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The home buying landscape has shifted dramatically over the last couple of years. At the height of the pandemic, 3% mortgage rates were common, but home prices were also surging and a shortage of inventory was adding to the stress on buyers.
These days, housing inventory remains low in many markets and home prices remain elevated. But the big difference is that the Fed hiked rates numerous times over the last 18 months to try and temper inflation, which has led mortgage rates to hover near 7% instead.
With mortgage rates as high as they are right now, buying a home can feel out of reach for many people. But the good news is that there are a few ways to snag a better mortgage rate this spring, and doing so could save you tens of thousands of dollars over the life of your home loan.
Learn more about the top mortgage rates you may qualify for here.
5 surprising ways to get a lower mortgage rate this spring
If you’re trying to get a low mortgage rate this spring, these five strategies may come in handy:
Work with a mortgage broker
While many buyers simply go to their local bank or a popular online lender to obtain a mortgage, working with an independent mortgage broker can pay off, and in certain cases, significantly. That’s because brokers have access to wholesale mortgage rates from a variety of lenders and can shop your loan scenario to find you the best deal.
Brokers also get paid by the lender, not by you, so you won’t have to spend more money to access this comprehensive rate shopping option. An experienced local broker will typically be able to size up your full financial picture and match you with the lowest-rate mortgage loan that fits your needs.
You can also shop around and compare what multiple mortgage brokers offer. By making brokers compete for your business, it can result in a lower rate than you’d get by going directly to a lender.
Compare your mortgage loan options online now.
Buy mortgage discount points
Many lenders offer the option to buy down your mortgage rate to a lower level. When you do this, you outright buy mortgage discount points that lower your mortgage rate permanently over the life of the loan. While the costs can vary, each point typically costs about 1% of the loan amount and reduces your mortgage rate by about 0.25%.
For example, if you wanted to lower your mortgage rate to 6.50% instead of 6.75% on a $400,000 mortgage loan, you’d pay 1% of the total loan, or $4,000, for one discount point. Paying for mortgage discount points will add to your upfront costs when buying a home, but in this case, doing so would also save you over $75 per month, or a total of $27,000 over a 30-year term.
You’ll need to crunch the numbers, but buying points can, in many cases, help you secure a much lower mortgage rate. So, as you shop around, be sure to ask lenders about their rate buy-down options and do the math to see if it makes sense based on how long you plan to stay in the home.
Move your closing date
The interest rate you lock in is partly determined by when your mortgage loan is scheduled to close or be delivered. And, in some cases, lenders may quote you a slightly lower mortgage rate if you’re willing to close toward the end of the month rather than the beginning.
This strategy relates to lenders’ compensation practices from loan services. Moving your closing date back by even a week or two could allow your lender to get a better rate from their bank or investor before you lock yours in. It’s a subtle move, but one that could shave 0.125% or more off your mortgage rate.
Opt for a shorter loan term
While 30-year fixed mortgage rates are the most popular option, you may be able to get a better rate if you opt for a 15-year mortgage instead. Take, for example, the difference between the average 30-year and 15-year mortgage rates today. Right now, the average 15-year mortgage rate is 6.46% while the average 30-year mortgage rate is 6.99% — a difference of about 0.53%.
The trade-off to getting a lower rate with a shorter loan is a much higher monthly payment, though, so it may not be the right call for every buyer. However, it can, in many cases, be a smart way to snag the lowest mortgage rate and pay off your loan quicker if you can afford the higher payments.
Negotiate everything
Just about every fee associated with your mortgage is negotiable, and while negotiating your mortgage loan fees won’t lower your mortgage rate, it can reduce your costs overall. For example, lenders commonly charge origination fees of 0.5% to 1% of the loan amount, as well as underwriting, processing and other add-on fees. But many lenders will reduce or eliminate some of thesefees if asked, especially if you have decent credit and negotiate firmly.
Simply asking “What fees are negotiable and what’s the lowest you can go on fees?” can prompt the lender to cut their charges and overall borrowing costs. Don’t take the first number they give you, and be prepared to walk away for a better deal elsewhere.
You can also try to negotiate your mortgage rate. For example, if a lender offers you a rate that’s lower than the rate you were offered with a different lender, you can use that as leverage to try and get a better rate. After all, lenders want to obtain your business, so there may be some flexibility with both your mortgage rate and the fees you’re charged.
The bottom line
While higher mortgage rates are common in today’s economic landscape, thinking creatively about ways to lower your rate can pay off tremendously. By using strategies like negotiating fees aggressively and buying discount points, you may be able to save thousands this spring home buying season. A little effort can go a long way in this higher rate environment.
Angelica Leicht is senior editor for Managing Your Money, where she writes and edits articles on a range of personal finance topics. Angelica previously held editing roles at The Simple Dollar, Interest, HousingWire and other financial publications.
