If you are purchasing a home you might be wondering what you can do to keep your monthly payments low. In fact, there can be two people who have the exact same house, have it cost the same amount, and yet their monthly payments are drastically different. Here are some ways that you can lower your monthly payments.
1. Put Down A Larger Down Payment
When you initially purchase the house you will have the option to pay a down payment. This money will be money that you put into the house as equity and the loan will only reflect the remaining amount. Some people only put down 3% of the house so that the rest of the house must be paid for through a loan. In addition, if you put down less than 20% on the home you will generally need to get private mortgage insurance (PMI). This will be rolled into your payments each month so the payments will be more.
Ideally, you should try to put down 20% on the home. This will allow you to avoid paying PMI and will significantly lower your payments.
2. Fight Your Interest Rate
When you are initially purchasing the house you should never accept the first interest rate offered to you. Instead, make sure you are shopping around to see what different lenders will offer you. Mortgage lenders are a business and they will fight for your patronage. If you can get a lower interest rate from a different lender you can either use it as leverage against another lender, or simply go with the lender who will give you more incentives. Having an interest rate that is even a couple of points lower will make a big difference in how much you pay over time and each month.
3. Pay Closing Costs Out Of Pocket
There are a couple ways to pay your closing costs. In some cases you can have the closing costs rolled into the loan. This means that you might pay an extra amount of money each month for the duration of the loan to cover the costs at closing. If you can pay the closing costs yourself, or have the seller of the home pay the closing costs it could significantly affect how much you pay each month in your payments.
As you can see, there are many factors that go into how much you pay each month in your mortgage, and by following these tips you can save money.