Mortgage rates have stayed at historic lows for some time, and the federal reserve has stated they are keeping the prime rate low for some time to come. For the consumer, this means that low mortgage interest rates are going to be around for some time. However, just because the federal reserve says they are going to keep the prime rate low does not guarantee that seekers of home loans are going to get the best rate. The average rate is just that - average. Banks can and do have higher mortgage interest rates, which means the customer needs to shop around to find a favorable interest rate.


The first step is to determine what type of mortgage product is needed. There are two types of mortgages, adjustable rate and fixed. Adjustable rate mortgages (ARM) have a floating interest rate, much like a credit card. The mortgage interest rates on an ARM are usually low at the time of origination, but rise if the federal reserve decides to raise the prime rate down the road. Interest on fixed mortgage home loans stay the same throughout the length of the loan, and are not susceptible to rate changes.


Begin the search for low-interest home loans both online and locally. There are many online mortgage companies to choose from, but it may not be possible to find one with terms that are favorable, although they have excellent mortgage interest rates. Turn the quotes into a negotiating tool with a local bank that offers higher interest but terms that are desired. Banks have flexibility when it comes to the interest rate they offer, although they do not come right out and say so. They are relying on their customers to not do much in the way of research and simply taking the higher rate. Bringing in paperwork showing that lenders are offering lower interest rates elsewhere is an excellent bargaining chip that works in the favor of the customer.


Look into FHA loans. These are loans that are backed by the government, and have competitive mortgage interest rates that are sometimes better than the lender. An FHA loan accepts as little as 3.5 percent down towards the housing purchase, although they do have higher fees. Bringing more money to the table for the purchase lowers the fees. The monthly loan payment is going to be higher because of the lower down payment, but it stays fixed throughout the loan term, making it a reliable bill every month.


Home loans that offer points are another loan product that offer low mortgage interest rates. An individual point reduces the interest rate by .125 percent and are purchased at loan origination. Their cost depends on the overall loan amount. For example, a home loan of $125,000 results in a point that can be purchased for $1,250. A customer is basically buying their way into a lower interest rate, which is locked into the mortgage for the entire term.