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If you're looking to buy a home, you probably know that housing affordability is in the dumps. Record-high prices and high mortgage rates are serving a double whammy to prospective buyers everywhere.
But mortgage rates aren't set in stone. Although current rates are hovering near 7%, more borrowers are finding creative ways to snag rates below what lenders advertise. Last year, nearly half of buyers purchased a home at a rate below 5%, according to Zillow.
"With borrowing costs elevated, buyers can take steps to reduce their housing expenses by securing a lower mortgage rate," said Hannah Jones, senior research analyst at Realtor.com.
The market forces that influence mortgage rates are out of your control. However, if you're financially prepared and shop around, you can save up to 1.5% on your personalized rate. Optimizing your credit score, making a larger down payment and negotiating with multiple lenders could also help you unlock homeownership in 2025.
Even a 1% difference in your rate can translate to about 10% savings on your monthly mortgage payment and tens of thousands of dollars in savings over the course of your loan.
Here are several ways to reduce your mortgage rate.
1. Improve your credit score
If your credit needs work, consider taking steps to raise your credit score before applying for a mortgage.
Lenders look at your credit score to decide whether you qualify for a home loan and what interest rate you receive. FICO credit scores range from 300 to 850, with 850 being the best score possible. Higher credit scores show you've managed debt responsibly in the past so it lowers your risk to a lender. This can help you secure a lower interest rate and save big.
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