Here's how you get a better mortgage rate as the 30-year fixed approaches a one-year low

Buying a home in a six percent world requires a steadier plan than waiting on headlines. Rates have recently stepped down to the lowest levels since October after their biggest one day drop in more than a year, yet the average 30 year fixed still sits around the mid sixes. The Federal Reserve meets on September 17 and markets are leaning toward a rate cut, which can nudge mortgage pricing, but not always in a straight line and not always enough to change your monthly payment by much. The healthier approach is to control what you can control. Lenders price loans based on risk, liquidity and competition. That means your credit profile, your down payment, your loan structure and the way you shop the market have outsized influence over your final offer.

In other words, the question is not only where rates go next but how to get a lower mortgage rate given the profile you bring to the table. Treat this like a planning exercise and the savings can be real. Treat it like a quick transaction and you may leave thousands of dollars on the table.

When benchmark mortgage averages hover near 6.29 percent for a 30 year fixed, the monthly payment on a typical loan still consumes a large share of a household budget. Even if the Fed trims its policy rate on September 17, mortgage rates do not move one for one with the Fed. Mortgages follow investor appetite for mortgage backed securities, inflation expectations and supply demand dynamics in the bond market. A cut can help at the margin. It can also be fully priced in before the meeting. Planning that depends on a specific future rate is fragile. Planning that improves your profile and loan design works in any environment.

For buyers who pressed pause in 2024 or early 2025, the current level is uncomfortable but workable. A six handle is likely to persist into the early part of next year according to many housing economists. That should not discourage you. It should focus your effort on the levers you control over the next 60 to 120 days.

Lenders tier mortgage pricing by credit score bands because higher scores have historically lower default probability. Crossing a band can tighten your rate even if the headline market rate is unchanged. In practice, borrowers with scores in the high 700s to 800s tend to see noticeably better offers than those in the low 700s, and a shift of even 20 points can move your pricing grid.

The fastest path is behavioral. Payment history is the single largest factor in a FICO model. Set every account on automatic payment at least for the minimum and review your statements weekly so you can pay the full balance where possible. Utilization is the next strongest lever. Keeping revolving balances below 30 percent of each card’s limit is a common guideline, but there is nothing magic about 30 percent. Lower is better, and distribution matters. A single card at 85 percent with others at zero can depress your score more than a balanced 10 to 15 percent across cards. If you have the cash to reduce balances, allocate enough to drop any maxed or near maxed card below key thresholds such as 49, 29 and 9 percent. If you do not have cash to pay down balances quickly, a credit line increase can reduce utilization, but it only helps if you do not add new spending. Ask for soft pull increases first so you do not introduce a hard inquiry right before underwriting.

Scan your credit reports for errors. A misattributed late payment or an old paid collection can weigh heavily until corrected. Dispute with documentation instead of blanket disputes. Underwriters can pause a file if they see active disputes during approval, so begin this cleanup a few months before you plan to apply. If you have medical collections under relatively small amounts, many bureaus have adjusted how they treat these, but removing paid or erroneous medical debts still helps clarity and reduces edge case underwriting questions.

Length of credit history is harder to move in a hurry, which is why chasing quick score boosts through new accounts can backfire. Becoming an authorized user on a trusted family member’s long standing, low utilization card can help in certain cases, but only if the card has impeccable history and the issuer reports authorized users to the bureaus. Never accept authorized user status on a card that carries balances or that you cannot see and monitor. Underwriters have a keen eye for synthetic score inflation.

You have likely heard the 20 percent rule. It is not a moral requirement. It is a pricing signal. More equity means lower perceived risk for the lender, lower likelihood of default, and reduced loss severity if something goes wrong. That naturally supports better pricing. Twenty percent down also removes private mortgage insurance on conventional loans, which can free up cash flow by eliminating a monthly premium. If 20 percent is not realistic, do not abandon the purchase entirely. Know how different levels change the math.

At 10 to 15 percent down, you might still see competitive rates but with mortgage insurance. The total cost can be acceptable if the property meets a long time horizon. Some lenders allow a one time mortgage insurance buyout through a slightly higher rate or up front premium. That trade needs a payback analysis. If you plan to refinance or sell within a few years, paying to remove mortgage insurance up front may not return its cost.

At 5 percent down or with certain first time buyer programs, pricing can widen further. If this is your path, strengthen the rest of your file. Cash reserves after closing equal to a few months of housing payments can soothe a lender’s concerns. A stable employment history with consistent income and a debt to income ratio well below program maximums also tells a positive story. If you are stretching on price, consider adjusting your target to keep your ratio near traditional guardrails like 28 percent for housing and 36 to 40 percent for total debt. You do not need to be perfect. You do want to be comfortably inside the boundaries. That is where pricing improves.

Many borrowers default to the 30 year fixed because it is familiar and stable. There is nothing wrong with that. It is often the cleanest solution for families who plan to keep a home for a long time and value payment certainty. Yet when the fixed rate is materially higher than a well designed adjustable rate mortgage, it is worth testing the fit.

A 7 over 6 ARM typically fixes your rate for seven years and adjusts every six months thereafter. If the initial rate sits meaningfully below the 30 year, the savings during the fixed period can be substantial. That can be compelling if you expect to sell or refinance within that window. To evaluate properly, ask your lender to show the index, margin and caps. Caps define how much your rate can rise at the first adjustment, at each subsequent adjustment and over the life of the loan. For example, a 5, 1, 5 cap structure means the rate can rise at most five percentage points at the first adjustment, one point per adjustment thereafter, and five points total over the life of the loan. If caps are generous and the spread to the fixed rate is small, the benefit may not justify the risk. If caps are protective and the spread is wide, the case strengthens.

