Mortgage Rates Hit Above 7% — 4 Ways Buyers Can Lower Their Monthly Payments
Mortgage rates have surpassed 7% for the first time since January 2025. As of Oct. 29, the 30-year fixed-rate mortgage averaged 7.24%, up from 6.30% a year ago, according to Freddie Mac.
However, not every buyer has to accept a 7% mortgage rate. From improving your credit score to comparing lenders, here are four ways to reduce borrowing costs even in today's higher-rate environment.
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Improve Your Credit Score Before Applying for a Mortgage
Having a high credit score can help you secure a lower mortgage rate. A recent Realtor.com analysis analysis found that reaching the 700 and 720 credit score thresholds can significantly reduce borrowing costs. Assuming an average rate of 7%, a buyer with a credit score below 660 and 20% down would likely receive a 7.30% rate, while someone with a 720 score could secure a 7.03% rate.
While raising your credit score is achievable, it takes time.
"This is a long process," said Jake Krimmel, senior economist at Realtor.com. "Think of it as multi-year [process], not just what you do before you start shopping. Start by knowing your scores across all three credit bureaus."
He recommended reviewing your credit reports line by line to identify what is helping and hurting your score and checking whether you are close to important credit-score thresholds.
To improve your score, focus on paying bills on time, keeping credit card balances low, paying down debt before applying for a loan and avoiding opening new credit accounts while shopping for a home.
Compare Mortgage Lenders Before You Borrow
Don't just accept the first mortgage offer you receive. Shopping around can lead to meaningful savings.
"The analysis compared borrowers with the same credit score, down payment, loan size, month and metro," Krimmel said. "Moving from a typical retail lender to an exceptionally lower one is worth 19.0 basis points — about $5,800 of home purchasing power — which is roughly double the best single credit move and available immediately."
For many buyers, this may be the fastest way to reduce borrowing costs without waiting months or years to improve their financial profile.
Aim for a Larger Down Payment To Lower Mortgage Costs
The Realtor.com analysis found that buyers generally receive better rates with at least 10% down and can unlock additional savings by putting down 20%.
However, much of the value of reaching the 20% threshold comes from avoiding private mortgage insurance rather than securing a dramatically lower interest rate.
"Below 20%, one threshold matters and it is 10%. Moving from 5% to 9% down to 10% to 14% is worth 5.5 basis points, the largest single step in the whole sub-20% region," according to the analysis.
Look At Total Mortgage Costs, Not Just the Interest Rate
When comparing mortgage offers, don't focus solely on the interest rate. It's also important to evaluate mortgage insurance, closing costs, discount points and other fees that affect the total cost of borrowing.
"Budget first and work backwards from there," Krimmel said. "Decide what down payment and monthly payment you can reasonably afford and aim for no more than 30% of income as a rule of thumb."
You should also try to negotiate on the price when possible.
"Rising rates hurt purchasing power, but buyers in many markets today can make back some or all of that by finding a seller willing to give a little on price," Krimmel said.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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