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10 Ways to Lower Your Mortgage Rate When Buying a Home

Is now a good time to buy a house – with mortgage rates at 20-year highs?
When mortgage rates elevate, be savvy. Maneuver for better rates. First-time home buyers can use proven strategies to get a lower interest rate and buy a home when mortgage rates are high.
Here are 10 ways to get a lower mortgage rate when buying your first home.
- → 1. Use a First-Time Home Buyer Mortgage Program
- → 2. Shorten Your Closing Date Into 15-Day Increments
- → 3. Pay for Mortgage Discount Points
- → 4. Raise Your Credit Score by 20 Points
- → 5. Increase Your Down Payment To the Next 5 Percent
- → 6. Use Seller Concessions
- → 7. Do a Temporary Mortgage Rate Buydown
- → 8. Use an Adjustable-Rate Mortgage
- → 9. Use HomeReady or Home Possible Loans
- → 10. Get Multiple Mortgage Rate Quotes
- → Common Questions About Getting A Lower Mortgage Rate
1. Use a First-Time Home Buyer Mortgage Program
First-time home buyers can use government and community mortgage programs to access lower interest rates and other home-buying incentives, including cash grants for closing costs and forgivable loans for down payments. See all first-time home buyer programs.
Most first-time buyer programs are state and municipal government programs. Home buyers can research what’s available via the Housing and Urban Development (HUD) website.
Other programs are federal and working their way through Congress.
For example, buyers may use the $25,000 Downpayment Toward Equity Act to pay for mortgage discount points to get a lower rate. They may also use the LIFT Act, which can lower a home buyer’s mortgage rate by as many as 4 percentage points.
Get pre-approved to see if you qualify for first-time home buyer programs.
2. Shorten Your Closing Date Into 15-Day Increments
When you buy your first home, your mortgage rate lock is the lender’s commitment to honor a specific mortgage rate for a guaranteed fee for a specified period.
Savvy home buyers can lower their mortgage rate by choosing a smarter closing date.
In general, mortgage lenders raise their interest rates by 0.125 percentage points for every additional 15 days in a rate lock. 30-day rate locks get the lowest rates. 90-day rate locks get the highest rates.
When you write your purchase offer, choose a closing date based on 15-day windows. Close in 30 days instead of thirty-one days. Close in 45 days instead of forty-six.
3. Pay for Mortgage Discount Points
Paying mortgage discount points is an effective way to lower your interest rate.
Mortgage discount points are an upfront, one-time fee paid at closing that permanently reduces a buyer’s interest rate. Each mortgage discount point costs 1% of your loan size and reduces your mortgage rate by approximately 0.25 percentage points.
Mortgage lenders typically offer a discount-point option when you go to lock your rate. Ask to see multiple discount point scenarios and choose which option works best.
Get pre-approved to see how much home you can afford.
4. Raise Your Credit Score by 20 Points
If you’re not under contract in the next 30 days, you have time to work on your credit score and get a lower rate. With every twenty-point increase in your FICO, your mortgage rate improves.
Most home buyers can do small credit work for significant score improvements:
- Pay past-due bills current
- Reduce credit card balances
- Correct erroneous reporting
Buyers can also use online tools such as StellarFi, which does credit-building work in about 30 days.
5. Increase Your Down Payment To the Next 5 Percent
For buyers with conventional mortgage financing, increasing the down payment size to its next five percent increment can result in lower mortgage rates.
For buyers with excellent credit scores, every additional 5 percent down payment may lower your rate by 0.125 percentage points. For buyers with below-average credit, though, savings begin after the down payment crosses twenty percent.
Note: this interest rate strategy applies to conventional loans only. FHA, VA, USDA, and most jumbo loans use a different pricing model.
6. Use Seller Concessions
Seller concessions are an arrangement between a home buyer and its seller to have the seller pay for some or all of the buyer’s closing costs – including mortgage discount points.
Seller concessions are negotiated at the point of sale. They can range up to 9 percent of the purchase price, depending on the mortgage and size of down payment.
Seller concessions may be used for closing costs only. Monies cannot be used for down payment, commissions, or other non-closing fees.
The first step is getting pre-approved.
7. Do a Temporary Mortgage Rate Buydown
Temporary mortgage rate buydowns are a home affordability tool to lowers a home buyer’s mortgage rate for up to 3 years.
Buydowns are named for the length. With a 3-2-1 buydown, the mortgage interest rate reduces by three percentage points in the first year, two percentage points in the second year, and one percentage point in the third year.
In the fourth year, the original rate returns and remains for the loan’s remaining life.
Temporary mortgage rate buydowns aren’t usually cost-effective. A 2-1 buydown may save you $8,000 in mortgage interest, but the cost of that 2-1 buydown is also around $8,000. It’s most common to see temporary buydowns in conjunction with seller concessions.
8. Use an Adjustable-Rate Mortgage
Adjustable-rate mortgages (ARMs) are mortgages where the interest rate adjusts annually after several years pass. ARMs let lenders share their interest rate risk with a home buyer, so lenders award buyers with lower starting mortgage rates.
Adjustable-rate mortgages work like this:
- The initial interest rate lasts for some number of years, usually 5
- After five years, the ARM interest rate changes to match the market
- Every subsequent year, the interest rate changes again
ARM interest rates begin at least one percentage point below a comparable 30-year fixed-rate mortgage rate. When ARMs adjust, they can usually only move within a two percentage point range.
Get pre-approved for an ARM loan.
9. Use HomeReady or Home Possible Loans
Home buyers in low- and moderate-income neighborhoods can lower their mortgage rates via the HomeReady and Home Possible mortgage programs from Fannie Mae and Freddie Mac, respectively.
HomeReady and Home Possible are part of the government’s affordable housing mandate. Eligible buyers get mortgage rates at a half-percentage point or more below standard 30-year rates, plus reduced mortgage insurance rates and closing costs.
See if you qualify for HomeReady or HomePossible.
10. Get Multiple Mortgage Rate Quotes
Comparison shopping is a proven way to reduce your mortgage interest rate.
According to a study from Freddie Mac, home buyers who get at least two mortgage rate quotes save $1,500 over the life of their loan in closing costs, interest rate saving, or both. Buyers who get more than four quotes save $5,000 on average.
Common Questions About Getting A Lower Mortgage Rate
Should I float my mortgage rate to get a lower quote?
Floating your mortgage rate is the opposite of locking it, which means that your lender has no obligation to honor a specific rate. When you float your mortgage rate, you are not guaranteed that interest rates will come down. You assume the risk that interest rates can go up.
It’s dangerous to float your mortgage rate. The safer option is to lock your rate.
Should I switch to a shorter loan term for a lower rate?
Shortening your loan term from 30 to 15 years will lower your mortgage interest rate. However, shorter loan terms result in higher monthly payments because payments compress into a smaller number of years. If you can stomach a high payment, choose the shorter loan term. Otherwise, stick with the 30-year loan term.
Are there other programs available that give buyers lower mortgage rates?
First-time buyers can get a mortgage rate discount through the FHFA First-Time Home Buyer Mortgage Rate Discount program.

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