Prime mortgage rates are based on the prime lending rate index established by the Federal Reserve. Normally, banks and lending institutions use this index and offer loans at several percentage points higher than the prime rate, a key financial indicator.

For those looking for a really great mortgage loan, it is important to compare types of mortgages and the various financial options of each to learn how close to the prime rate you can find. It can be the difference of only a fraction of a percentage rate that changes your mortgage cost over the life of a loan by thousands. For that reason, finding a near prime rate for a mortgage loan can be a great way of obtaining a very good deal for your home loan and saving lots of money.

One means of getting your loan interest rate down to nearer the prime mortgage rate is to pay points on the mortgage. This means that you pay part of the interest up-front at closing. In financial terms, a point is equal to 1% of the amount of the loan. So, if the prime lending rate is 5% and the mortgage rate that is the lowest you can locate is 7%, by paying 1% of the loan amount at the time of closing, you can lower your interest rate and monthly loan costs.

As with any other mortgage, the best mortgage loan rates are available to individuals who meet certain criteria and have an excellent financial history and a corresponding high credit score.