Freddie Mac’s average 30-year fixed mortgage rate jumped to 6.95% on Sept. 17, 2026, up from 6.76% a week earlier. A year ago, the rate averaged 6.26%. For homebuyers, that makes every dollar of the loan amount and every fraction of a rate reduction matter.
Consider a $500,000 home purchase with a 20% down payment, or $100,000. That produces a $400,000, 30-year fixed-rate loan. At 6.95%, the estimated principal-and-interest payment is $2,648 per month. That excludes property taxes, homeowners insurance, HOA dues and any mortgage insurance.
A Tropical Financial Credit Union mortgage professional can help compare the trade-offs and identify a monthly payment strategy that supports the buyer’s broader financial goals.
Here are seven ways buyers may be able to reduce that payment.
1. Make a larger down payment.
Putting more money down means borrowing less. On the $500,000 example, increasing the down payment from 20% to 25% reduces the loan from $400,000 to $375,000 and lowers the estimated principal-and-interest payment from $2,648 to $2,482. That is a savings of about $1,986 over one year and $19,858 over the first 10 years.
A 30% down payment produces a $350,000 loan and an estimated payment of $2,317. Compared with the 20%-down scenario, that is about $3,972 less over one year, which is more than a monthly payment, and $39,717 less over the first 10 years.
2. Use an eligible gift toward the down payment.
A relative’s gift can help a buyer make a larger down payment without depleting all of the buyer’s own savings. For conventional loans sold to Fannie Mae, eligible donors generally include a spouse, child, dependent, or another person related by blood, marriage, adoption, or legal guardianship.
Certain non-relatives with a documented familial-type relationship—such as a domestic partner, fiancé or long-standing mentor—also may be eligible. Gifts generally cannot come from a builder, developer, real estate agent, or another party with an interest in the sale. Gift funds also cannot be used for an investment-property purchase.
For example, an additional $25,000 gift could move the buyer from 20% to 25% down. That reduces the estimated principal-and-interest payment by $1,986 over one year and $19,858 over the first 10 years.
The lender will require gift documentation, including a signed gift letter that identifies the amount, donor relationship, and confirms that repayment is not expected,
3. Buy down the interest rate with discount points.
Discount points are an upfront payment at closing in exchange for a lower interest rate. One point equals 1% of the loan amount, so one point on a $400,000 loan costs $4,000. The exact rate reduction varies by lender, loan type, and market conditions, so compare loan estimates rather than assume a standard discount.
For example, a 0.25-percentage-point rate reduction—from 6.95% to 6.70%—would lower the estimated payment on the $400,000 loan to about $2,581. That saves roughly $800 over one year and $8,002 over the first 10 years.
A half-point reduction, to 6.45%, would lower the estimated payment to about $2,515. That represents savings of about $1,592 over one year and $15,919 over the first 10 years.
Before paying points, compare the upfront cost with the expected savings and consider how long they expect to keep the loan. The time needed for monthly savings to equal the upfront point cost is often called the break-even period.
4. Ask the seller to pay eligible points and closing costs.
A seller concession cannot directly become the buyer’s down payment or required borrower contribution. However, it can help cover eligible closing costs, prepaid expenses, and, within program limits, discount points. That can free the buyer’s cash for a larger down payment.
For instance, if seller-paid costs let the buyer contribute $25,000 more toward the down payment, the loan could drop from $400,000 to $375,000. At 6.95%, the estimated payment would drop from $2,648 to $2,482 per month, a savings of about $1,986 over one year and $19,858 over the first 10 years.
Concession limits and eligible uses vary by loan program and loan-to-value ratio. Buyers should work with their lender and a real estate professional to structure the offer correctly.
5. Choose a less expensive home or negotiate the price.
A lower purchase price directly reduces the amount financed. With 20% down, every $10,000 reduction in purchase price lowers the loan by $8,000. At 6.95%, that decreases the estimated principal-and-interest payment by approximately $635 over one year and $6,355 over the first 10 years.
A $25,000 reduction in purchase price, from $500,000 to $475,000, would reduce the loan by $20,000, assuming the same 20% down payment. The estimated payment would decline by about $1,589 over one year and $15,887 over the first 10 years.
6. Improve credit before locking the loan.
The credit score affects one’s mortgage pricing. Fannie Mae’s loan-level pricing adjustments consider the borrower’s representative credit score and loan-to-value ratio, among other loan characteristics. A stronger credit profile may help a buyer qualify for more favorable pricing or avoid additional points and fees.
Buyers should review their credit reports early, dispute legitimate reporting errors, avoid opening new credit accounts before closing, and pay down revolving balances where practical. Even a modest rate improvement can make a difference: a 0.25-percentage-point reduction on the $400,000 example saves approximately $800 over one year and $8,002 over the first 10 years.
7. Avoid or eventually eliminate private mortgage insurance.
For many conventional borrowers, a down payment below 20% may require private mortgage insurance, or PMI. It adds to the total monthly housing payment, even though it is not included in the $2,648 principal-and-interest example. A larger down payment may reduce PMI costs or avoid the charge entirely.
For conventional loans, eligible borrowers generally may ask their servicer to cancel PMI once the principal balance reaches 80% of the home’s original value, subject to applicable payment-history and other requirements. Actual savings vary widely by credit profile, loan-to-value ratio, insurer, and loan amount so that a lender can provide a tailored PMI estimate.
