After spiking in June, mortgage rates are now holding steady below 6%

After spiking above 6% in June, rates on 30-year, fixed-rate mortgages are holding below 6% in July. Indeed, the average rate for a 30-year fixed-rate mortgage is 5.85%, according to Bankrate data from July 13. And the national average for 15-year fixed-rate mortgage loans is 4.94%. (See the lowest mortgage rates you can get now here). 

But how do you get the lowest rate possible? First up, shorten your loan term if you can. Rates on 15-year mortgages are lower than 30-year mortgages, and for some adjustable rate mortgages (ARM) are also worth considering. The latest Bankrate data shows that average rates on 5/1 ARMS (rates are fixed for five years, then adjust) are 4.21%, significantly lower at the start than both the 15-year and 30-year fixed rate mortgages. But ARMs tend to make the most sense for short-term homeowners, who only plan to be in the same home for 5 to 7 years.

And because ARM rates become variable, “ARMs can be risky, and in the long run they may end up costing more than a fixed mortgage with a higher upfront rate,” says Jacob Channel, LendingTree’s senior economic analyst, recently told MarketWatch Picks.

Whether you opt for a 15-year fixed, 30-year fixed or an ARM,  experts recommend gathering quotes from 3 to 5 lenders and figuring out your credit score (improve it if needed) and debt-to-income ratio (DTI), which can help you determine what rate you can expect to pay. (See the lowest mortgage rates you can get now here). To calculate your DTI, divide your monthly debt payments (mortgage; credit card payments; auto, student or personal loans; child support) by your gross monthly income. If the number you come out with is at or below 36%, your chances of qualifying for a mortgage, and at a better rate, are better than if you come out with a higher number as your DTI.

There are also other ways to bring your mortgage rate down. Buying discount points, which are fees paid to reduce an interest rate, can be impactful if you can afford it.  Generally, one point decreases the interest rate by 0.25%, though this can vary. “When you pay discount points, you’re handing the lender a chunk of interest payments up front in exchange for paying less interest every month,” Holden Lewis, home and mortgage expert at Nerdwallet, recently told MarketWatch Picks. But note that there may be limits to how many discount points you can buy, and buying points may not make sense, especially if you don’t plan to stay in the home for long.