Lessons Learned: How I Got the Lowest Mortgage Interest Rate

In 2020, mortgage lenders were offering up some of the lowest interest rates in history in the wake of the COVID-19 pandemic and the economic crisis it fueled. My husband and I weren't looking to move at the time, and we already had a decent interest rate on our existing mortgage. But as a general rule, refinancing a mortgage can make a lot of sense when you're looking at shaving around 1% or more off your current rate.

Since we were in a position to lower our loan's interest rate by over 1%, we pursued a refinance in the summer of 2020. And we wound up going with the first lender we talked to. But there was another step we took to be sure that we were truly getting the best deal.

Shopping around is key

I happen to have a good friend whose friend has a mortgage company. When we mentioned we were looking to refinance, they suggested we call him, which we did.

My husband and I had a 30-year loan at the time we started exploring refinances, but we were interested in swapping that for a 15-year loan. And the reason was that based on how low rates were, we were looking at almost the same monthly payment for a 15-year loan as a 30-year one. Our monthly payments did go up a little, but it was an uptick we could comfortably handle.

Also, my husband and I had already been paying our mortgage for a good 10 years as of 2020. We didn't want to reset the clock on that loan and start over with a new 30-year term, so a 15-year loan was what we pursued.

My friend's mortgage lender friend quoted us 2.625% on our refinance with minimal closing costs. The offer seemed really good, but we couldn't be sure until we shopped around.

So we spent about 10 days gathering quotes from different lenders and seeing where we landed. We purposely wanted to do our rate shopping quickly, because here's something you may not realize: Every time you apply for a mortgage, a hard inquiry is done on your credit report. And from there, your credit score has the potential to drop by a few points.

A single hard inquiry isn't such a big deal. But as you might imagine, having eight or nine of those isn't optimal.

However, when you have multiple hard inquiries on your credit report for the same purpose, such as a mortgage refinance, they all count as one inquiry as long as they're done in short order -- commonly, within 14 to 30 days. So we purposely did our rate shopping quickly to avoid credit score damage, and also, because we wanted to move quickly on our new loan while rates were low.

In the end, the 2.625% rate we got as our first offer wound up being the best one. There was another lender whose rate initially seemed the most competitive, but its closing costs were considerably higher, which negated that savings.

How you can get the lowest rate on your next mortgage

Whether your next mortgage is a purchase mortgage or a refinance, shopping around is truly important. It just so happened to work out that in the case of our refinance, the first offer we got was the best. But we couldn't have known that without doing our research.

There's another step you can take to snag a competitive interest rate on a mortgage, and it's boosting your credit score. When my husband and I applied to refinance, our credit scores were above 800, which meant we were eligible for some of the best rates being offered for borrowers in our area. But if your score is, say, in the low 700s, getting it into the upper 700s -- or better yet, above 800 -- could help you snag a better rate.

Boosting your credit score can require ongoing work, like paying bills on time and whittling down credit card debt, which won't happen overnight. But one move that may result in a pretty quick credit score boost is reviewing your credit report and correcting errors that may be working against you.

All told, for me, getting the lowest mortgage rate I could find boiled down to being patient and taking the time to make phone calls. It was a somewhat time-consuming process, but not an unreasonable one. And I'm glad I spent the time, because that way, I was able to sign my new mortgage feeling confident in the deal I was getting.