7 Tips for Lowering Your Home Mortgage Rate When Buying A Home
Last Updated: January 19, 2023

7 Tips for Lowering Your Home Mortgage Rate When Buying A Home

Are you considering buying a new home and wondering if now is a good time to purchase with a high mortgage rate? 

While mortgage rates are important to consider, we will teach you how to secure a lower home mortgage rate using proven homebuyer strategies to purchase your dream home, so you can start your home-buying journey off on the right foot.

Why Are Mortgage Rates High?

Mortgage rates rose over the last year due to a series of factors, including Fed fund rate hikes, supply chain, and demand issues after the pandemic, the war in Ukraine, the rising cost of inflation for food and energy, and other contributing factors. 

While mortgage rates have been slowly dropping since the fall of 2022, many are hopeful that 2023 will continue a gradual decline.

According to Freddie Mac, mortgage rates for 2023 will be at 6.4%. You can look at the Primary Mortgage Market Survey from Freddie Mac to learn more about mortgage trends. 

7 Tips for Lower Mortgage Rates

By using these home-buying tips to lower your mortgage rate, you can avoid some of the pitfalls of high-interest rates and still become a home buyer while growing equity in your investment.

1. Select A First-Time Homebuyer Program

If you’re a first-time home buyer, you have the opportunity to use federal, state, municipal, and first-time mortgage programs to secure lower interest rates, help with closing costs, provide down payment loans, and more.

As federal and other programs continue to expand, this is an excellent way to get the best interest rate for you.

How Can This Help Me?

One popular first-time home buyer program that is government-backed and part of HUD is an FHA loan insured by the Federal Housing Administration. 

If you qualify for an FHA home loan, then you’ll be able to take advantage of lower down payments. Although these will likely be offset by mortgage insurance and other requirements, this is a great option for many.

Meanwhile, state programs may also offer qualifying programs for first-time home buyers based on income, property price/value/location, and more.

2. Select An Adjustable Rate Mortgage

One thing is for certain: current mortgage rates will change and an adjustable rate mortgage will allow your mortgage to adjust within a few years.

This means that you have the potential to start your loan about one percentage point less than a 30-year (fixed rate) mortgage would be.

How Can This Help Me?

If you don’t love the current mortgage rate but can afford the monthly premium, then an adjustable-rate mortgage will allow you to match the market within about 5 years (or refinance).

After the initial set interest rate period, the interest rate will adjust yearly, often within a 2% range of a 30-year fixed-rate mortgage.

3. Improve Your Credit Score

Improve your FICO score and your chance for a great home loan and mortgage rate. Aim to spend the next month or two reducing your credit card balances, paying off past-due bills, and even reporting incorrect changes to help you receive a better mortgage rate from lenders. 

How Can This Help Me?

Improving your score by 20 or more points will have the biggest impact on your mortgage rate.

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4. Work With A Trusted Lender

By working with a skilled loan officer, you will be provided with the best options for home-buying programs, as well as the best lenders and rates. 

How Can This Help Me?

Your Promise Homes Mortgage Officer will help you to compare your options, quotes, and loan types, as well as let you know about affordability tools, including temporary mortgage rate buydowns, to help you lower your mortgage for the next few years while mortgage rates may be uncertain.

5. Ask for Seller Concessions

While seller concessions may not be applied directly to your mortgage, they can help to pay for all or some of your closing costs. Hint: this can include closing costs to help with mortgage discount points!

How Can This Help Me?

Once you’re pre-approved, the sky’s the limit. While your seller concessions can be applied to closing costs that can include mortgage discount points, they will not apply to commissions or other payments.

However, in addition to the mortgage discount points, these seller concessions can reduce your out-of-pocket expense and give you more money for your monthly mortgage.

6. Shorten the Closing of Your Loan

Short and sweet can have some benefits when you’re closing a home loan. When a lender commits to your mortgage rate, they do so for a specific period of time.

How Can This Help Me?

While this depends on whether mortgage rates are increasing or decreasing at any given time, a shorter close will lock in your interest rate and prevent you from being subject to a raise.

7. Improve (And Reduce!) Your Interest Rate Through Your Down Payment

If your credit score is already in good-to-great standing, another option is to increase your down payment. If you’re selecting a conventional mortgage loan, an increased down payment (5% or more) may decrease your loan rate.

How Can This Help Me?

If you’re still working at improving your credit score, you may have to increase your down payment by 20% or more to experience helpful mortgage percentage point improvements.

What Are Your Next Steps?

Get started and secure your rate and options today. Your mortgage officer will let you know if you qualify for the Downpayment Toward Equity Act of 2021 to help pay for mortgage discount points for a reduced rate or programs like the LIFT Act to reduce a mortgage rate by up to 4%.

Qualify for a first-time home loan today, refinance, or find out your options at www.promisehomeloans.com.

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