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Homebuyers hoping for an imminent cut to mortgage rates were left disappointed this week after the latest report from the Bureau of Labor Statistics showed a slight rise in the inflation rate. Higher inflation reduces the chances of a cut to the benchmark interest rate range and, if it continues to rise, could result in interest rates increasing from their current 23-year high. Mortgage rates, then, will follow.
After hitting their highest point since 2000 last summer, the average rate on a 30-year mortgage loan has hovered around 7%. And while the 3% rates of 2020 and 2021 are unlikely to return anytime soon — especially after this week’s inflation news — there are still ways to reduce costs.
These moves won’t bring back the rates of the recent past, but they will save buyers money now — and over the years and decades to come. Below, we’ll break down four great ways to get a mortgage rate under 7% now.
Start by seeing what mortgage rate you could qualify for here now.
4 great ways to get a mortgage rate under 7% now
Here are four effective ways buyers can secure a mortgage rate under 7% right now.
Check rates daily
Mortgage rates change each day, influenced by a variety of factors. So it’s important to be proactive and check rates often. The rates you see today may be different tomorrow and better than what they were yesterday.
That said, you should check rates intending to lock one in when you find that they’ve dropped low enough to act. Otherwise, you could lose your window of opportunity to secure a better rate. And don’t wait for a perfect rate, either, as many experts don’t expect them to return soon.
Start checking today’s mortgage rates from multiple lenders here today.
Shop around for lenders
While mortgage lenders will offer approximately the same rates, they won’t be identical. And every basis percentage point adds up, particularly for 30-year mortgages. So shop around for lenders to see who is offering the lowest rate. But don’t just look at rates — look at fees and closing costs, too, which can easily eat into the savings obtained with a seemingly lower rate.
Apply for a shorter mortgage loan term
While not ideal for many buyers, one great way to pay less to a lender is by shortening the mortgage loan term. So, if you can, apply for a 15-year mortgage loan (currently 6.42%) instead of a 30-year loan (which is 6.84%). Not only will this save you money each month, but it will also save you in interest costs that otherwise would have been spread out over double the time frame.
Investigate mortgage assumptions
Assumable mortgages are rare and difficult to secure, but they could be a great way to get a much lower interest rate (think 3% or 4%). Most traditional mortgages are not assumable but government-backed ones like VA loans can be. This would entail the current homeowner signing over their existing mortgage loan balance — and interest rate — to a new buyer. But it would also mean paying the seller back the mortgage loan amount they’ve paid off to date. The details here are important (and most won’t qualify), but if you can find a home backed with a government-backed mortgage, it is possible to get it done.
The bottom line
With inflation persistent and interest rates still elevated, homebuyers active in today’s market don’t have many great options. By checking rates daily, shopping for lenders, applying for a shorter mortgage loan term and investigating potential mortgage assumptions, however, they can position themselves to secure a rate under 7% right now. It may not be as beneficial as what could’ve been obtained in recent years, but it’s still better than paying today’s average rates.