How to Set Yourself Up for the Best Mortgage Rate When Buying a Home
When you’re getting ready to buy a home, one of the most important pieces of the puzzle is securing a strong mortgage rate. The rate you lock in doesn’t just affect your monthly payment, it impacts your overall financial picture for years to come. While you can’t control everything, there are definitely some strategic moves you can make to put yourself in the best possible position.
Here’s what to keep in mind if you’re buying in the Twin Cities area:
Know Where Your Credit Stands
Your credit score is one of the first things lenders look at when determining your rate. The higher your score, the more favorable your rate will likely be. It’s worth taking time to check your credit report for any errors, pay down existing balances, and make sure you’re current on payments before applying. These small steps can have a big impact on what you’re offered. A great lender will also give you guidance on how to improve your credit score quickly (spoiler alert you can make an immediate impact on your credit score with a few of these tricks and tips).
Shop Around
Not all lenders are created equal. From big-name banks to credit unions and mortgage brokers, each may offer different rates and terms. Even just a small difference in your interest rate can save you thousands over the life of your loan. It’s smart to compare at least a few quotes before making a decision, and don’t be afraid to ask questions about fees, turnaround times, and rate lock options. If you don't know where to start, ASK ME!
Explore Different Loan Types
The type of loan you choose matters. Fixed-rate loans offer stability and predictable payments. Adjustable-rate mortgages may start with a lower rate but carry more risk if rates go up. The right loan really depends on your long-term goals and how long you plan to stay in the home. A trusted lender or broker can walk you through the options and help you find the best fit.
Put More Down (If You Can)
The more money you put down upfront, the less you’ll need to borrow, which may open the door to better rates. A larger down payment can also help you avoid private mortgage insurance (PMI), lowering your monthly costs. Even if 20% isn’t realistic, increasing your down payment even slightly can make a meaningful difference. Using 'Gift Funds' can also be an option (if you're lucky enough to have a family member willing to help out), but you'll want to be clear with your lender up front about where those 'Gifts' will be coming from.
Pay Attention to Your Debt-to-Income Ratio
Lenders want to see that you can comfortably manage your monthly mortgage alongside your other financial obligations. The lower your debt-to-income ratio (DTI), the more attractive you’ll be as a borrower. This could mean paying off credit cards, car loans, or other debt before applying, or holding off on big purchases while you’re in the home-buying process. (This is NOT the time to finance that amazing Restoration Hardware couch you've been eyeing for 5 years that will go perfect in your gorgeous new living room).
Ask About Local Incentives
In Minnesota, there are some fantastic programs out there for first-time buyers and even repeat buyers, grants, down payment assistance, and more. These programs can improve your overall buying power and possibly lower your costs. They are available through participating lenders across the state and are designed to make homeownership more affordable, no matter where you are at in your journey. Click here to read more about the different programs.
Understand Rate Locks
Once you find a rate you’re happy with, talk to your lender about locking it in. A rate lock gives you protection from fluctuations while you complete your purchase. It’s one of those behind-the-scenes steps that can provide peace of mind, especially in a market where rates are moving. Locking in your rate can even give you a competitive edge with your offer.
Be Ready for Closing Costs
It’s not just about the down payment. Closing costs, like lender fees, title insurance, appraisals, and more, can add up quickly. Some lenders offer the option to roll those into your loan or cover them in exchange for a slightly higher rate. Just be sure you understand the trade-offs, and plan ahead so there are no surprises at the closing table.
Build the Right Team Around You
Buying a home is never a solo mission. You’re building a team of professionals to support and guide you, your agent, your lender, your inspector, your title company. Each person plays a role in helping you make smart, confident decisions.
I work with several excellent mortgage professionals here in the Twin Cities, and I’d be more than happy to connect you with someone I trust. These are people who understand our local market, stay ahead of trends, and genuinely care about finding the best solution for your unique situation.
If you’re thinking about buying a home soon, or even just want to know where to start, reach out. I’m always here to answer questions, make introductions, and help you feel fully prepared for what comes next.
