After the home's sticker price, your interest rate is the biggest influence on your monthly mortgage payments. With a higher rate, interest takes up a larger share of your monthly housing budget, and it might also affect the price range that you can comfortably shop.
Though it can feel like you’re at the mercy of lenders and the market, there are steps you can take to improve the rates you’re offered, potentially saving thousands of dollars and growing your homebuying budget.
Here are seven smart strategies to lower your monthly mortgage cost.
1. Strengthen your financial profile
The best mortgage rates are typically reserved for borrowers with the best credit scores, so you’ll want to know where your credit score will stand with lenders. FICO scores in the highest range (740-850) are considered “very good” to "exceptional," while scores in the 670-739 range are “good,” scores in the 580-669 range are “fair,” and scores below 580 are "very poor.”
A rival platform, VantageScore, uses different ranges, where 781-850 is considered "superprime," 661-780 is "prime," 601-660 is "near prime" and 300-600 is "subprime."
You can grow your credit score by paying your bills on time, reducing your debt and maintaining low credit balances. Keep your cards open to prevent your utilization from going up. You’ll also want to pay off any debts that have gone to collections.
NerdWallet recommends that you request free credit reports from the three major credit reporting bureaus (Experian, Equifax and TransUnion) and dispute any errors that might be suppressing your credit score. You can access these reports at AnnualCreditReport.com.
In addition to your credit score, lenders will also consider your debt-to-income ratio (DTI). This is the percentage of your gross monthly income that goes toward paying your debts. This number does not include nondebt expenses, such as groceries or utilities.
Lenders typically want this number to be no higher than 36% — the lower, the better. Paying down credit card debt will also improve your debt-to-income ratio. You can find this number using NerdWallet’s DTI calculator.
2. Make a larger down payment
Being able to put a larger amount down on a house will lower your loan-to-value ratio (LTV) and generally also your mortgage rate. For example, if you make a 20% down payment, your LTV is 80%.
Conventional mortgage borrowers who put down less than 20% are also required to pay private mortgage insurance (PMI), an additional monthly expense. When looking at lender rates online, be aware that the advertised rate often assumes that the borrower is putting down 20% or more.
3. Consider paying points
Discount points are fees borrowers pay to reduce the interest rate on their mortgages. One point costs 1% of the loan amount, which typically reduces the mortgage rate by 0.25%, although the reduction can vary.
When you pay discount points, you typically shell out thousands of dollars upfront to save a few dollars every month. You’ll likely have to pay at least three or four discount points to save more than $100 each month. It takes several years for your total savings to exceed the initial amount paid. This break-even period varies depending on the loan amount, the cost of the points and the interest rate.
You can calculate the potential savings of paying points and find the break-even period using NerdWallet’s mortgage points calculator. If the break-even period exceeds the amount of time you plan to be in the home, then buying points probably isn’t worth it.
For example, if you pay $3,000 for one discount point on a $300,000 mortgage, you could bring your mortgage rate down from 6.75% to 6.5%. This would result in monthly savings of $50, with a break-even period of five years to recoup the cost of the point.
4. Take advantage of first-time home buyer programs
Before you settle on a mortgage, find out whether you’re eligible for any special programs that make homebuying less costly. Many states offer help to first-time home buyers as well as repeat buyers.
Each state offers its own mix of programs, often including down payment assistance, combined with favorable interest rates and tax breaks. Some programs are targeted geographically, and others offer help to home buyers in certain professions, such as teachers, first responders and veterans.
DATA: What's the Homebuying Climate this month?
NerdWallet's Homebuying Climate Index puts a familiar weather label on how favorable conditions are for home buyers.
For August, our analysis puts the Climate Index at 53.2 out of 100, keeping the index in Partly Cloudy territory for the 49th straight month as most variables hold relatively steady.
Read more about the factors affecting this month's index to gauge how they might affect your homebuying plans.
5. Shop around with multiple lenders
You probably wouldn’t commit to buying the first home you tour, right? You’d shop around until you found one that fits your needs and budget. The same philosophy can be applied to finding a lender.
If you have an existing relationship with a lender, they can be a great place to start, especially if they offer discounts to current customers. However, applying for preapproval with a few lenders gives you an opportunity to compare offers and see which is offering the lowest rate.
You could also use a mortgage broker, who would gather mortgage rate quotes on your behalf and find you the lowest offer.
6. Explore alternative types of mortgages
Though 30-year fixed-rate mortgages are popular among home buyers, other types of mortgages can come with lower rates.
Adjustable rate mortgages: Adjustable-rate mortgages (ARMs) can have an introductory fixed rate below market for a certain number of years before changing at a regular cadence, usually every six months. ARMs can be risky because you’ll have to pay more if rates rise, but they can be a strategic choice if you plan to sell before the fixed period ends.
Shorter-term loans: Loans with shorter loan terms, like 15-year mortgages, often have lower interest rates than 30-year mortgages. Your monthly payments will be higher due to the shorter loan period, but you’ll save on the overall loan because you’ll be making fewer interest payments.
FHA loans: Loans backed by the Federal Housing Administration (FHA) can also have lower rates than conventional mortgages as well as more flexible qualification requirements. However, you'll have to pay an upfront insurance fee, plus a monthly insurance premium (MIP). If you can make a down payment of 10% or more, you can cancel the MIP after 11 years. If you put down less than 10% you must pay it for the life of the loan or until you refinance.
Seller financing: Sometimes a seller may be willing to finance the mortgage at a lower rate than mortgage lenders are offering. Your down payment goes directly to the seller who continues to be the legal owner as you make regular payments over a predetermined period. After you pay off the home, you take over the title. Seller financing can be complicated, so you’d need to hire an experienced real estate attorney.
7. Include a new construction home in your search
You might consider buying a new construction home, as homebuilders often offer below-market interest rates to entice buyers.
According to Realtor.com’s New Construction Report released in May 2025, the average mortgage rate for new-construction home buyers was half a point lower than the average rate for buyers of pre-existing homes.
