As of mid-January 2023, the rate for a 30-year fixed-rate mortgage is 6.33%. Though the rate has dropped since its peak of 7.08% in October 2022, it is still high compared to the past two years. So, how can you get a lower mortgage rate and avoid leaving money on the table? Here are some tips!

1. Shop Around

Just like you would for insurance, or any other purchase, you can and should shop around for mortgage lenders. A study from Freddie Mac shows that nearly half of all home buyers do not shop for better rates before taking out a mortgage. That’s unfortunate because if you get at least two different quotes you’ll likely save an average of $1,500 in closing costs and/or interest payments over the life of your loan. Those who obtain more than four quotes typically save $5,000 or more.

2. Closing Date Science

A mortgage rate lock is the lender's guarantee to honor a certain interest rate for an agreed-upon fee over a set time frame. By selecting a sooner closing date, home buyers can reduce their mortgage rate.

Generally, mortgage lenders increase their interest rates by 0.125 percentage points for every 15-day increment of a rate lock. The lowest rates are associated with 30-day rate locks and the highest rates with 90-day rate locks. When drafting your purchase offer, select a closing date that falls within 15-day intervals. For example, opt for thirty days instead of thirty-one and forty-five days rather than forty-six to get the most competitive interest rate available.

3. Discount Points

You can secure a mortgage rate buydown by paying points. These are fees paid upfront when taking out a loan in exchange for a reduced interest rate. As an example, if you’re offered a 6% interest rate on a $400,000 mortgage, you could pay $4,000 to lower the rate to 5.75%. Although you’re spending more money initially with this option, you’ll spend less over the life of the loan due to having locked in a lower interest rate.

4. Downpayment Increase

For those with excellent credit scores, each 5% increase in your down payment can yield a decrease of 0.125 percentage points to your interest rate. However, buyers with less-than-stellar credit will not experience any savings until they have made a 20% down payment.

Taking advantage of these tips could save you thousands over the life of your loan. If you're looking for local lender suggestions, we've got them! Don't hesitate to reach out for a list. Just email [email protected] or call 239-472-1950.