If you are looking for a mortgage, now is a great time! But you can still lower your monthly mortgage payment with a few (fairly) easy tips. We’ll take a look at each strategy to get a low mortgage payment.
Work on Your Credit Score
Non-government mortgage programs look at your credit score as it falls on a tiered system. If you can raise your credit score into the next tier, your rates will drop substantially. The tiers are 740+ (the best rates), 720-739, 700-719, 680-699, 660-679, 640-659, 620-639 and so on. Most mortgage companies require a FICO score over 620.
Adjustable Rate Mortgage (ARM)
If you do not plan to stay in your house for more than a certain time period, an ARM offers very low rates at during the beginning of the loan. Your mortgage will increase, possibly drastically, after the ARM period and any savings will be eaten up in the variable interest rates.
You can refinance, but there is no guarantee that rates will be in your favor.
When you lock in a mortgage rate, you’ll probably have 30 days to close. You can take out a 60-day lock, but those are more expensive. Before you lock in, check and repair your credit score, assemble all needed documentation life tax returns and W-2s, and responds quickly to any requests from the mortgage company.
The more you can put down on your new home, the less you will have to borrow and the lower your mortgage payments. You may need to look at a less expensive house in order to make your down payment go farther.
Get Multiple Mortgage Quotes
Try for four mortgage quotes. A 2012 study found that consumers with four or more quotes saved $2,700 on a $200,000 home loan. Get all the quotes on the same day since mortgage rates can be volatile. Ask for a Loan Estimate from each since you’ll get a more accurate list of loan costs and they will be easier to compare.
Increasing Mortgage Balance
If your mortgage balances changes in the upward direction, take a few minutes to find out why. You may have reached the end of the ARM fixed period, you may have had an interest-only loan, your escrow requirements changed, or the lender made an error. It is worth a few minutes on the phone to find out and possibly fix an error.
With a bit of effort, you can find low mortgage rates and by following these tips, you may even be able to lower your monthly payments.