In partnership with
Retirement Download
Strategies for a successful retirement
How to Secure a Better Mortgage Rate as 30-Year Fixed Hits Near 1-Year Low
The 30-year fixed mortgage rate experienced its most significant one-day drop in over a year on Friday, offering a glimmer of hope for homebuyers. According to Mortgage News Daily, the average rate for a 30-year fixed mortgage is now around 6.29%—the lowest since October 2024 but still significantly higher than the sub-3% rates seen early in the pandemic.
With the Federal Reserve expected to cut interest rates at its September 17 meeting, mortgage rates may see further relief. However, Lawrence Yun, chief economist at the National Association of Realtors, cautions that buyers should expect rates around 6% to be the norm through early 2026. “Hoping for 4% or 5% rates is unrealistic,” Yun said.
Despite this, prospective homebuyers can take steps to secure more favorable mortgage terms. Here are three expert-recommended strategies:
1. Boost Your Credit Score
Your credit score plays a critical role in determining the mortgage rate you qualify for. “A higher FICO score means a better rate,” says Scott Lindner, national sales director for real estate and secured lending at TD Bank.
FICO scores range from 300 to 850, with scores above 670 considered “good,” above 740 “very good,” and above 800 “exceptional.” For example, borrowers with a score between 780 and 850 might secure a 6.19% rate on a 30-year fixed mortgage, while those with scores between 700 and 739 could face a 6.39% rate. On a $350,000 loan, this 0.2% difference adds $13,000 in interest over the loan’s life, per LendingTree data.
Tips to improve your credit score:
Pay bills on time, even if it’s just the minimum payment.
Keep revolving debt below 30% of your available credit.
Request a higher credit limit to lower your credit utilization rate, but avoid increasing spending.
Check your credit report for errors, as a single incorrect late payment can drop your score by 50 points or more.
Maintain a long credit history, as it demonstrates responsible debt management.
Keep This Stock Ticker on Your Watchlist
They’re a private company, but Pacaso just reserved the Nasdaq ticker “$PCSO.”
No surprise the same firms that backed Uber, eBay, and Venmo already invested in Pacaso. What is unique is Pacaso is giving the same opportunity to everyday investors. And 10,000+ people have already joined them.
Created a former Zillow exec who sold his first venture for $120M, Pacaso brings co-ownership to the $1.3T vacation home industry.
They’ve generated $1B+ worth of luxury home transactions across 2,000+ owners. That’s good for more than $110M in gross profit since inception, including 41% YoY growth last year alone.
And you can join them today for just $2.90/share. But don’t wait too long. Invest in Pacaso before the opportunity ends September 18.
Paid advertisement for Pacaso’s Regulation A offering. Read the offering circular at invest.pacaso.com. Reserving a ticker symbol is not a guarantee that the company will go public. Listing on the NASDAQ is subject to approvals.
2. Increase Your Down Payment
A larger down payment can lead to a lower mortgage rate, as it reduces the lender’s risk. “Borrowers who put 20% down will likely get a better rate,” Yun explains, noting that lenders see more “skin in the game” as a positive signal.
However, a 20% down payment is challenging for many. The National Association of Realtors reports that in 2024, the average down payment was 18% for all buyers and just 9% for first-time buyers. Still, a larger down payment can save tens of thousands in interest over the loan’s life and eliminate the need for private mortgage insurance (PMI), which can cost thousands annually.
“If you can manage a 20% down payment, the savings are significant,” says Matt Schulz, LendingTree’s chief credit analyst.
3. Explore Alternatives to the 30-Year Fixed Mortgage
“Don’t assume a 30-year fixed mortgage is your only option,” advises Lindner. Adjustable-rate mortgages (ARMs) often have lower initial rates than fixed-rate loans. For instance, a 7/6 ARM currently averages 5.59%, nearly 0.7% lower than the 30-year fixed rate, according to Mortgage News Daily.
ARMs are gaining popularity, with Yun noting that while 90% of buyers opt for 30-year fixed mortgages, ARMs can be a smart choice for those with shorter time horizons, such as younger buyers who may relocate or trade up within a few years. “A seven-year ARM lets you benefit from a lower rate now, and you can refinance later if rates drop,” Lindner says.
However, ARMs carry the risk of higher rates after the initial fixed period, so they’re best suited for buyers planning to sell or refinance before the rate adjusts.
Factors Affecting Rates for Retirees
Credit Score and DTI: A strong credit score (ideally 740+ for the best rates) and low DTI (under 43%) are crucial. Retirees with excellent credit and documented stable income (e.g., via two years of tax returns showing consistent retirement funds) can secure rates comparable to working borrowers. However, fixed incomes may inflate DTI, potentially pushing rates up by 0.25%–0.5% or more compared to someone with employment income.
Shorter Loan Terms: If you can afford a larger down payment (e.g., 20%+ to avoid private mortgage insurance), retirees often qualify for 15-year mortgages, which typically carry lower interest rates than 30-year options (e.g., 0.5%–1% lower as of September 2025). This is because shorter terms reduce lender risk. Monthly payments are higher, but total interest paid is less.
No Special "Retiree Discounts": Unlike some auto loans or credit cards that offer senior discounts, standard mortgages don't. Rates are market-driven; as of September 2025, average 30-year fixed rates hover around 6.8%–7%, with no retiree-specific adjustments.
How was today's newsletter?
👩🏽⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.