Mortgage rates just jumped a quarter of a point in a single week. The average 30-year fixed loan hit 7.28% on Thursday, up from 7.03% the week before, according to Freddie Mac.
That’s the highest level since November 2023, Fox Business reports.
Here’s what that looks like in real money. On a $400,000 loan, principal and interest now run about $2,737 a month. A year ago, when the average was 6.34%, the same loan cost about $2,486.
That’s $251 more every month — a car payment for a lot of families — and roughly $90,000 extra over the life of a 30-year loan.
You didn’t cause this. The bond market did. Mortgage rates tend to follow the 10-year Treasury yield, and that yield has been climbing. Lenders simply pass the bill along to you.
But here’s what most people don’t realize: The rate in the headline isn’t the rate you have to pay. Two buyers with the same house and the same income can walk away with very different loans. Here’s how to make sure you’re the one paying less.
1. Get at least 3 quotes — in the same week
Most people get one quote: from their own bank or from whatever lender the real estate agent recommends. It’s one of the costliest habits in home buying.
Freddie Mac actually measured it. When rates spiked in late 2022, borrowers who got two quotes could have saved as much as $600 a year. Those who got four or more could have saved over $1,200 a year.
The higher rates go, the more shopping pays.
Worried all those applications will ding your credit? Don’t be. Multiple mortgage credit checks within 45 days show up as a single inquiry, according to the Consumer Financial Protection Bureau. So shop hard, and shop fast.
Compare written loan estimates, not phone quotes. Loan estimates use a standard format, so you can line up the rate, points and closing costs side by side.
Older borrowers especially need to do this — homeowners over 55 pay what amounts to a “seniority tax” of about $2,400 a year when they refinance.
When you’re ready to start, you can compare mortgage offers from several lenders in our Solutions Center.
2. Fix your credit score before you apply
Lenders price loans by credit score tiers, and the gaps between tiers are bigger than most people think.
Look at Fannie Mae’s pricing grid. On a purchase loan with 20% down, a borrower with a 780 score gets hit with an extra fee of 0.375% of the loan amount. A borrower in the 640-to-659 range pays 2.25% more.
The good news: Small improvements count. Moving from a 650 to a 660 drops that charge from 2.25% to 1.875% on the same grid — $1,500 back in your pocket on a $400,000 loan.
So before you apply, pull your free credit reports at AnnualCreditReport.com and dispute any errors. The CFPB warns that a mistake on your report can mean a higher interest rate. Pay down credit card balances, and don’t open any new accounts until you close.
3. Do the break-even math before you buy points
A point is a fee you pay upfront to lower your rate. Each point costs 1% of the loan, so on a $400,000 mortgage, one point is $4,000.
Points have gotten popular. The share of homebuyers paying them roughly doubled between 2021 and 2023, from 31% to 61%, according to the CFPB. The bureau also warned that points only pay off if you keep the loan long enough.
Here’s how to tell. Say one point lowers your rate from 7.28% to 7.03%. (How much a point buys varies by lender, so ask.) Your monthly payment drops about $68. Divide $4,000 by $68, and it takes about 59 months — roughly five years — just to break even.
As a CPA, here’s my take: If you’ll keep the loan 10 years, points can be a fine deal. But if you’re paying points at 7% while planning to refinance when rates fall, you’re buying a discount you’ll never collect.
If refinancing in a couple of years is your plan, skip the points and save the cash. When that day comes, here’s where to compare refinance rates.
4. Make the seller pay
In plenty of markets, sellers need buyers more than buyers need sellers. That’s leverage, and a housing market standoff can be your best chance to make a deal.
One of the smartest ways to use it: Ask the seller to pay for your rate. Fannie Mae’s rules let sellers contribute toward closing costs or a rate buydown, up to limits set by your down payment, according to its Selling Guide.
