Get the best interest rate

Everyone wants to get the best interest rate on their loan.  But what is the "best rate"?  Is the "best rate" the same for everyone?  And what factors affect what rate you get? 

These are great questions to ask when getting pre-approved for a loan.

There isn't a "best rate" that is the same for everyone on a particular day.  Rates depend on many factors, some which a buyer can control and others that are fixed.  One of the biggest factors is your credit score.  While you can control this before you buy a house, it is going to be set once your lender pulls your credit report.  So always check your credit far in advance of buying to make sure that it looks good.  If it doesn't you'll have time to fix some things before you're ready to buy.

For most loans, if you have a credit score of a 740 or above will get you the quoted rates.  If you have a score lower then your rate would increase.  If the score is really low the rate may increase by as much as 1%.  Those with lower credit scores are also affected more by the amount of downpayment they put down. The best way to minimize this is to put down 5%, 10% or 25%.  You'd think 20% would also give you a better rate, but lenders don't require mortgage insurance at that downpayment level (which means more risk for them) so they charge a higher rate to you.

Now for some of the items that are set no matter what your score. Loans on condos are at higher rates, again because the lenders view them as higher risk.  And duplexes and fourplexes are higher for the same reasons.  For investors buying property the rates are very high, almost 1.5% higher than a primary residence.

So the optimal rate option is to be buying a house you'll be living in, with a 740+ credit and putting down 5,10 or 25%.  And worst goes to an investor buying a duplex or condo.