Homebuyers

Want a Better Mortgage Rate? Your Credit Score May Matter More Than You Think

Homebuyers looking for a lower mortgage rate may have more control than they realize. Improving their credit score or adjusting their down payment could translate into thousands of dollars in additional purchasing power.

Borrowers purchasing homes during the same month often received substantially different mortgage rates, even when the national average remained unchanged, according to a Realtor.com analysis of more than 1.35 million purchase loans.

“The headline rate is driven by global forces out of any single borrower’s control,” said Jake Krimmel, senior economist at Realtor.com. “But in a typical month the middle half of borrowers were separated by almost half a percentage point.”

The difference can be significant. In a hypothetical month with mortgage rates around 7%, the middle 80% of borrowers would have received rates ranging from 6.50% to 7.43%.

For someone with a $2,000 monthly budget to cover the principal and interest on a mortgage payment, that spread translates into approximately $28,400 in additional homebuying power.

Fortunately, there are steps homebuyers can take to lower their interest rates.

A higher credit score could unlock a better mortgage rate

Credit scores had the largest independent effect on mortgage rates, according to Realtor.com’s analysis of purchase loans originated between January 2023 and December 2025.

Two numbers stood out: 700 and 720.

Crossing each threshold was associated with an average mortgage rate improvement of approximately 5.5 basis points. A basis point 1/100^th of a percentage point. So, a 5.5 basis point decline in a mortgage rate would take a rate of 7.25% to 7.155%, for example.

Moving from a score in the 680s to 720 translated into an 11-basis-point improvement. That’s worth roughly $3,200 in additional purchasing power for someone with a $2,000 monthly principal-and-interest budget.

“Things like knowing what credit score or down payment thresholds matter the most and acting on it are real things buyers can start doing now in preparation for their home search,” said Krimmel.

Homebuyers hoping to improve their scores can start by paying bills on time, reducing outstanding credit card balances, and checking their credit reports for errors.

Even those planning to purchase sooner may benefit from understanding how their credit profile affects their available mortgage options.

You may not need 20% down to improve your mortgage rate

Saving for a larger down payment can also help homebuyers secure more favorable mortgage terms, such as lower fees. However, Realtor.com’s findings suggest that some down payment milestones matter more than others.

For example, increasing a down payment from the 5% to 9% range to the 10% to 14% range was associated with a 5.5-basis-point decrease in mortgage rates.

Surprisingly, increasing a down payment from 15% to 19% to exactly 20% produced a much smaller rate improvement of approximately 0.7 basis points.

However, reaching 20% down on a Conventional mortgage generally allows homebuyers to avoid private mortgage insurance, potentially reducing their overall monthly payment.

“Twenty percent down is still an important financial benchmark because it ends mortgage insurance,” said Krimmel. “But buyers should not assume it produces a large rate drop on its own.”

Homebuyers should consider the full financial picture when deciding how much to put down. This includes how much cash they want to preserve for closing expenses, moving costs, and unexpected repairs.

Look at the full monthly mortgage payment, not just the interest rate

A lower mortgage rate can make homeownership more affordable, but it is only one part of the equation.

Homebuyers should also consider mortgage insurance, closing costs, discount points, property taxes, and homeowners insurance when evaluating their budget.

Depending on their circumstances, they may also want to explore options such as a temporary mortgage rate buydown, an adjustable-rate mortgage, or a loan program with a lower down payment requirement. Buydowns allow you to pay for a lower mortgage for the first few years of a loan, while discount points permanently lower the rate for the life of the loan.

Comparing the total monthly cost of different loan options, including mortgage insurance and upfront expenses, can help homebuyers make a more informed decision.