The average 30-year fixed mortgage rate saw its sharpest single-day decline in over a year this past Friday. While rates are now at their lowest since October, they still linger around 6.29%—far above the sub-3% levels seen at the start of the pandemic. But savvy homebuyers still have ways to secure more favorable loan terms.
Where Rates Stand
Analysts expect the Federal Reserve may cut interest rates at its September 17 meeting, which could provide modest relief for prospective buyers. Yet, even with potential rate cuts, experts caution that 6% should be considered the “new normal” through early next year. “Expecting rates to return to 4% or 5% is unrealistic,” said Lawrence Yun, chief economist at the National Association of Realtors.
Three Strategies to Lock in a Better Rate
- Boost Your Credit Score
Your credit score directly affects the mortgage rate you can secure. Borrowers with excellent FICO scores (780–850) might lock in a 6.19% rate on a 30-year fixed mortgage, while those with scores between 700–739 could see rates of 6.39%—adding tens of thousands in interest over the life of a $350,000 loan.
Improving your score is simple in theory: pay bills on time, keep credit utilization under 30%, dispute errors on your report, and consider lengthening your credit history. Even small improvements can translate into substantial long-term savings.
- Increase Your Down Payment
Putting more money down upfront can lead to lower rates. A 20% down payment signals financial stability to lenders, potentially reducing interest costs and avoiding private mortgage insurance. While the average down payment in 2024 was 18% for all buyers (and just 9% for first-time buyers), even a modest increase could yield significant savings. - Explore Alternatives to the 30-Year Fixed
Adjustable-rate mortgages (ARMs) have gained traction as buyers look for lower initial rates. A 7/6 ARM, for example, offers a current rate of 5.59%, roughly half a percentage point below the standard 30-year fixed rate. This can be an attractive option for those with shorter time horizons or who plan to refinance if rates drop further. However, ARMs carry the risk of future rate increases, so they’re best suited for younger buyers or those planning to move within several years.
Bottom Line
While the market may feel daunting compared to the historically low rates of the pandemic, borrowers still have strategies to reduce costs. From improving credit scores to exploring different loan structures, homebuyers who plan carefully can still capitalize on today’s opportunities.