Blog > Mortgage Rates Are Back Above 7%: How Houston Buyers Are Lowering Their Payment
Mortgage Rates Are Back Above 7%: How Houston Buyers Are Lowering Their Payment
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The short answer
- The average 30-year fixed rate was 7.40% on October 15, 2026, up from 6.27% a year earlier (Freddie Mac).
- On a typical Houston purchase, that's roughly $220 a month more than last year for the same loan.
- In today's market, many sellers and builders will pay to bring your rate down, through discount points or a 2-1 buydown, within your loan program's limits.
- Run the break-even math before you choose. A point usually pays off only if you keep the loan for several years.
Rates moved fast this fall. The 30-year average climbed for seven straight weeks to 7.40%, the highest since late 2023. On one of our listings last week, the buyer's quoted rate dropped from 7.61% to 7.46% in just a few days. If you're buying in Houston right now, the rate is part of the negotiation, not just something you accept from the lender.
A quick note on my background: I hold a Texas loan officer license, although I don't originate loans. I use it to read financing the way a lender does and to structure offers that actually lower my clients' payments. Here's how that works.
What 7.4% means for your payment
Take the Houston median price of $325,000 with 10% down, a $292,500 loan:
| 30-year rate | Principal and interest |
|---|---|
| 6.27% (a year ago) | about $1,805 a month |
| 7.40% (today) | about $2,025 a month |
| Difference | about $220 a month, or $2,640 a year |
Taxes, insurance, HOA dues and mortgage insurance are extra. In Houston, taxes and insurance often add $800 or more a month.
Four ways Houston buyers are lowering their payment
1. Seller-paid discount points
A discount point costs 1% of the loan and lowers your rate for the life of the loan, often by around a quarter of a percent, depending on the lender and the day. On a $292,500 loan, one point costs $2,925 and might take the rate from 7.40% to about 7.15%, saving about $50 a month.
That's a break-even of roughly five years. If you think you'll sell or refinance sooner, a point may not be worth it. If you'll keep the loan longer, it usually is, and it's even better when the seller pays for it.
From a recent deal: our buyers in Montrose negotiated $22,000 in seller credits, $17,000 more than first agreed. We worked with their lender to apply the extra credit to discount points that lowered their interest rate, so none of it was lost.
2. A temporary 2-1 buydown
A 2-1 buydown lowers your rate by 2 points in year one and 1 point in year two, then the loan goes to its full rate. On the same $292,500 loan at 7.40%:
- Year one at 5.40%: about $1,643 a month (about $383 less)
- Year two at 6.40%: about $1,830 a month (about $196 less)
- Year three on: about $2,025 a month
The cost, about $6,900 here, is paid upfront into an escrow account, usually by the seller or builder. It gives you breathing room early on. Just know that lenders typically qualify you at the full rate, and if rates fall and you refinance, many programs credit unused buydown funds toward your loan.
3. Seller credits toward closing costs
Sometimes the best use of a credit is simply covering closing costs so you keep more cash in the bank. Your lender caps total seller concessions by loan type:
| Loan type | Maximum seller concessions |
|---|---|
| Conventional, less than 10% down | 3% of the price |
| Conventional, 10% to 25% down | 6% |
| Conventional, more than 25% down | 9% |
| FHA | 6% |
| VA | 4% in concessions, plus normal closing costs |
A credit can't exceed your actual costs. If a seller offers more than you can use, we restructure it before closing, which is exactly what we did on that Montrose purchase.
4. Assuming the seller's low-rate loan
FHA and VA loans can be assumed by a qualified buyer with the lender's approval. A seller who financed in 2020 or 2021 may have a rate in the 3% range. The catch is the equity: you pay the difference between the price and the loan balance in cash or with a second loan, and approvals can take a while. When it works, it can save hundreds a month. Be careful with "subject-to" deals, where the seller's loan stays in their name. Most mortgages let the lender call the loan when the home sells, so talk to a real estate attorney first.
Builders are buying down rates, too
With rates above 7%, many Houston builders are offering below-market rates through their preferred lenders, paid for out of the builder's incentive budget. Compare the total package: a lower price, a buydown or closing cost help. Sometimes a price cut does more for you long term than a temporary rate. We cover that in our new construction guide for buyers.
Should you wait for rates to drop?
Nobody can promise where rates go next, and I'd be wary of anyone who does. What I can tell you is what today looks like in Houston: inventory is at 5.5 months, homes are taking 58 days to sell on average, and sellers are open to credits. Buying in a slower market with a slightly higher rate can work out better than buying in a hot market at a lower rate, because you can negotiate price, repairs and closing help. If rates fall meaningfully later, refinancing may be an option, although it comes with its own closing costs.
Mortgage rate questions
What are mortgage rates in Houston right now?
The national average 30-year fixed rate was 7.40% on October 15, 2026, according to Freddie Mac. Houston quotes are similar but vary with credit score, down payment, loan type and points.
Can the seller pay to lower my interest rate?
Yes. Seller credits can pay for discount points or a temporary buydown, within loan program limits: 3% to 9% of the price for conventional loans depending on your down payment, 6% for FHA and 4% in concessions for VA.
What is a 2-1 buydown?
It lowers your interest rate by 2 percentage points in the first year and 1 point in the second year, then the loan returns to its full rate. The cost is paid upfront, often by the seller or builder.
Is buying a discount point worth it?
It depends on how long you keep the loan. One point costs 1% of the loan and often lowers the rate about a quarter point, which can take around five years to break even. It's a better deal when the seller pays for it.
Can I take over a seller's mortgage in Texas?
FHA and VA loans can be assumed by a qualified buyer with lender approval, but you need to cover the seller's equity in cash or with a second loan. Most conventional loans aren't assumable.
Want to see what a seller credit could do for your payment? I'll run the numbers with your lender before we write the offer. Call or text (832) 777-3904 or send me a note.
Sources
- Freddie Mac: Primary Mortgage Market Survey
- Freddie Mac: Mortgage rates hold steady at 7.40% (Oct. 15, 2026)
- Fannie Mae Selling Guide: interested party contributions
- Houston Agent Magazine: HAR September 2026 market update
Payment figures are estimates for illustration. Rates and program rules change, so confirm with your lender. This isn't financial advice.
About the author: Evan Compean is the founder of Compean Group, a Houston real estate team and brokerage at 802 W. Patton St. He has invested in Houston real estate since 2002, holds TREC license 617930, and has helped sell 1,000+ homes over 15 years. Why clients work with us.