Written by Dan Green
Dan Green
Dan Green (NMLS 227607) is a licensed mortgage professional who has helped millions of people achieve their American Dream of homeownership. Dan has developed dozens of tools, written thousands of mortgage articles, and recorded hundreds of educational videos. Read more about Dan Green.
This website discusses mortgage programs and how to qualify. Your eligibility may vary based on lender guidelines and investor overlays. Check with your lender for specific details.
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This article was checked for accuracy as of November 4, 2024. Learn more about our commitments to accuracy and your mortgage education in our editorial guidelines.
Updated: November 4, 2024
Today’s mortgage rate for a conventional 30-year fixed-rate mortgage averages near 6.25%. But let’s say you want a lower mortgage rate than that.
You may be able to get it.
There are many reasons to want a lower mortgage rate:
To get a lower mortgage rate, start with a lender that displays current mortgage rates online. Then, apply these ten principles to potentially reduce your rate further.
Here are 10 proven ways to get a lower mortgage rate.
There are more than 3,000 public and private first-time home buyer programs available. Benefits may include interest rate discounts, cash grants for closing costs, tax credits, and forgivable loans for making a down payment.
Congress is also discussing first-time home buyer programs that may help you get a lower mortgage rate, such as the $25,000 Downpayment Toward Equity Act and the LIFT Act.
A mortgage rate lock is a lender’s guarantee of a specific rate for a set period.
Lenders typically raise interest rates by 0.125 percentage points for every 15 additional days added to a rate lock.
When writing your offer, aim to close within a 15-day window. For example, close in 30 days instead of 31 or 45 days instead of 46.
Discount points are one-time fees paid at closing to reduce your mortgage rate permanently. Each discount point costs 1% of your loan size and typically lowers your rate by 0.25 percentage points.
At today’s mortgage rates, one discount point on a $200,000 mortgage costs $2,000 and saves approximately $11,639 in payments over the life of the loan.
If you have time before needing mortgage approval, improving your credit score can help you qualify for lower rates. Even a 20-point increase can make a big difference.
The earlier you begin to improve your credit score, the more you can benefit from better rates.
Fixing credit involves reducing balances, correcting errors, and using services like StellarFi for credit building, which may show results in as little as 30 days.
Average mortgage rates for conventional loans based on credit scores when the loan-to-value exceeds 80%:
For buyers using a conventional mortgage, raising your down payment in 5% increments can result in lower rates.
For buyers with excellent credit, moving from 5% to 10% down can lower the mortgage rate by 0.125 percentage points. On a $200,000 loan, this could reduce the payment by $16 per month.
This technique is less effective with FHA, VA, and USDA loans.
Seller concessions allow sellers to cover some of the buyer’s closing costs, including buying discount points.
Seller concessions are negotiated by the buyer’s and seller’s agents as part of the contract. In For Sale By Owner deals, the buyer and seller negotiate directly.
Seller concessions can cover up to 9%, depending on loan type and loan-to-value. They cannot cover the down payment or commissions.
Temporary mortgage rate buydowns reduce your rate for 1-3 years but are not permanent. They work like non-permanent discount points.
A 3-2-1 buydown reduces your rate by three percentage points in the first year, two in the second, and one in the third. Afterward, the original rate returns for the loan’s remainder.
Though temporary buydowns can provide upfront savings, they are often not cost-effective. For a full analysis, consult your lender.
Adjustable-rate mortgages (ARMs) feature lower initial rates than fixed-rate mortgages. After a fixed period, the rate adjusts annually based on market conditions.
Today’s ARMs include safeguards like limits on annual rate changes and do not allow negative amortization.
Buyers in low- and moderate-income neighborhoods can benefit from lower rates with HomeReady and Home Possible loans.
These loans offer lower rates, reduced mortgage insurance, and lower closing costs. On a $100,000 loan, a half-point rate reduction can save $386 annually in principal and interest payments.
Getting multiple mortgage rate quotes can save you money. According to Freddie Mac, getting two quotes can save an average of $1,500, while getting four quotes can save around $5,000 over the life of a loan.
Imagine a first-time home buyer submitting an offer on their first home.
The buyer has pre-approval from a mortgage lender but is concerned about payment shock. They improved their credit score, earning a 60-point increase, which gave them access to lower rates.
They request seller concessions to buy discount points and ask for a closing within 30 days to lock in a lower rate. This helps reduce monthly mortgage payments and manage their budget.
Floating your mortgage rate means choosing not to lock your rate, betting that rates will drop before closing. However, there’s no guarantee rates will decrease, and the lender is not obligated to offer a lower rate. Speak with your lender for advice on floating.
Switching from a 30-year to a 15-year loan generally reduces your rate but increases monthly payments. Choose a shorter term if you can manage the higher payments.
First-time buyers may automatically receive a rate discount through the FHFA First-Time Home Buyer Mortgage Rate Discount program. Ask your lender for more details.
Both brokers and banks may offer competitive rates. Generally, the lender with the lowest overhead and cost structure offers the best rates. Compare multiple quotes to find the lowest rate.
Mortgage rates are typically non-negotiable to avoid Fair Credit violations, as lenders must offer consistent terms to similarly qualified applicants. However, comparing offers can help you find the best rate.
This article, "10 Ways to Get A Lower Mortgage Rate," authored by Dan Green, is based on extensive professional mortgage experience and includes references to trusted sources such as industry-leading financial institutions and expert research from the following websites:
This article was last updated on November 4, 2024.
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