You can cut your mortgage costs by thousands with this simple strategy

At a time when mortgage rates are at multi-year highs and show little sign of falling next year, cutting a few basis points from your interest rates could save thousands of dollars over the life of your mortgage.

Buyers who evaluate their mortgage lender options and shop around could lower mortgage rates by as much as 0.55%, Realtor.com said in a new analysis of nearly 2 million mortgages from 2023 and 2024. For a 30-year mortgage with 20% down on a median-priced home of $425,000, Realtor.com said the gap in rates could provide nearly $44,000 in savings over the life of the mortgage.

“After years of rising borrowing costs, even small improvements in rates can open doors to more buyers,” said Danielle Hale, chief economist at Realtor.com.

Why and how you should shop for a mortgage

The FTC also recommends getting quotes from several different mortgage lenders throughout your home buying process, and making sure you know the terms of the lender and broker you may be working with so you’re prepared to negotiate.

Besides the Federal Trade Commission (FTC), there are several other government entities that have guides on shopping around for different pricing options, such as the Federal Reserve and the Consumer Financial Protection Bureau.

Credit score and down payment can also have big impacts on your mortgage savings

Improving your credit score and making a larger down payment can also help you save money on your mortgage in the long run.

Realtor.com found that raising your credit score to the 720 to 760 range from the 660 to 720 range can lower your mortgage rate by about 0.11%, saving about $8,700 over the life of a typical 30-year mortgage.

On the other hand, doubling your down payment from 10% to 20% will save you just over $100,000 with a slight average improvement in your mortgage rate, as this helps reduce the amount of interest you will have to pay.

However, coming up with an extra 10% — that’s $42,000 for a median-priced home — would be very difficult (if not impossible) for many of today’s homebuyers. Improving your credit and shopping for a mortgage may be within reach.