Put down less than 10%, and the seller can chip in up to 3% of the price. Put down 10% to 25%, and the limit is 6%. Put down more than 25%, and it’s 9%.
So on a $450,000 home with 10% down, a seller could cover as much as $27,000. That can pay for points, knock down your rate and shrink your payment every month for as long as you keep the loan.
Many sellers will consider this before a straight price cut, because it keeps the sale price — and the neighborhood comps — intact. Have your agent write it into the offer.
A quick nudge — when it comes to money, the best day to get smart was 20 years ago. The second-best is today. Sign up for the free Money Talks Newsletter and start now. Takes 10 seconds, costs nothing, and could change your retirement.
5. Hunt for a house with an assumable loan
Here’s a move most buyers never hear about. Some mortgages can be taken over by the next buyer, rate and all.
All Federal Housing Administration-insured mortgages are assumable if the new borrower passes a credit review, according to the Department of Housing and Urban Development. And according to the Department of Veterans Affairs, VA loans can be assumed too — even by someone who isn’t a veteran — with the servicer’s approval.
Why does that matter? Because a lot of homeowners locked in loans when rates were rock-bottom. The 30-year average hit a record low of 2.65% in January 2021, according to Freddie Mac.
Take over a $300,000 balance at 3%, and your principal and interest run about $1,265 a month. Borrow the same $300,000 at today’s 7.28%, and it’s about $2,053. That’s nearly $800 a month.
There are catches. You’ll have to pay the seller for their equity, in cash or with a second loan. Assumptions can be slow. And a veteran’s VA entitlement stays tied to the loan unless another veteran substitutes theirs, which makes some sellers hesitant.
Still, it’s worth asking. Search listings for the word “assumable,” and have your agent ask listing agents directly.
6. Consider an adjustable-rate mortgage — with your eyes open
Adjustable-rate mortgages are back. They made up 10.3% of applications in the latest weekly survey from the Mortgage Bankers Association, which put the average 5/1 ARM at 6.47%.
The math is tempting. On a $400,000 loan, 6.47% means a payment of about $2,520, versus $2,737 at 7.28%. That’s $217 a month, or about $13,000 over the five years before the rate can change.
But after those five years, your rate resets based on the market. I started on Wall Street in 1981, when mortgage rates topped 12%, and I can tell you rates can climb further and faster than anybody predicts.
So an ARM makes sense only if you’re likely to sell or pay down the loan before it adjusts.
Ask the lender for the caps — how much your rate can rise at each adjustment and over the life of the loan — and make sure you could live with the worst-case payment.
7. Lock smart — and ask about a float-down
When rates move a quarter of a point in a week, a rate lock is your insurance policy. Locks typically run 30, 45 or 60 days, according to the CFPB, and extending one can get expensive. Pick a lock period that matches your real closing date.
The downside of a lock is that it can shut you out if rates fall before closing.
That’s where a float-down option comes in. It lets you grab a lower rate if the market drops while you’re locked. Some lenders charge for it, and some don’t offer it at all, so ask.
Whatever you agree to, get it in writing. Oral lock agreements are hard to prove if there’s a dispute, the Federal Reserve warns.
‘Marry the house, date the rate’ is a bet, not a plan
You’ve probably heard this line from a real estate agent: Buy now, and refinance when rates drop. The problem is it assumes rates will drop.
Remember when Fannie Mae predicted rates would slide toward 6.1% by the end of 2026? We reported that Fannie Mae’s prediction might disappoint. So far it has. We’re at 7.28%.
So buy a payment you can afford at today’s rate. If rates fall later, a refinance is a bonus, not a rescue plan.
And if you already own a home with a low rate, don’t give it up for a cash-out refinance. If you need cash, a home equity line of credit leaves your first mortgage alone. You can compare HELOC options here.
You can’t control mortgage rates. You can control what you pay. Get the quotes, clean up your credit, run the numbers on points, and make the seller chip in. That’s how you beat a 7% market.
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