Nearly half of recent home buyers have mortgage rates below 5%.

After falling to nearly 6% in September, the average 30-year fixed-rate mortgage is rising back to 7%, pushing many home seekers out of the housing market. But a new Zillow real estate market study found that, remarkably, nearly half of recent buyers secured a mortgage rate below 5%.

How? Using creative strategies to achieve homeownership, according to Zillow. Without these hacks, many homeowners would still be renting.

Mortgage rates have risen from a historic low of 2.65% in 2021 to a ten-year high of 7.79% by fall 2023, significantly impacting buyers’ purchasing power. Typical mortgage payments rose 115% from pre-pandemic levels to a peak in May 2024.

Mortgage rates have risen due to inflation and declining home sales. However, this has not led to a decline in home prices, which are still near record highs.

Needless to say, high prices and unpredictable mortgage rates create problems for homebuyers, limiting their options and, in some cases, preventing them from entering the housing market. However, determined buyers are finding innovative ways to make homeownership a reality.

According to a Zillow survey, 45% of recent buyers received a rate below 5%. More than a third (35%) achieved this through special financing offered by home sellers or builders. About a quarter made their offer contingent on an interest rate, refinanced at a lower rate after purchasing, or borrowed from friends or family.

“This surprising discovery highlights the creativity of both buyers and sellers navigating today’s dynamic real estate market,” said Amanda Pendleton, Zillow housing trends expert. “Buyers are finding innovative ways to secure lower mortgage rates, while sellers are offering financing solutions to attract potential buyers. Prospective home buyers should explore all options to lower their monthly payments and make homeownership achievable.”

Strategies for securing a lower mortgage rate

Focus on your credit score: A higher credit score may result in a lower interest rate. Buyers should work to improve their credit score and maintain it through closings, avoiding new lines of credit or large purchases. Zillow’s rental reporting service can help renters get credit by reporting on-time rent payments.

Consider Buying Rates and Mortgage Points: Buyers may want to explore the option of buying down mortgage rates or purchasing points to reduce interest costs. Buying rates involves an initial upfront payment for discounted rates, while buying points provides ongoing savings. Builders may be able to cover these costs to build new homes, but negotiation is an option.

Increase in down payment: A larger down payment reduces the size of the loan and the risk for the lender, potentially leading to a lower mortgage rate. While saving for a down payment can be challenging, especially for first-time buyers, there are resources that can help. Zillow listings may show available down payment assistance programs.

Think about breaking into a house: Renting out rooms to generate rental income can help lower your mortgage rates. Buyers who included projected rental income in their mortgage application were more likely to receive a rate below 5%.

Explore non-traditional loan types: In addition to a conventional 30-year fixed-rate mortgage, options such as an adjustable rate mortgage (ARM) offer lower rates initially that adjust after a certain period. Shorter loan terms, such as a 15-year mortgage, have higher monthly payments but lower interest rates. Consulting a loan officer can help buyers evaluate affordability and make informed decisions based on their budget.