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Mortgage rates hit 3-year low: 6 proven ways to lock in the best deal

Sarah BradyJanuary 16, 2026 at 12:31 AM

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Unrecognizable man giving the house keys to another person (ingwervanille via Getty Images)

Taking out a mortgage is expensive. If you want to borrow money to purchase a home, you have to first come up with a down payment and cover the closing costs on the loan. Then comes the single biggest factor in what you'll pay: your mortgage rate.

Right now, the average rate for a 30-year mortgage is 6.06% — the lowest level in more than three years, according to Freddie Mac. And both purchases and refinances have jumped as buyers and homeowners rush to lock in savings.

That narrow window won't last forever. And while you can't control the market, you can control several factors that directly influence the rate lenders offer you.

Here are six proven strategies to secure the lowest mortgage rate available — and save tens of thousands over your loan.

1. Start working on your credit

Your credit scores play a big role in the rate you get. Most lenders will approve you with credit scores of 620 or higher, but the best mortgage rates are reserved for borrowers with a healthy credit report and scores of 760 and up, according to FICO.

To build excellent credit, you may need several years of on-time debt payments and may even have to stick to a tight budget so you can reduce your high-interest credit card debt and loan balances. In other words, some borrowers will need to start working on this step well in advance of house shopping.

Struggling to make serious improvements or not sure where to start? Consider one-on-one advice from a credit counselor certified by the National Foundation for Credit Counseling. Get connected with a counselor by completing a form on the NFCC’s site.

🔍 Read more: 9 surprising factors that can damage your credit score (and how to fix them)

2. Increase your down payment

A bigger down payment will help you qualify for better rates. At least 20% up front is typically required to avoid paying private mortgage insurance (PMI) on conventional loans, but you don't necessarily need that much. In fact, the average down payment is just 14.4%, according to Realtor.com.

Still, any increase in your down payment can help you get lower mortgage rates and reduce your loan amount. Here are some ways to save even more:

Earn interest. For the funds you've already saved, earn interest on them by depositing them into a CD or Treasury bill that will mature before you buy.

Consolidate or refinance. As interest rates come down, consider refinancing your mortgage or consolidating your loans to reduce your monthly payments and free up money for your down-payment fund.

Ask for a gift. Ask a loved one if they can help you achieve your goal by contributing to your down payment. More than 30% of buyers under the age of 45 used a cash gift to help them buy a home in 2025, according to the National Association of Realtors. The gift could be particularly helpful for those on fixed incomes and people whose families will inherit the property they’re gifting money for.

What is PMI — and why does it cost you extra every month?

Private mortgage insurance is insurance that protects your mortgage lender from loss if you default on your loan or aren’t able to repay what you borrow. You’ll typically pay PMI on conventional mortgages when your down payment is less than 20% of your home’s purchase price. If you put down less, you’ll pay PMI until you’ve built at least 20% equity in your home, after which you can request your lender to remove your PMI responsibility.

🔍 Read more: 5 ways to build equity in your home more quickly (and why it matters)

3. Wait for rates to drop

You can make all the right moves to prepare for homebuying, but if market rates are high, you'll inevitably end up with a high interest rate. While mortgage rates appear to be dropping, it's still impossible to match what lenders offered in 2022.

Average rates have fluctuated from 2.78% in July 2021 to 6.06% today, according to Freddie Mac

A 1% drop in mortgage rates can save you a significant amount. For example, if you borrow $400,000 at 6% APR instead of 7% (with no PMI), your monthly payments will be $390 lower and you'll pay about $140,000 less in interest over 30 years.

🔍 Read more: How the Federal Reserve's rate decisions affect your mortgage

4. Reconsider the cosigner

Experts often recommend applying with a cosigner to reduce your mortgage rate, but the results can be mixed. If your cosigner has a better borrower profile than you — including higher income and less debt — you could qualify for better rates.

That said, you may be better off having your cosigner apply alone. Why? Because lenders use the lowest of the two applicants' credit scores to determine the loan terms. One study showed that for couples where one partner had a credit score below 740, 25% would have significantly reduced their borrowing costs if the higher-scoring partner had applied alone.

If you're not sure how much you could reduce your rate by submitting a joint versus single application, ask the lender to show you the numbers for each scenario.

🔍 Read more: Should you cosign a loan for your child or a loved one? A guide to risks and rewards

5. Compare two or more offers

When interest rates are high, different lenders will offer the same borrower a wider variety of rates. As a buyer, that means you have big potential to save money by comparing offers from multiple lenders.

How much could you save? According to a long-term study of homebuyer data from Freddie Mac, homebuyers who compared just two rate quotes during high-interest periods could have reduced their borrowing costs by as much as $600 a year. If they had gotten at least four quotes, they could have saved at least $1,200 a year — or a whopping $36,000 over 30 years.

