Watch CBS News

How to get the best mortgage interest rate in today's economy

To get the best mortgage rate in today's economy borrowers should first improve their credit scores. Getty Images

Interest rates are high. In fact, after the Federal Reserve adjusted the benchmark interest rate to a range between 5.25% and 5.50% in July, they're now the highest they've been in 22 years. And with a discouraging inflation report for last month, there's a reasonable chance that they could go even higher in the weeks and months to come.

Against this backdrop, many borrowers are doing their best to limit how much they put on their credit cards or take out in loans. But this may not be possible for some, particularly those who need to purchase a new home. 

With elevated rates what they are, there may still be some advantages to buying a home now. That said, home buyers in today's market should take some steps to get the best mortgage interest rate that they possibly can.

You can easily discover the rate you qualify for here now.

How to get the best mortgage interest rate in today's economy

Mortgage interest rates have exponentially risen in recent years, with the current rate for a 30-year mortgage loan around 7% for the most qualified borrower.

But the key word in that sentence is "qualified." If you don't do your due diligence, you could get stuck with an even higher rate than that. To that end, here are three things you can do to get the best mortgage interest rate in today's economy:

Improve your credit score

Arguably, the best way to ensure that you've secured the best mortgage interest rate is to maintain and, hopefully, improve your credit score. Your credit will be checked numerous times during the mortgage application process, so you'll want to make sure it's as high as possible. 

This means paying down (or, even better, paying off) as many debts as possible. It also means paying all of your debts and bills on time (or early). And you may even want to check your existing credit report for any inaccuracies or errors that could be dragging down your score. Anything you can do to improve your credit score before closing on your loan helps.

See what mortgage rates you currently qualify for here now.

Don't apply for new credit

One of the best ways to improve your credit — or at least not to hurt it further — is to immediately stop applying for new credit. Your credit worthiness is already being evaluated for your mortgage application. You don't want to do anything to diminish it by applying for a new credit card, personal loan or car lease or loan. 

If you need to borrow money, check first to see if a family member or friend can help you instead. This doesn't have to remain permanent, but if you want to get the best mortgage rate possible, you'll want to avoid applying for any new credit until after you've completely closed on your mortgage loan.

Consider buying mortgage points

Mortgage points are essentially a fee charged by the bank or lending institution. In return for paying for points, the bank will provide you with a lower mortgage rate than you otherwise would have gotten on your own. 

In today's elevated interest rate environment, it may make sense to pay to get the lower rate if you can afford it. Just understand that it could take months or years to recoup the money you spent at closing to get the lower rate. 

Still, every penny counts, particularly in today's rate environment, so make sure to thoroughly research this option to see if it could help you get a better deal.

Learn more about your mortgage rate options here now.

The bottom line

Mortgage interest rates are high at the moment, but the one you secure for yourself could be even higher if you're not careful. In order to get the best mortgage rate in today's economy, first make efforts to improve your credit score as much as possible. 

One important way to do this is to stop applying for additional credit sources right away. (You can revisit your additional credit needs after you've closed on your home loan.) And, finally, consider buying mortgage points. While an extra upfront cost isn't particularly attractive, it could pay dividends over the months and years to come via a lower mortgage interest rate.

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.