How to Secure a Low Mortgage Rate in 2025
Mortgage interest rates have risen again, making home buying more expensive for many prospective buyers. While the Federal Reserve is expected to cut rates twice in 2025, those reductions may not occur for several months. However, waiting indefinitely for rates to fall isn’t always practical or advisable. Instead, there are several strategies homebuyers can use to secure a lower-than-average mortgage rate.
Do Your Research
Finding the best mortgage rates begins with thorough research. Mark Worthington, branch manager at Churchill Mortgage, emphasizes the importance of comparing lenders. “The place to start is by doing research to discover which mortgage companies have the best reviews and most options,” he advises. Reviewing multiple loan offers ensures you are making an informed decision rather than settling for the first available option.
Shop Around
One of the biggest mistakes buyers make is accepting the first mortgage rate they’re quoted. Steven Parangi, a mortgage broker and owner of Alpine Mortgage, advises borrowers to compare offers from multiple lenders. “Even a tiny difference in rates can save you thousands of dollars over the life of the loan,” Parangi notes. Taking the time to explore different lenders can result in significant long-term savings.
Improve Your Credit Score
Lenders reserve the best mortgage rates for borrowers with high credit scores. Conventional loans typically require a minimum credit score of 620, but a score of 740 or higher is necessary to qualify for the lowest rates. To improve your credit score, Parangi suggests paying down high-interest credit card debt and avoiding new credit accounts. Additionally, making timely payments is crucial, as payment history comprises about 35% of a FICO score.
Make a Higher Down Payment
A larger down payment can help secure a lower mortgage rate in multiple ways. “A bigger down payment reduces the loan-to-value (LTV) ratio, making you a less risky borrower in the eyes of lenders,” says Parangi. Additionally, putting down at least 20% eliminates the need for private mortgage insurance (PMI), saving borrowers extra costs on their monthly payments.
Consider Different Loan Terms
Opting for a shorter loan term can also result in lower interest rates. Data from Freddie Mac shows that as of January 2, 2025, the average rate for a 15-year mortgage was 6.13%, compared to 6.90% for a 30-year mortgage. While shorter loan terms come with higher monthly payments, they can lead to substantial interest savings over time.
Lock in Your Rate
A rate lock ensures that your mortgage interest rate remains unchanged for a set period, provided your financial situation remains stable. If rates drop but are expected to rise again due to inflation or economic shifts, locking in your rate early can be a wise move. Parangi recommends that borrowers consider rate locks to protect against future fluctuations.
Consider Buying Mortgage Points
Another strategy to reduce mortgage rates is purchasing mortgage points. One mortgage point typically costs 1% of the loan amount and lowers the interest rate by about 0.25%. For instance, purchasing one point on a $420,000 home would cost $4,200. “This is a good strategy if you plan to stay in the home long enough to recoup the upfront cost through monthly savings,” explains Parangi.
For homebuyers in 2025, securing a favorable mortgage rate requires proactive planning. “Start working on your financial profile early, explore all options, and don’t accept the first offer you get,” advises Parangi. Getting the best mortgage rate isn’t a matter of luck—it’s about having a well-thought-out plan. By following these strategies, buyers can maximize their chances of securing a lower mortgage rate and making homeownership more affordable.