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For much of the last year, prospective homebuyers have been caught between two major affordability challenges: elevated home prices and stubbornly high mortgage rates. While many potential homebuyers had hoped that borrowing costs would fall more sharply this year, mortgage interest rates have remained surprisingly resilient, keeping monthly payments higher than many buyers had hoped for or anticipated.
That’s become especially frustrating for borrowers now that inflation is accelerating rapidly. With inflation ticking upwardthe Federal Reserve is less likely to cut interest rates right now, meaning the path to lower mortgage rates could be a longer one than expected. In turn, the average 30-year mortgage rate is hovering near 6.5% this June, a level that continues to strain household budgets and purchasing power.
Still, averages don’t tell the whole story. Mortgage rates vary based on a range of factors, including the lender, loan type and borrower profile, meaning some homebuyers may be able to secure significantly better terms. But how exactly can they do that? Below, we’ll examine three ways to consider now.
Find out how low your mortgage loan interest rate could be today.
3 ways to get a mortgage loan rate below 6% this June
Getting a mortgage rate below 6% isn’t easy in today’s environment, but it may be possible for qualified borrowers willing to explore all of their options. Here are three ways to improve your chances this month:
Shop around for mortgage lenders
Many borrowers focus on timing the market, meaning locking in a rate when they fall to a low enough level, but one of the most effective ways to lower your mortgage rate is simply comparing offers from multiple lenders. Rates can vary significantly between banks, credit unions, online lenders and mortgage brokers, after all, as different lenders have different funding costs, risk models and business goals, which can result in noticeably different rate offers.
That’s why experts often recommend obtaining at least three to five loan estimates before choosing a lender. While the average 30-year mortgage rate is sitting near 6.5%, some lenders may be willing to offer qualified borrowers rates below that benchmark in an effort to win their business. The process of comparing lenders and offers can take some extra time, but even a small rate difference can produce meaningful savings over the life of a mortgage. So, for borrowers chasing a sub-6% rate, comparison shopping may be the simplest place to start.
Compare your best mortgage loan offers online and find the right fit now.
Consider an adjustable-rate mortgage (ARM)
Fixed-rate mortgages remain the most popular option among homebuyers, but they’re not the only choice available. Adjustable-rate mortgages typically offer a lower introductory rate than comparable 30-year fixed loans because the lender isn’t locking in that rate for decades. Rather, they’re offering a low intro rate for a certain number of years, followed by a rate that can change over time. For example, a 5/1, 7/1 or 10/1 ARM provides a fixed rate for an initial period before adjusting periodically based on market conditions.
And, depending on the loan product and borrower qualifications, some ARM rates may already be below the 6% threshold, meaning that this could be a good time to consider one. While an adjustable rate can be risky, as it can increase or decrease over time, borrowers who expect to move, sell their home or refinance before the adjustment period begins may find that the lower initial rate outweighs the potential risks. That said, ARM loans certainly aren’t right for everyone. If rates remain elevated in the future, monthly payments could rise after the fixed-rate period ends. That’s why borrowers should carefully review adjustment caps and long-term payment scenarios before choosing this route.
Buy mortgage points
If you’re already being quoted a rate close to 6%, purchasing mortgage points may help push it below that level. Mortgage points, also known as discount points, can be a useful tool because they allow borrowers to pay an upfront fee at closing in exchange for a lower interest rate. Typically, one point costs 1% of the loan amount and reduces the rate by approximately 0.25%, though exact pricing varies by lender.
For example, a borrower offered a 6.25% mortgage rate may be able to buy enough points to reduce the rate to 5.99% or lower. While the upfront expense can be significant, the strategy often makes sense for buyers who expect to stay in their home for many years. Before moving forward, though, you should calculate your break-even pointwhich is the amount of time it will take for the monthly savings to exceed the upfront cost. If you plan to move or refinance before reaching that point, buying points may not provide enough value.
The bottom line
Mortgage rates remain elevated right now, with the average 30-year loan hovering near 6.5%, but that doesn’t mean a sub-6% mortgage rate is impossible to find. Borrowers who compare multiple lenders, explore adjustable-rate mortgages and strategically purchase mortgage points may be able to secure a lower borrowing cost than the national average. Given how much even a small rate reduction can impact monthly payments, taking the time to explore these options could pay off both immediately and over the life of the loan.