Mortgage Rates Are Near 7% Again. Here's What You Can Do About It

If you’ve been watching mortgage rates, this month was a rough one. The average rate on a 30-year mortgage climbed back to around 7%, up from about 6.25% a year ago. On a typical $400,000 loan, that’s roughly $180 more every month.

That’s a real hit, especially if you’ve been saving for a while. There’s some better news on the other side, though.

Right now there are a lot more homes for sale than there are buyers. Redfin estimated there were about 58% more sellers than buyers in August, the biggest gap in its data going back to 2013. And in Redfin’s data, sellers offered some kind of concession, like help with closing costs or repairs, in about 45% of August sales. How much room you’ll have depends a lot on your local market, but in many places sellers are more willing to deal than they’ve been in years.

Ask the seller to help with your mortgage

Most buyers only think to ask for a lower price. Another option is to ask the seller for a credit at closing that goes toward your mortgage.

A common way to use that credit is a two-year buydown. Your loan’s interest rate doesn’t change. Instead, the seller’s money is set aside at closing and covers part of your payment for the first two years. Your agent writes it into your offer, and your lender sets it up.

Here’s roughly how that works on a $400,000, 30-year loan at 7%, counting principal and interest only (not taxes or insurance):

• Year one: you pay about $514 less a month
• Year two: you pay about $263 less a month
• From year three on: you pay the full amount, about $2,661 a month

That costs the seller about $9,300. If you asked for $9,300 off the price instead, your payment would drop by only about $60 a month, but that smaller payment would last for the life of the loan.

So a seller credit can make the first couple of years noticeably easier, while a price cut is a smaller help that keeps going. Either way, the number that matters most is the payment you’ll owe once any discount ends. Make sure that one fits your budget.

The same credit can also be used to lower your interest rate for the whole loan, or put toward your closing costs so you need less cash up front. Which is best depends on your situation, and that’s a question for your lender.

Two things worth knowing:

• Because your actual rate stays the same with a two-year buydown, lenders still judge you on the full payment when deciding how much you can borrow. It won’t help you qualify for a bigger loan.
• There’s a limit on how much a seller is allowed to contribute. Your lender can tell you what it is for your loan.

The question to ask your lender

You don’t need to work out which option is best on your own. Get quotes from two or three lenders, and ask each one something like this:

“If the seller gives me about $9,000, can you show me what happens if it goes toward a two-year buydown, a permanently lower rate, or my closing costs?”

For each option, ask what your payment will be once any temporary discount ends, and what the loan will cost in total over the number of years you expect to keep it. The Consumer Financial Protection Bureau has a short guide to comparing loan offers if you want help lining the quotes up side by side.

Where it’s worth asking

Not every seller will say yes. A home that just hit the market with a line of people waiting to see it probably doesn’t need to offer you anything.

The best places to ask are homes that have been listed for a while, especially ones that have already dropped their price. Those sellers tend to be more open to a deal. We put together a simple guide to spotting a motivated seller if you want to know what to look for.

Many sellers also prefer giving a credit over cutting the price, because the final sale price stays higher. So a seller who won’t budge on price may still say yes to this.

Once you’ve toured a few homes, it’s easy to lose track of which one had been sitting or had just dropped its price. CazaHQ lets you save each home with your own photos and notes, so you can jot those details down as you go. It’s free to download.

New homes often come with deals too

If you’re open to a newly built home, builders are feeling the pinch as well. About two out of three builders are offering incentives right now, and a lower rate through their lender is one of the most common.

These can be good deals. Just get a quote from at least one other lender too, so you can compare the full cost and make sure the discount is real.

Don’t count on refinancing later

You may hear people say, “Buy now and refinance when rates drop.” Sometimes that works out. But nobody knows when rates will fall, or whether they will. The Federal Reserve just raised rates this month for the first time since 2023. Refinancing also costs money, often several thousand dollars.

The safer plan is to buy a home whose payment you can handle at the rate you’re getting today. If rates come down later, a refinance is a nice bonus.

Should you wait for rates to drop?

It’s the question almost everyone is asking, and there isn’t a clear answer. Rates could go down next year, or they could keep climbing. If they do drop, more buyers will likely jump back in, and the deals sellers are offering today may not last.

Rather than trying to time it, focus on two things you can control: whether the monthly payment fits your budget, and whether you’ve found a home you’d be happy living in for a while. If both are true, you may have more room to negotiate right now than buyers have had in years.

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This is general information, not financial advice. Everyone’s situation is different, so talk to a lender about your own numbers.