Also ask about autopay discounts. Many mortgage lenders offer a small interest rate reduction of around 0.25% if you commit to automatic payments.

🔍 Read more: How to shop for a mortgage: A guide for smart homebuyers

6. Run the numbers before buying points

Some lenders give you the option to buy "points" in order to reduce your interest rate. One point typically costs 1% of your loan amount. Research indicates that mortgage points don't necessarily save you money, so each borrower should look at the numbers on their loan before going this route.

Points are most likely to save you money under these circumstances:

The lender offers a high discount rate per point — rates generally range from 0.125% to 0.25%.

You will still have enough cash for at least a 20% down payment and your closing costs.

The points are not rolled into the loan financing — which would turn them into debt.

Before forking over cash for a discount, ask the lender to show you a comparison of your total borrowing costs, with and without points included. And make sure you’ll stay in your new home long enough to benefit from the upfront cost.

🔍 Read more: What I wish I knew before buying a house (that no realtor ever tells you)

Yes, you can negotiate your rate

Certain costs involved with your mortgage are negotiable, including your interest rate. You're more likely to have a successful negotiation if your credit scores are high, you have a large down payment and you've received a better preapproval offer from another lender.

Here are the costs that you can usually negotiate with your lender:

Interest rate. Use a lender’s advertised rate as a starting point, asking about available discounted or special rates.

Closing costs. Some lenders and sellers will compromise on closing fees. And don’t forget to shop around for homeowners insurance for the best deal.

Application fee. This one-time fee is often negotiable, especially if it’s separate from origination or processing fees you’re already paying the lender.

Origination fee. You might be able to get your lender to lower or waive this underwriting cost that can range from 0.50% to 1.00% of your total loan amount.

Underwriting or processing fees. These fees can be a part of or separate from origination fees but cover similar costs associated with reviewing your documents, filing paperwork and determining your loan terms.

Rate-lock fee. Even if you can’t negotiate the initial fee to lock in a rate, if there’s a delay requiring an extension, you can ask to waive any additional fees.

Title insurance. You can negotiate with the lender or seller to pay a portion of this fee.

Real estate agent commission. It’s as simple as asking if there’s room to lower this fee.

Fees paid to the government — like taxes or recording fees — can't be negotiated, and fees the lender pays to third parties for appraisals, title transfers or recording fees are usually non-negotiable too. Still, it doesn’t hurt to ask.

🔍 Read more: Prequalification vs. preapproval: How to time these two tools when shopping for a home

What factors go into your mortgage rate?

Each lender offers a set range of rates based on market conditions and their internal policies. When you apply for a loan, the lender takes a thorough look at your finances before determining where you fall within that range.

Here's what typically qualifies a borrower for the best mortgage rate available:

Credit scores of 760 or higher

Low debt-to-income ratio (DTI) — or your debt in comparison to your income

A down payment of 20% or more

At least two years of uninterrupted employment history

Can you qualify for homebuyer assistance if you've already owned a home?

Just because you've already owned a home doesn't mean you'll be denied assistance. Many homebuyer assistance programs are for first-time buyers, but they tend to use a liberal definition of "first time." And there are a surprising number of options for senior buyers and retirees, for people who've purchased a home before or even people who need help paying off their current home.

Learn more about how these programs work and you might qualify in our guide to homebuyer assistance.

Buying on a fixed income? Retirees can still qualify

Mortgage lenders will look at your fixed income differently from somebody’s full-time income. Yet lenders can't deny you simply because you have a fixed income or because of your age.

You’ll need to prove that you have enough money to cover loan payments, with retirement accounts, Social Security, annuities and trusts and any paid consulting or side gigs all counting toward what lenders consider “income.”

If your income is too limited for lenders, you may simply have to get creative in order to make a mortgage work. For example, you might need to consider downsizing to a smaller, more affordable property.

For more flexible loan requirements, try a lender who offers bank statement loans, which consider your cash assets as part of the approval process. The Federal Housing Authority (FHA) also offers specific loan assistance for seniors.

🔍 Read more: Can you qualify for a mortgage if you're about to retire?

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About the writer

Sarah Brady is a finance writer and educator who covers a wide range of topics, from personal and small business credit and loans to financial scams. Her expertise has been featured in Yahoo Finance, Forbes Advisor, CNN, Fortune, Investopedia and other top media brands. As an NFCC-certified credit counselor, Sarah taught workshops on money management and coached thousands of clients on how to improve their credit. She is also a former HUD-certified housing counselor and educator for the City of San Francisco's affordable homebuyer programs.

Article edited by Kelly Suzan Waggoner

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