Mortgage rates have reached their lowest levels in more than three years, according to Freddie Mac. With careful planning, borrowers can secure interest rates below the national average.
Yahoo Finance analyzed nearly 5,000 lenders reporting 2024 loan data under the Home Mortgage Disclosure Act. The analysis found that large national banks, credit unions, and homebuilders financing their own construction offered the most favorable rates to diverse borrowers.
Since rates change constantly and vary by lender, research is necessary. Borrowers should know their credit score, debt-to-income ratio, and down payment amount before contacting lenders for rate estimates.
Once borrowers identify two or three potential lenders, they can apply for preapproval to get more exact mortgage rates. For those not buying new construction from lenders offering buydowns or credit union members, eight strategies exist for securing lower rates through regular mortgage lenders.
Improving credit scores can lead to better rates. For example, moving from a FICO Score of 620 to 640-659 could reduce APR from 7.26% to 7.09% based on early January rates with one discount point. Larger discounts come with higher credit tiers.
Lowering debt-to-income ratios also helps secure better rates. Aim for 25% or less DTI by dividing total monthly debt by monthly income before withholdings. While lenders may consider DTIs up to 50%, they prefer 35% or less, with the lowest rates going to borrowers at 25% or below.
Making larger down payments earns lower mortgage rates. While loans can be obtained with as little as 3% down, paying more upfront improves rates. First-time home buyers made median down payments of 10% in 2025, according to the National Association of REALTORS®.
Buying discount points involves prepaying interest to lower ongoing mortgage rates. One point equals 1% of the loan amount and typically reduces interest rates by one-quarter percentage point. Points can be purchased in fractional amounts.
Lenders sometimes add points to make rates appear more enticing, but borrowers actually pay for discounts with upfront fees. When shopping for loans, compare offers with zero points first, then decide how many points to buy.
In a Zillow survey of home buyers over seven months of 2024, about 45% obtained mortgage rates below 5% when rates were above 6.5%. One-third negotiated special financing with sellers or builders, more than one-quarter got rate buydowns, and 23% bought discount points.
To get below 5% when rates are near 6%, borrowers need four to five discount points. Each point reduces interest rates by approximately one-quarter point. For a $300,000 mortgage, five points would cost about $15,000.
Interest rate buydowns lower mortgage rates for the first few years of loans. Home builders, sellers, and some lenders occasionally offer buydowns to boost sales, though this option remains rare among mortgage lenders. Guild Mortgage and AmeriHome Mortgage offer buydown programs.
A buydown might reduce rates from 6% to 5.5% for two years. Borrowers should compare mortgages with and without buydowns, as lenders qualify based on permanent rates, not temporary buydown rates. Monthly payments will rise after the discount period ends.
Adjustable-rate mortgages have returned to popularity as rates rise. ARMs feature fixed introductory rates for three to ten years, then adjust regularly. Borrowers should look for introductory rates lower than fixed-rate mortgages and choose terms matching their planned home stay duration.
Shorter-term mortgages like 20- or 15-year fixed loans typically have lower interest rates than traditional 30-year terms, though monthly payments are higher. These loans offer unchanging rates and faster home equity building.
Assumable mortgages allow taking over existing home loan payments. Borrowers make lump sum payments to current owners for equity value or profit, requiring available cash or additional loans. Most conventional mortgages aren't eligible for assumption, so borrowers need sellers with FHA, VA, or USDA loans.
Recently, home loan interest rates have been in the low-6% range. According to Realtor.com, 68.6% of existing homeowners have mortgage rates below 5%, and 51.5% have rates below 4%, making refinancing currently unappealing for many.
After moving in, homeowners should monitor interest rates for dips of 1% to 2% below current rates before considering refinancing. Refinance closing costs exist, and borrowers must decide whether to lower monthly payments or pay off homes sooner.
The lowest mortgage rate ever on a 30-year loan was 2.65% in January 2021, according to Freddie Mac. COVID-19 created the dramatic financial stress needed to push rates that low. Fifteen months later, rates reached 5%.
While never impossible, mortgage rates are unlikely to return to 3% unless another drastic event like the pandemic occurs. VA loans, particularly 15-year VA loans, usually have the lowest mortgage rates because shorter terms feature lower rates than longer terms.