How to Obtain the Best Interest Rate

There is no one-size-fits-all best interest rate. There is only the optimal interest rate for your finances and house-hunting ambitions. Instead of viewing the battle to find a low interest rate as a struggle against lenders who want to rip you off at every turn, think of the process as a component in a larger picture financial program.

Factors that can influence your interest rate include: your FICO credit score, your employment history, the amount of money you have to pay for a down payment, the kind of mortgage you want to get (fixed versus adjustable rate), your neighborhood, your lender's fees, your source of financing, and your participation in one of any number of Federal or state funded mortgage assistance programs.

Obtaining a stellar interest rate often means obtaining a rate that works harmoniously with your budget. If you have tons of money in the bank and lots of expected income on the horizon, you might be willing to drop a large percentage of your overall housing bill upfront and thus really cut back on your monthly payments. However, it may make more sense to invest some of that extra money in holdings like mutual funds or other real estate adventures.

In other words, calculating your best rate means more than just entering your information into an online mortgage calculator and creating some prefab monthly payment package. It means understanding how you're going to grow your money, how you're going to build your asset column, and how're you going to reduce your overall liabilities. Thus, your consumer credit card debt, expected educational costs, safety-net funds, and investment funds should all be considered when you're piecing together your plan.

All that said, there are specific tactics -- some subtle, some obvious -- that you can leverage to lower your rate. Get pre-approved with the lender before home hunting so you don't have to worry about fluctuating rates right before you purchase your home.

Buy in an area of the country where property values are expected to rise, so you can potentially use the equity buildup to refinance in a few years. Finally, force lenders to fight for your business by pitting their quotes against one another.