Three factors that can help buyers secure lower rates

Mortgage rates above 7% can make buyers feel as though affordability is largely out of their hands. But new Realtor.com research shows that rates can vary widely among borrowers.

An analysis of Freddie Mac loan data found that the middle 80% of borrowers received rates spanning nearly a full percentage point in a single month. That difference can translate into thousands of dollars in buying power.

The research points to three areas buyers can influence: their credit score, down payment and choice of lender.

Credit matters

Borrowers with stronger credit generally received better rates, with some of the biggest benefits happending to buyers who cross key credit-score thresholds.

For example, Realtor.com found that improving a credit score from 680 to 720 was associated with an 11-basis-point lower rate. For a buyer with a $2,000 monthly principal-and-interest budget, that translated to about $3,200 in additional purchasing power.

“Focusing on keeping a good credit score will provide the best benefit for getting a better rate and mortgage terms overall,” Sarah DeFlorio, vice president of mortgage banking at William Raveis Mortgage, told Realtor.com.

Improving credit can take time, however, making it something prospective buyers may want to address well before applying for a mortgage.

Down payment help, especially at key thresholds

Putting more money down can help buyers secure a lower mortgage rate, but Realtor.com found that the biggest benefits tend to occur at certain thresholds.

Crossing the 10% down mark produced the largest rate improvement below 20%, lowering the rate by about 5.5 basis points. Moving from 15%-19% down to 20% produced only a small additional rate reduction, although reaching 20% can eliminate private mortgage insurance on a conventional loan.

Larger down payments can produce more substantial savings. Realtor.com found that moving from 20% to 40% or more down lowered the rate by about 17.5 basis points, adding roughly $5,400 in purchasing power for a buyer with a $2,000 monthly principal-and-interest budget.

Shopping lenders pays off

Comparing lenders may be the quickest step buyers can take. Realtor.com found meaningful rate differences among lenders even after accounting for borrowers' financial background and local markets.

Buyers should consider:

• Rates and fees: A lower advertised rate may come with additional upfront costs.
• Loan options: Different lenders may offer programs that better fit a buyer's circumstances.
• Closing needs: Buyers should also consider whether a lender can meet financing and contract deadlines.

The research focused on conventional loans acquired by Freddie Mac and did not include FHA, VA, jumbo or portfolio loans.

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