A similar logic applies to temporary buydowns like 2 1 or 1 0 structures where the seller or builder funds a lower rate for the first year or two. Temporary buydowns reduce early payments and can be useful cash flow relief if you anticipate income growth or a refinance within a reasonable period. Just remember the note rate remains the true rate. When the buydown expires, the payment steps up to the contractual level. Use these tools to smooth a known transition, not to stretch a budget that is already tight.

Two borrowers can look at the same lender’s rate sheet and see very different offers because of discount points and lender credits. A discount point is a fee paid up front to reduce the interest rate. A lender credit is a higher rate that comes with money to offset closing costs. Neither choice is inherently better. The right move depends on how long you will keep the loan and how valuable cash is to you today.

If you plan to own and keep the loan for a long horizon, paying points to reduce the rate can be sensible. Calculate the break even. Divide the cost of the points by the monthly payment savings to see how many months it takes to recover the upfront cost. If the break even is 60 months and you realistically expect to hold the loan for eight to ten years, the numbers may favor points. If the break even is 90 months and you are likely to refinance in three to five years, points are harder to justify. Be careful with assumptions about future refinances. Refinance optionality is valuable, not guaranteed. Paying nothing up front and accepting a slightly higher rate in exchange for a generous lender credit can be smart if your goal is to preserve cash for an emergency fund, repairs, or higher priority debts.

Ask each lender to provide a consistent apples to apples comparison with the same lock period and the same points and credits so you can truly see whose base pricing is better. Then layer in the structure you want.

Competition lowers prices. Mortgage lending is no exception. A common mistake is shopping casually over weeks and letting multiple hard inquiries hit your credit at different times. FICO models treat rate shopping as a single inquiry if you cluster your applications within a short window. Two weeks is safe for most models. Thirty days can work in newer versions. The cleanest path is to gather your documents first, request formal quotes from at least three reputable lenders on the same day, and keep the window tight.

Request a written loan estimate from each lender. This standardized form lists the rate, APR, points, lender fees, and third party costs. Do not anchor only on rate. APR reflects the cost of points and fees, though it does not capture everything. Read the sections on lender credits and rate lock policies. Some lenders offer float down options that let you capture a lower rate if markets improve before closing. Others do not. The value of a float down is hard to quantify, but in a volatile market it can be worth something. Ask whether the lender services the loan or sells it immediately. Servicing transfer is common and not necessarily bad, but knowing the practice can set expectations.

Locking secures your rate for a period such as 30, 45 or 60 days. Longer locks typically cost more or price slightly worse. If you are under contract with a predictable closing date, choose a lock that comfortably covers the timeline and any contingencies such as appraisal or condominium questionnaire. If you are shopping without a contract, resist the urge to lock based on a headline. Lenders can usually relock if your lock expires, but pricing may change. Your goal is not to time the exact bottom. Your goal is to avoid surprises.

Clarify with your loan officer how repricing works if markets rally after you lock. Some lenders allow a one time float down if the market improves by a certain amount. Others can renegotiate at underwriting discretion. Understand the rules in writing.

Not all homes price the same. Condominiums sometimes carry slightly higher rates or stricter guidelines because association risk and project concentration add complexity. Multi unit properties can price differently than single family homes. Second homes and investment properties almost always price worse than primary residences. If you are choosing between a condo and a townhome or between a duplex and a single family, factor the potential pricing difference into your decision. Keep documentation clean as well. Large unexplained deposits, side gigs without a tax record, or changing employment structures right before underwriting can add friction that costs time and sometimes pricing.

The mortgage is one piece of your financial picture. As a planner, I want your housing choice to respect cash flow resilience, emergency reserves and your long term savings rate. If paying points drains the cash you need for a six month emergency fund, the lower monthly payment may not be worth the trade. If a temporary buydown makes the first two years comfortable but the step up would crowd out retirement contributions or college savings, the short term relief may create long term strain. A rate that is one eighth higher but comes with a strong lender credit could free cash to shore up protection gaps such as life or disability insurance. Those decisions are not purely mathematical. They are about aligning the mortgage with the life you are building.

Begin with three questions. How long do you intend to keep this home if life follows your plan. How likely is a change in the next five to seven years such as a relocation, a growing family or a career shift. How much liquidity do you need to feel secure given your job stability and the condition of the property. Your answers shape the loan choice. A long horizon argues for stable fixed terms or points that break even in a reasonable timeframe. A medium horizon opens the door to a well capped ARM or a smaller point buy. A short horizon tilts toward preserving cash and avoiding heavy upfront spend.

You cannot control the bond market, but you can control your file, the way you shop and the structure you choose. Improve the factors that matter most to pricing such as payment history and utilization. Bring a down payment that reflects your reality and strengthens your profile even if it is below 20 percent. Choose a loan structure that matches your time horizon and that you fully understand, including caps and realistic exit plans. Weigh points and credits with break even math, not feelings. Shop lenders in a tight window, compare consistent loan estimates and ask clear questions about locks and float down policies. Treat the property type and occupancy as pricing variables, not afterthoughts. Above all, keep the mortgage aligned with your broader plan so that your home supports your goals instead of quietly crowding them out.

Markets will continue to move. The most dependable way to benefit is to build a file that prices well under a range of conditions. If rates drift lower after you close, you can revisit. If they do not, you still secured a fair price because you focused on controllable levers. That is how to get a lower mortgage rate without relying on luck.

The rate environment may keep challenging buyers through the early part of next year, and that can feel discouraging. It does not have to derail your plans. Start with your timeline, improve the inputs you control, then choose the structure that fits the life you are living. Slow, steady preparation beats trying to guess what the market will do next week. The smartest plans are not loud. They are consistent.