Mortgage rates keep rising, but here’s how to pay less

The latest mortgage rates

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Mortgage rates continue to rise, with 30-year fixed mortgages now sitting at 6.53%, according to Bankrate data from September 21. The national average for 15-year fixed-rate home loans, while rising since August, has fallen slightly. from one day before to 5.75%. (See the lowest mortgage rates you can get right now here.)

How to get a lower mortgage rate

There are several things you can do now to get a lower mortgage rate. First, if you can afford it, shortening your loan can be beneficial. In fact, 15-year mortgage rates are still lower than 30-year mortgage rates.

An adjustable-rate mortgage (ARM) may also be worth considering, if it makes sense for your long-term plans. The most recent data from Bankrate shows that average rates on 5/1 ARMS (rates are fixed for five years and then adjusted) are 4.84%, considerably lower to start with than 15-year fixed-rate mortgages and 30 years That said, ARMs often make the most sense for short-term homeowners who only plan to be in the same house for 5-7 years. Because ARM rates become variable, “ARMs can be risky and, in the long run, can end up costing more than a fixed mortgage with a higher initial rate,” Jacob Channel, senior economic analyst at MarketWatch Picks, recently told MarketWatch Picks. LendingTree.

Experts advise shopping around, getting quotes from 3-5 lenders, calculating your credit score (improving it if needed) and debt-to-income ratio (DTI), to help you determine what rate you’ll pay, regardless of whether you get a 15-year fixed, a 30-year fixed, or an ARM. To calculate your DTI, divide your monthly debt payments (mortgage, credit card payments, personal, auto or student loans, child support) by your monthly gross income. If the number you get is 36% or less, your chances of qualifying for a mortgage, and at a better rate, are better than if you get a higher number as your DTI.

Another way to lower your mortgage rate is to use discount points, which are fees paid to lower your interest rate. One point generally reduces the interest rate by 0.25%, although this can vary. “When you pay discount points, you are giving the lender a portion of the interest payments up front in exchange for paying less interest each month,” Holden Lewis, housing and mortgage expert at Nerdwallet, recently told MarketWatch Picks. But keep in mind that there may be limits to how many discount points you can buy, and buying points may not make sense, especially if you don’t plan on staying in the house for long.

This MarketWatch Picks guide has additional tips to help you save on your mortgage, including using first-time homebuyer programs, getting quotes from 3-5 different lenders, and more.

Any advice, recommendations, or ratings expressed in this article are from MarketWatch Picks and have not been reviewed or endorsed by our trading partners.

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