On a $400,000 mortgage, the gap between 6.5% and 7.5% equals about $87,000 in extra interest over 30 years.
Mortgage rates are currently at 6.63% as of August 2025, according to Federal Reserve data—a significant jump from the sub-3% rates we saw during the pandemic. Experts predict rates will likely stay above 6% throughout the year due to persistent inflation and economic uncertainty.
The good news? There are proven strategies to help you secure the lowest possible rate. Discover 12 expert-backed ways to reduce your mortgage rate and compare our top mortgage lenders to find your best option.
1. Save for a Larger Down Payment
Your down payment reduces how much you have to borrow to buy your home. When you make a large down payment, you'll enjoy:
A lower monthly housing expense.
A shorter timeframe for needing mortgage insurance, if required at all. For instance, you can avoid mortgage insurance if you put down 20% or more on a conventional home loan.
A faster path to becoming debt-free (if you make more than the minimum monthly payment).
A high down payment can also positively impact how much you pay in interest since you're starting with a lower balance to charge interest on. Plus, "The more you put down, the less risk for the lender—and that can mean a better rate," says Grant R. Menard, president of Onshore Mortgage LLC.
2. Buy Discount Points
Paying more up front can save you money long-term through discount points, explains Stephanie Amedee, branch manager at Semper Home Loans, Inc.
How Discount Points Work
- One point costs 1% of your loan amount
- Each point typically lowers your rate by 0.25%
- You pay this fee at closing
For example, on a $300,000 loan at 7% interest, you could buy four discount points for $12,000 total ($3,000 each) to reduce your rate to 6%.
- When this makes sense: You plan to stay in your home for many years and can afford the upfront cost.
- Important consideration: Calculate your breakeven point first. If you sell within a few years, you may lose money on the points you purchased.
3. Shop Around and Compare Lenders
Mortgage interest rates and loan fees can vary dramatically from lender to lender, so it's wise to compare quotes from multiple banks to ensure you're getting a good deal. "Don't just take the first quote," warns Menard.
The best way to distinguish between a competitive and subpar quote is to review the loan estimate. The loan estimate is a three-page document that the lender must provide you within three days of applying for a mortgage.
Each estimate contains important details you'll need to compare:
- Interest rate and APR: The base rate plus the true annual cost, including fees.
- Monthly payment breakdown: Principal, interest, taxes, and insurance costs.
- Closing costs and fees: All upfront expenses you'll pay at settlement.
- Cash required to close: Total amount you need to bring to closing.
Putting these documents side-by-side will help you determine which quote offers the best value for your situation. Don't just focus on the interest rate—a lender with slightly higher rates might have lower fees, making them cheaper overall.
4. Consider Shorter Loan Terms
Lenders charge higher rates on 30-year mortgages because they face more risk over the longer repayment period. You can secure a lower rate by choosing a shorter loan term, though this means higher monthly payments.
The rate difference is significant. As of April 2025, Truist Bank offered 30-year mortgages at 6.99% versus 15-year mortgages at 6.1%—a difference of nearly 1%.
Here's what that means for a $200,000 loan:
- 30-year mortgage at 6.99%: $1,330 monthly payment, $279,000 total interest paid
- 15-year mortgage at 6.1%: $1,700 monthly payment, $106,000 total interest paid
- While your monthly payment increases by $370, you'd save $173,000 in interest and own your home outright 15 years sooner.
When this makes sense: You have a stable income and can comfortably afford the higher monthly payment without straining your budget. The extra $370 per month shouldn't compromise your emergency fund or other financial goals.
5. Explore Different Mortgage Types
Most borrowers automatically choose 30-year fixed-rate mortgages, but an adjustable-rate mortgage (ARM) could offer significant savings if you don't plan to stay in your home long-term.
How ARMs Work
- Initial fixed period: Rate stays locked for 5, 7, or 10 years at a lower rate than fixed mortgages.
- Adjustment period: After the intro period, your rate adjusts periodically based on market conditions.
- Lower initial rates: Lenders offer better rates upfront since you're taking on future rate risk.
The savings can be substantial. As of April 2025, Chase Bank offered a 30-year fixed mortgage at 6.625% compared to a 5/6 ARM at 6.250%—a difference of 0.375%. With the ARM, your rate would stay at 6.250% for the first five years, then adjust every six months.
When this makes sense: If you plan to sell or refinance before the introductory period ends, or if you're comfortable with the possibility of higher payments later. However, if you want predictable monthly payments or plan to stay in your home for decades, a fixed-rate mortgage provides more security.
