period ends. This figure is calculated by adding the index (whatever that happens to be when your initial rate expires) and a margin (usually 1.75% for Fannie Mae or Freddie Mac loans).

How does an adjustable-rate mortgage work?

An ARM offers a lower interest rate for a set number of years, typically anywhere from 3, 5, 7, or 10 years. When that introductory period ends, the interest rate adjusts, usually once per year, based on market conditions.

Are adjustable-rate mortgages ever a good idea?

ARMs got a bad rap because of their contribution to the housing crash of 2008 and 2009, but they’re not necessarily a bad product — and lenders have tightened their requirements of ARM borrowers, making adjustable-rate loans safer than they were in the past. An ARM could be a good way to save money if you know that you’re going to sell your prospective home before the introductory rate expires.

How do you shop for mortgage rates?

You can shop for mortgage rates by reaching out to lenders on your own to obtain loan estimates, or you can use a mortgage broker, a professional who can shop for mortgage offers on your behalf.

Is it better to have a lower interest rate or APR?

Generally, it’s better to score a lower APR than a lower interest rate. Why? Because APR — short for annual percentage rate — is the annual cost of a loan to a borrower, including the interest rates and fees. That means APR gives you a fuller snapshot of your mortgage costs. Comparing APR offers is relatively easy since the Federal Truth in Lending Act requires lenders to disclose a borrower’s APR in every consumer loan agreement.

The bottom line: Low-rate mortgages

Though mortgage rates have increased in recent months, borrowers can still save on their mortgage loans by making sure they’re getting the lowest possible interest rate.

Check your mortgage rates. Start here (Dec 21st, 2024)