4 ways to find low mortgage rates this October, according to experts

There are multiple ways to secure a below-average mortgage rate this October. Catherine Falls Commercial/Getty Images

The last few months have ushered in notable improvements on the mortgage rate front. The average rate on 30-year mortgage loans recently declined to 6.13%, the lowest point seen in three years.

Still, rates are a far cry from those ultra-low rates of the pandemic — and for many homebuyers and refinancers, they're still pretty pricey considering today's home prices.

Fortunately, waiting it out for rates to drop further isn't your only option if you need a better deal. Experts say there are a number of strategies that can improve your chances of scoring a low mortgage rate, especially as we enter the typically slower season for real estate (when lenders must compete more for business). 

Want to snag a lower rate on your upcoming refinance or home purchase? We asked some experts to share their strategies for securing a low mortgage rate this October, specifically. Below, we'll break down four of their recommendations.

Start by seeing how low your current mortgage rate offers are here.

4 ways to find low mortgage rates this October, according to experts

Here are some of the better ways to locate a low mortgage interest rate this October, according to the experts we spoke with:

Compare several lenders

There are multiple mortgage lenders you can choose to get a loan with. And comparing at least a handful of those? Experts say that's the number one step you can take in today's market.

"The best way to secure a low mortgage rate right now is to shop around with multiple lenders," says Darren Tooley, team sales manager at Union Home Mortgage. "Rates can vary from one lender to another on any given day, so it's important to do some  research and compare multiple quotes."

When you're shopping around, be sure to get quotes from different types of lenders — banks, credit unions, online lenders, etc. — and use the same terms and loan type when you apply.

"The mortgage rate you get and the mortgage fees you pay depends on your unique scenario, as well as how much the company you are working with is trying to make off the loan," says Jennifer Beeston, executive vice president of national sales at Guaranteed Rate. "Rates and fees vary dramatically across the industry, and even if your sister or Realtor referred you to the lender, make sure you shop them."

You should look beyond the rate, too, as fees and other lender features can also vary. As Tooley puts it, "The lowest rate isn't necessarily the best rate."

"Just because a lender claims they can offer you the lowest rate possible, there may be negatives, such as significantly higher closing costs or a lender with a poor reputation for underwriting or servicing after closing," Tooley says. "This can lead to more substantial headaches down the road." 

Start shopping for mortgage rates and lenders online today.

Increase your credit score

Typically, the best interest rates go to those with the highest credit scores, as it means you're less of a risk to the lender. If your credit score is on the lower end, taking time to increase it before applying could help you snag a better rate — especially if you're using a conventional loan.

"Raising your credit score from the mid-600s to the mid-700s may not make a significant difference in government programs like FHA or VA loans, as the credit score has minimal impact on the rate," Tooley says. "However, on a conventional loan, it can reduce your rate anywhere from several tenths of a percent to a full percent or more in some cases, saving you tens of thousands over the life of the loan."

Most credit card issuers offer free credit score monitoring, but if you don't have a card with this feature, you can access your score through one of the three credit bureaus — Experian, TransUnion, or Equifax. After you find out your score, you can determine your next steps. if it needs work before applying. 

"Improving your credit score is imperative if it's not above at least 700," says Steven Conners, a financial advisor and founder and president of Conners Wealth Management.

Consider an ARM or shorter-term loan

The 30-year, fixed-rate mortgage isn't the only option you have as a borrower. In fact, by choosing a loan term or type that's different from this norm, you may be able to get a lower rate.

Take the 15-year loan, for example. According to FreddieMac, the average rate on these loans is just 5.41% right now, compared to over 6% that comes with a 30-year loan. That can add up to significant savings over time.

You can also explore an adjustable-rate mortgage (ARM). These have rates that start off lower than fixed-rate loans, for a limited period of a few years. After that, their rate adjusts up or down based on the index they're tied to. 

"While both ARMs and shorter-term loans can offer a lower rate, there is a trade-off as well," Tooley says. "With an ARM, the trade-off is that at some point in the future, the rate will become adjustable and can increase, resulting in higher payments in the future. On the other hand, a shorter-term loan can offer a low fixed rate, but it will also require a larger monthly payment than a 30-year fixed-rate would."

"The primary benefit of an ARM is they are at a fixed rate for several years, and if your plan is to sell or refinance again before the fixed period ends, it's a win," says Chris Parks, sales manager for Churchill Mortgage.

Buy points if the numbers work

Buying mortgage points is another method you could use to get a lower mortgage rate. This involves paying an upfront fee — usually 1% of the loan balance — to reduce your rate by a fractional amount. You then enjoy the lower rate (and payment it comes with) for the entire loan term.

Whether it's a smart move, though, "depends on whether you plan to stay in the home long enough to benefit from the savings and how optimistic you are about the market and economy," says Bill Dawley, senior vice president of residential lending at Amegy Bank. 

Generally speaking, points are a good strategy if you plan to be in the home for a while. This would give you plenty of time to save more from the points than they initially cost you. If you only plan to be in the house for a couple of years, though, you may not reap the full benefits of the lower rate — and could even end up paying more than you need to. 

To determine if points are a smart move, calculate their breakeven point by taking the total cost of the points and dividing it by the monthly savings the lower rate offers.

For example, if your points cost $2,000 and save you $100 per month, you'd break even in 20 months — or a little less than two years. If you plan to stay in the home that long, then they could be worth the investment. 

"If your plan is to live in the home through the payback period, then it can be a sound strategy, as every month following the payback period, the investment in the points compounds your savings," Parks says. "However, if the payback period is more than 36 months, it's not likely to be as good of an investment."

The bottom line

The most important thing to do when getting a mortgage this October and in the months after is to be thorough. Compare lenders and loan offers, improve your credit score before applying, and work with your loan officer to weigh options like points or alternate loan programs. You can also consider working with a mortgage broker, who can explore mortgage rate options for you.