In today's financial climate, buying a house isn't exactly easy. When adjusted for inflation, what would have cost around $30,000 in the 1940s now costs around $200,000.
It's no wonder that so many potential homeowners are foregoing ownership in favor of rental. For these individuals, buying a home is either unfeasible or impossible.
However, that doesn't mean that you should give up on homeownership just yet. By reducing your mortgage, you might be able to make homeownership a reality.
Wondering how to get a low mortgage payment? Read on. This article is here to help.
Here's How to Get a Low Mortgage Payment
There's no magic method for lowering one's mortgage payment. If you want a low payment, you have to put in some work. Here's what you need to do.
1. Optimize Your Credit Score
It's simple: the higher your credit score is, the lower your mortgage payment will be. This is due to the fact that higher credit scores are rewarded with lower interest rates. For instance, whereas a credit score of between 620 and 639 will result in an interest rate of around 5.759%, a credit score higher than 760 will result in an interest rate of around 4.17%.
For this reason, before making an offer on a house, you need to do everything in your power to optimize your credit score. This means paying off debts, making payments in a timely manner, and keeping your credit usage to a minimum.
2. Save Plenty of Money for a Downpayment
The most straightforward way for a person to reduce his or her mortgage payment is to make a large downpayment. The more money you put down on your home at the beginning of the purchase, the smaller your monthly payments will be. Not only will a large downpayment decrease principal costs on a month-to-month basis, but interest costs as well.
Saving for a downpayment on a house is a marathon, not a sprint. You will likely need to save up for years before you've accumulated a reasonable amount of money.
Set a goal and start pinching pennies. Though consistency, sacrifice, and hard work, you'll obtain the money you need to reduce those monthly mortgage payments.
3. Avoid Private Mortgage Insurance
The easiest way to increase your mortgage payment is to subject yourself to private mortgage insurance. This insurance is forced on homeowners who fail to make a downpayment of at least 20%. Its yearly cost runs between 0.5% and 1% of the yearly cost of the mortgage and must be paid monthly.
By failing to avoid PMI, you are subjecting yourself to paying hundreds (or thousands) of additional dollars every year. On a monthly basis, depending on the size of your mortgage, this could be anywhere from $50 to $300 to $1,000 extra.
So, save up that 20% and save money in the long run.
4. Increase the Length of Your Mortgage
When taking out a mortgage, you usually have the option of two different loan terms: 15 years and 30 years. If you want to lower your monthly payments, you should take the 30-year term.
Note, however, that by increasing the duration of your mortgage, you are also increasing the total price that you have to pay over time. After all, you'll be paying 15 more years of interest.
5. Shorten the Length of Your Mortgage
While increasing the length of your mortgage will allow you to make smaller payments on a monthly basis, decreasing the length of your mortgage will allow you to spend less money over time. So, if you have the funds available to make the monthly payments, and if you plan on staying in your home long-term, you should consider opting for a 15-year mortgage.
Your monthly payments will be higher, but you'll spend much less money on interest. As a result, you'll accumulate much more disposable income in the long run.
6. Lock in Your Interest Rate
It's important to know that interest rates on mortgages fluctuate. However, it's also important to know that once you've secured an interest rate, you'll be able to keep it until your mortgage is paid off. This is why, if you've been offered a good interest rate, you need to jump on it as fast as you can.
Most lenders allow their lendees to lock interest rates until they've found their homes. In some cases, a lock will cost an additional fee; In other cases, it will be offered free of charge. In either case, if the fee is especially attractive, it's worth the lock.
Note, however, that once you've locked in a rate, it's locked. This means that, if the rate lowers, you will still be subjected to your locked rate.
7. Shop Various Lenders
When searching for a mortgage, it's vital that you speak to various lenders. Different lenders provide different interest rates, with some catering to specific types of buyers more than others.
In other words, if you want to get the lowest interest rate possible, you need to explore all avenues.
8. Utilize the Services of a Real Estate Agent
The last tip we'll provide to you is to work with a real estate agent. While real estate agents don't directly handle mortgages, they do help their clients to find the best possible mortgage lender.
This is especially important if you're a first-time buyer with very little knowledge of real estate transactions. Your real estate agent can set you on the right path, ensuring that you get the best possible deal.
Looking for a Real Estate Agent in Staten Island?
Now that you know how to get a low mortgage payment, you might be interested in utilizing the services of a real estate agent. If so, and if you're looking for an agent in Staten Island, Casandra Properties, Inc. has you covered.
Ours is the top real estate team in State Island, having helped thousands of homeowners to buy and sell their homes. Whether you're a first-time buyer a frequent buyer or otherwise, we can help.
Contact us today to discuss your real estate needs!