Mortgage Rates Are the Lowest Since 2022 — Here’s How to Get One Even Lower

Mortgage rates can change fast, and smart homebuyers know they do not always have to accept the first rate they see. With the right strategy, you may be able to lower your mortgage rate or reduce your monthly payment.

If you are planning to buy soon, start by reviewing the documents needed for mortgage pre-approval so you know what lenders may ask for.

Here are a few ways buyers and refinancers may be able to get a better mortgage rate.

1. Buy Mortgage Points

Mortgage points are fees you pay upfront to a lender in exchange for a lower interest rate. This is sometimes called buying down the rate.

• Potential savings: Paying points may lower your mortgage rate and monthly payment.
• How you pay: Points are usually paid at closing, although some buyers may roll certain costs into the loan depending on the lender and loan type.
• What to check: Compare the upfront cost with the monthly savings to see how long it takes to break even.

The Consumer Financial Protection Bureau explains discount points and lender credits if you want to understand how buying down a rate works.

If you are not sure which lender to choose, read our guide on how to choose the best lender for a first-time home buyer.

2. Consider an Adjustable-Rate Mortgage

An adjustable-rate mortgage, also called an ARM, may start with a lower rate than a fixed-rate mortgage. However, the rate can change later after the initial fixed period ends.

• Possible benefit: An ARM may offer a lower starting payment.
• The risk: Your rate and payment may increase later when the adjustable period begins.
• Best fit: Some buyers consider an ARM if they plan to move, sell, or refinance before the rate adjusts.

Before choosing an ARM, review the CFPB’s guide to adjustable-rate mortgages so you understand the risk.

You can also read our article on whether mortgage rates may drop to compare your options before locking in a loan.

3. Make a Larger Down Payment

A larger down payment can sometimes help you qualify for better loan terms because it lowers the lender’s risk.

• Lower loan-to-value ratio: A bigger down payment means you are borrowing less compared with the home’s value.
• Smaller monthly payment: Borrowing less can reduce your monthly mortgage payment.
• Possible PMI savings: Depending on the loan, putting enough down may help you avoid private mortgage insurance.

Before using all your savings for a bigger down payment, make sure you still have money left for closing costs, repairs, moving, and emergencies.

If you are new to buying, read our guide on how to make the home buying process easier.

Bonus Tips to Lower Your Mortgage Rate

• Improve your credit score: A higher credit score may help you qualify for a better rate.
• Shop around: Different lenders may offer different rates, fees, and loan options.
• Compare the full loan cost: A low rate is helpful, but closing costs, points, lender fees, and loan terms also matter.
• Ask about rate locks: A rate lock may protect you from rate changes for a set period while your loan is being processed.

The CFPB has a helpful guide on comparing mortgage loan offers before choosing a lender.

Before making a final decision, you may also want to read our article on common mistakes first-time homebuyers make.

Bottom Line

Getting a lower mortgage rate is not always about waiting for the market to change. You may be able to improve your rate by comparing lenders, improving your credit, buying points, choosing the right loan type, or making a larger down payment.

Rates change often, so it is smart to compare offers and ask questions before locking your rate. If you are close to buying, talk to a lender and review your full monthly payment, not just the interest rate.

If you are ready to prepare, start with the mortgage pre-approval document checklist.