07/26/2026
If you've been watching mortgage rates lately, you're probably feeling a sense of déjà vu. Rates have once again drifted toward levels that many buyers consider uncomfortable, reminding us of the peaks we experienced in October 2023 and again in early 2025. It is natural to look at today's rates and feel like homeownership has become less affordable.
But a little perspective can go a long way.
For much of modern history, mortgage rates in the 6% to 8% range were considered fairly normal. The exceptionally low rates many buyers became accustomed to over the last decade were largely the result of extraordinary government and Federal Reserve intervention designed to stimulate the economy. In other words, taxpayers and government policy played a significant role in suppressing borrowing costs.
Today, we're operating in a more normalized interest rate environment. While that doesn't make monthly payments any easier, it does remind us that the market isn't broken—it's simply functioning without many of the artificial supports that existed during previous years.
The question isn't whether rates are higher.
The question is: How do you improve affordability when rates are higher?
The Most Underutilized Tool: Buying Down the Rate
One of the most effective strategies available to homebuyers today is paying discount fees, commonly known as "points." New home builders use this strategy on every new development...
A point equals 1% of the loan amount and is prepaid at closing in exchange for a lower interest rate. While pricing varies by lender and market conditions, a reasonable rule of thumb is that each point may reduce the interest rate by approximately 0.25%.
For example:
1 Point = roughly 0.25% rate reduction
2 Points = roughly 0.50% rate reduction
3 Points = roughly 0.75% rate reduction
Most buyers can contribute approximately 3% of the loan amount toward discount points before practical or guideline limitations begin to come into play.
But what if we could do even more?
The Real Power Move: Seller Incentives
Many buyers focus exclusively on negotiating a lower purchase price.
In today's market, that may not be the best approach.
Instead, buyers should consider requesting a seller credit toward closing costs and prepaid expenses. Depending on the financing program and down payment amount, seller contributions can often be substantial—sometimes up to 9% of the sales price!
These funds can be applied toward discount points and other closing costs, dramatically improving affordability without requiring additional cash from the buyer.
Here's Why This Matters
Let's assume:
Purchase price: $1,000,000
Down payment: 20%
Loan amount: $800,000
Now suppose the seller agrees to provide a 4% incentive, or $40,000.
Since discount points are calculated based on the loan amount, that $40,000 concession equates to 5 points on a $800,000 loan.
Using our rule of thumb:
5 Points × 0.25% reduction per point
Potential rate improvement: 1.25%
Imagine turning a 7.00% APR mortgage rate into something closer to 5.75% APR.
In an environment where many buyers would love to see an interest rate beginning with a "5" again, that's a strategy worth exploring.
Seller Incentives vs. Price Reductions
Here's the part many sellers haven't considered.
A seller incentive is often dramatically more powerful than a price reduction.
For a buyer, the monthly payment impact from a rate reduction frequently outweighs the benefit of a comparable reduction in sales price. In many scenarios, every dollar used toward discount points can create purchasing power and payment relief that far exceeds the effect of lowering the home's price.
Simply put:
Seller concessions can often deliver three times the affordability benefit of a comparable price reduction.
That's why sellers should seriously evaluate concession requests before automatically lowering their asking price.
After all:
The buyer gets a lower payment.
The seller often preserves their contract price.
The transaction becomes easier to close.
Everybody wins.
A Real-Life Example
I used this strategy personally.
Rather than spending my cash on closing costs, I structured the transaction so that the sales price was increased by approximately the amount of those costs, with the seller then contributing that same amount back as a credit at closing.
The seller loved the approach.
From her perspective:
She achieved her desired sales price.
The recorded price of the home remained strong.
She sold the property without effectively giving up anything additional.
From my perspective:
I preserved valuable cash reserves.
I reduced my out-of-pocket expenses.
I improved my overall financial position after closing.
It was a classic win:win scenario.
The Bottom Line
Higher mortgage rates don't have to stop a buyer from achieving affordability.
Rather than focusing solely on the headline rate, buyers should work with a knowledgeable mortgage professional to explore every available strategy. Discount points, seller incentives, and creative offer structuring can often accomplish far more than buyers realize.
The reality is that we can't control interest rates.
But we can control how we navigate them.
And sometimes, the smartest move isn't negotiating a lower price—it's negotiating a better payment.
Remember to keep your eye on the 10-year treasury, as that's your best barometer for the direction of mortgage rates.
Until next time, I remain a financial resource to you, and I always welcome discussions around how I can assist you or anyone you know with evaluating whether a residential property purchase or refinance makes sense given any financial scenario.
Kindest regards,
ET😊
Eric Trailer
Mortgage Loan Originator
[M]
+1 650-224-4365
[email protected]
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