Understanding Mortgage Rates: What Determines Your Rate in 2026
Two people can get quoted rates 1%+ apart on the same day. Here is why and how to get the lowest rate.
Your mortgage rate is determined by: credit score (biggest factor — 740+ gets the best rates), down payment percentage (20%+ avoids PMI and gets better rates), debt-to-income ratio (under 36% is ideal), loan term (15-year rates are 0.5-0.75% lower than 30-year), loan type (conventional vs FHA vs VA), and market conditions (the Federal Reserve and bond market).
The Cost of Each 0.25% in Rate
On a $300,000 30-year mortgage, each 0.25% rate increase costs approximately $44/month and $15,840 over the life of the loan. The difference between a 6.0% and 7.0% rate: $177/month and $63,720 in total interest. Getting the lowest possible rate by improving your credit score and shopping multiple lenders is worth thousands.