Low Monthly Payments
One of the most common sentiments of potential home loan applicants is that their finances aren’t good enough to qualify for a good interest rate and, therefore, lower monthly payments.
Yahoo! Finance reported this month that even though financial advisors often recommend spending no more than 25 percent of a family’s monthly budget on housing, many Americans are spending over 30 percent. Simply put, many families are having to spend more on housing because they weren’t able to get the best rate when they applied for their loan.
There are a number of factors that contribute to how much homeowners pay each month. However, there are some measures loan applicants can take to lower those mortgage payments.
Buy a home that is less expensive
One could make the argument that a homeowner’s monthly payment starts here, but perhaps it bears repeating. The less the house is, the less you’re going to pay each month. You get to save a bit more each month.
Improve your credit score
Yahoo! Finance states one of the easiest ways to improve credit scores is to ask credit card companies to increase your credit limit. That improves your debt-to-income ratio. Also, continue to make payments on time. Routinely making late payments will take valuable points off your credit score and ultimately cost you more money in the long run.
Make a larger down payment
The consensus is to put down as much upfront as you can possibly afford. If you put down at least 20 percent, you can avoid having to pay private mortgage insurance. But if you can put down even more than 20 percent, you borrow less and that will lower your monthly payment.
On a related note, if you are a homeowner currently and weren’t able to make at least a 20 percent down payment, do what you can to eliminate your private mortgage insurance. PMI is a policy that protects the lender in the event that the homeowner can’t make mortgage payments. Private mortgage insurance ends once homeowners reach 20 percent equity in their home, but in some cases, it stays on for the life of the loan. If you can afford to pay more each month than you’re required, you reach that 20 percent threshold quicker and then begin to pay less.
The concept of mortgage points that we’ll discuss here refers to credits a borrower can pay in exchange for a lower interest rate.
Mortgage closing costs can comprise any number of expenses above a home’s purchase price. See what’s included.
USDA mortgages are especially attractive because no down payment is required and there is no minimum credit score to be eligible.