10 Things Homebuyers Can Do About the Highest Mortgage Rates in 14 Years

Inflation has spiraled over the last few years. Though it’s finally coming back down, mortgage rates are still high.
The Federal Reserve (Fed) recently lowered the federal interest rate (0.5%) for the first time in over two years. However, there were 11 hikes from 2022 to 2023, causing a 5.25% to 5.50% increase. So this cut, while larger than expected, won’t have a significant impact on mortgage rates right out the gate. They’re still quite high compared to the last decade.
So what can you do to secure the best mortgage rate today, if you’re in the market?
1. Boost Your Credit Score

This is one of the most significant factors lenders will take into consideration when looking over your mortgage application. The higher your credit score, the more trustworthy you are, and the more likely you are to get a lower rate.
If your credit score isn’t at least 670, you’re considered fair or worse on the trustworthiness scale. That doesn’t mean you can’t qualify for a mortgage, but it will be at a higher rate. That’s if all other factors pan out.
2. Shop around for the Best Rates

You should never take the first offer that comes your way. It’s in your best interest to compare rates between lenders to get the best deal.
Be very careful, though. More credit inquiries will lower your score—albeit temporarily—but this can hurt your chances if the lender doesn’t disregard them as shopping around.
3. Lower Your Debt-To-Income Ratio

Your debt-to-income ratio can have a significant impact, even though your credit report doesn’t show your income. Aim for no more than 30% utilization on your credit cards, at the very max.
The lower the utilization rate, the more favorable lenders will view you, because it shows you spend responsibly. There are ways to reduce this in the immediate future other than paying it down by using a 0% balance transfer card. Use this method very carefully and make sure you pay off the transfer sooner, rather than later to avoid excess interest charges.
4. Be Prepared to Put down More Money

Putting a large down payment on a home can help lower your mortgage rate, considering you will be borrowing less. It will also lower your overall payment, too.
Make sure you have documentation as to where the money for the down payment came from. Lenders will look at this. If you received a windfall or a family member gifted you the money, you will need proof of such.
5. Hone Your Negotiation Tactics

Sometimes, you just need to hone your negotiation tactics and drive a price down. Doing so can lead to a lower overall payment.
Most of the time, when people list their homes, they list them a little above market value to try to make more profit. That leaves a bit of wiggle room when it comes to accepting an offer. However, be aware if you’re in a seller’s market, this tactic likely won’t work, because the seller will have the upper hand.
6. Broaden Your Search

If you’re not finding anything in your area you like or qualify for, it might be time to expand your search. Often, just considering the next town or city over can yield even more results.
Let your Realtor know what you’re looking for, especially if you have children and want to buy in a good school district. They can help you narrow down your search and show only homes that meet your criteria.
7. Take Your Time

Unless you’re in an absolute rush to buy a home, it’s better to slow down the search and take your time. That way, you not only find a home you love, but in the interim, rates may drop.
If you are in a hurry, consider renting short-term until you find a home you love or the market presents more favorable results. Some apartment complexes and landlords allow leases for six months or less.
8. Know Your Options

When you apply for a mortgage, you will likely have a few different options outside of the standard 30-year loan. There’s the 15-year adjustable rate mortgage, which adjusts to the market rate. Given how the Fed is likely to cut rates again soon, that may be an attractive option.
Then, there’s the consideration of “points” which would equate to a lower rate, but you’d have to pay a fee upfront. Ask your lender to be upfront about all of your options.
9. Be Prepared to Lock in Your Rate

If the market rate is attractive to you now and you fear it may increase in the future, know that you can lock in on a rate today while you are in the prequalification process.
The good news is if the rate drops prior to closing, you can lock in at the new lower one before the process is complete.
10. Know How Much You Can Afford

Before you start your house search, it’s important to know how much you can afford. There are calculators online that can help create a ballpark figure, but you’ll definitely want to speak to a lender first.
A lender will not only tell you how much house you can afford, but also prequalify you, which will give you more power in the eye of the seller.
Why Are Mortgage Rates So High?

Mortgage rates are at their highest due to inflation. As the Fed tried to combat this, it continually hiked the federal funds rate, which made it more expensive for banks to lend money.
As a result, the banks had to charge higher interest rates. While the Fed has begun cutting rates, it’s not enough to completely impact mortgages just yet.
Will Mortgage Rates Come Down?

Yes. In time, as the federal funds rate decreases, buyers will begin seeing mortgage rates lower, too.
This is a good thing, because it will be more affordable for some people to buy homes. It’s likely that some people who purchased in the past few years will try to refinance as well.
Should You Wait to Buy a Home?

The choice is yours. Right now, there’s no guarantee the Fed will continue to cut rates or how fast it will make these cuts. If you’re waiting on lower rates, you could be waiting awhile.
If you’re in the market for a new home, try one or more of the tips we provided to prepare for the search and eventual buying process.