6. Look Into Government-Backed Loans
Government-backed mortgages typically offer lower interest rates than conventional loans because the government reduces the lender's risk by guaranteeing the loan.
The rate difference is meaningful. As of April 2025, Truist Bank offered FHA and VA loans at 6.625%—more than a third of a percentage point below their conventional rate of 6.99%. USDA loans also feature lower rates, with some very low-income borrowers qualifying for rates as low as 5%.
Main Types of Government-Backed Loans
- FHA loans: Available to most borrowers with down payments as low as 3.5% and credit scores starting at 580.
- VA loans: Exclusive to active duty military, veterans, and eligible spouses. No down payment required and no mortgage insurance.
- USDA loans: For homes in eligible rural and suburban areas. No down payment required for qualified borrowers.
Keep in mind that each program has specific eligibility requirements. VA loans require military service, USDA loans are limited to certain geographic areas, and FHA loans have property and loan limits.
Your lender can help determine which programs you qualify for and whether the lower rate offsets any additional fees or requirements.
7. Improve Your Credit Score
Your credit score could cost or save you tens of thousands of dollars over your mortgage term. According to Experian, if you have a 620 credit score, your interest rate may be around 0.75% higher than a borrower with an 840 credit score.
It's smart to boost your credit score as much as possible before applying for a mortgage. Here are a few strategies to raise your score:
Pay all your bills by the due date every month.
Reduce how much you owe to 30% or less of your available credit.
Avoid applying for new credit cards or loans unless necessary.
If you're feeling discouraged by the distance between where your score is and where you want it to be, remember: "Even a 20-point increase can significantly lower your rate," reassures Menard.
8. Negotiate Lender Fees
Don't assume lender fees are non-negotiable. Many borrowers successfully reduce costs by leveraging existing bank relationships or presenting competing offers from other lenders. If business has been slow, your lender may offer discounts to secure your loan.
Also consider asking the seller to cover some of your closing costs—this negotiation could save you thousands at settlement.
9. Lock-In Your Rate
Mortgage rates change daily and can shift significantly between your application and closing. A rate lock guarantees your quoted rate for a specific period, typically in 15-day intervals.
Some lenders offer free rate locks, while others charge a fee or a slight rate increase. If rates are volatile or trending upward, locking makes sense. However, you could miss out on mortgage savings if rates drop during your lock period, though some lenders allow you to relock at lower rates.
10. Sign Up For Autopay
Many lenders offer small rate discounts for automatic payments. For example, Citizens Bank reduces rates by 0.125% when you enroll in autopay. While modest, this discount saves money over the loan's lifetime with zero effort on your part.
11. Research First-Time Homebuyer Programs
First-time home buyers often qualify for assistance programs offering down payment help, closing cost grants, or below-market interest rates. Some programs provide forgivable loans, while others offer tax credits for mortgage interest paid.
Programs vary by state and locality, with eligibility based on income, occupation, or property location. Check with your state housing authority or local housing department to see what assistance is available in your area.
12. Time Your Application Strategically
It's tempting to wait for mortgage rates to return to the ultra-low levels we saw just a few years ago, when 30-year fixed rates were around 3%. Unfortunately, experts forecast rates will likely stay elevated through at least the end of 2025.
The reality is that waiting for perfect conditions could cost you more than buying now. Home prices continue rising in most markets, potentially offsetting any future rate savings. Plus, you're paying rent every month while waiting—money that could be building equity in your own home.
"With inflation cooling and the Federal Reserve adjusting its monetary policy, rates may trend downward, but locking in a good rate now with the option to refinance later is the better move," said Menard.
Conclusion
While mortgage rates remain elevated in 2025, you're not powerless to reduce your borrowing costs. By implementing these strategies, you can potentially save thousands of dollars over your loan's lifetime.
Remember, even small rate reductions add up significantly over 15 or 30 years. The key is to act strategically, compare all your options, and work with experienced lenders who can guide you toward the best deal for your specific situation.
Frequently Asked Questions
What credit score do I need to get the best mortgage rates?
You’ll generally need a 740+ credit score for the lowest rates, though you can qualify with scores as low as 580–620 depending on the loan type.
Can I still save if I don't have great credit?
Yes — shop multiple lenders, consider FHA/VA/USDA loans, or buy points to offset higher rates.
Should I wait for better credit or lower rates?
Not necessarily. If you’re ready, buy now — you can always refinance later when rates or your credit improve.