3 great ways to get a lower mortgage interest rate in today's market
With months of promising signs that inflation was finally cooling, many homebuyers were cautiously optimistic that interest rates would be coming down later this year and into 2024. But after a report that showed inflation ticked up in July again, that outlook seems less clear. And now there are some experts predicting additional rate hikes to come, all of which will come after the Federal Reserve bumped the benchmark interest rate to a 22-year high last month.
While the average mortgage interest rate for a 30-year loan currently hovers around 7%, there are still some great ways buyers can get a lower rate, even in today's market. While the 2% to 4% range from 2020 and 2021 is unlikely to return anytime soon, there are multiple ways borrowers can get that 7% or even lower — and they can do it today.
Start by exploring your mortgage rate options here to see what you qualify for.
3 great ways to get a lower mortgage interest rate in today's market
Here are three reliable ways borrowers can get a lower mortgage interest rate now.
Improve your credit score
While a 7% interest rate isn't ideal, it will be even higher if your credit is subpar. So be sure to improve your credit score as much as possible before applying. The lowest rates and best terms will be reserved for those borrowers with the best credit. And, if you improve your score dramatically, you may be eligible for a rate that's even lower than the average one offered at the time of your application.
What does this mean, exactly? First, check your credit report for any errors, inconsistencies or inaccuracies. (A mortgage lender will be looking at it anyway, so it's best to make sure it's accurate now.) Stop applying for any new credit immediately and pay down (or off) any existing debt that could be dragging down your score. And, pay all existing bills on time (or early) so you don't risk a late fee penalty.
Not sure what mortgage rate you'd be eligible for? Find out here now.
Buy mortgage points
Mortgage points are the fee you'll need to pay to a lender to secure a lower mortgage rate. This can generally be paid upfront at closing, or it can be added to your overall mortgage loan balance. And while any additional fees are generally unwelcome, they could be worth it if you could save a significant amount in your monthly mortgage.
Like mortgage refinancing, however, you'll want to make sure that you're planning on staying in your home long enough to break even on the cost that accompanies any points purchased. Otherwise, it may not be worth it. Similarly, if you're planning on refinancing in the short term (less than a few years), the lower rate mortgage points offer may not be worth it relative to what you can potentially secure with a better refinance rate.
Lock in a rate
While today's rates pale in comparison to the recent past, they could be the very best you'll get for a while. Timing the market is difficult to do, so don't pass on a good rate today hoping for a better one tomorrow. The mortgage market is too unpredictable right now to take that approach.
So, for example, if you can secure a 6.75% rate today, it's smart to lock it in. Rates could always go down between now and the time you close. But if they tick up close to 8% between that time, you'll be happy you locked in the lower rate — and saved money over the next few years.
Explore your current mortgage interest rate options here to learn more.
The bottom line
While today's mortgage interest rates are significantly higher than they had been in recent years, there are still some ways buyers can get a lower rate than what's typically available. By improving their credit score they'll position themselves to secure the lowest rate possible at the time of application, but by buying mortgage points, they can get a rate that's even lower.
Finally, buyers should strongly consider locking in a competitive rate today — and not wait for the market to improve — as today's "high" mortgage interest rate could be tomorrow's "low" one.
