If you are purchasing a house you might be wondering what you can do to keep your payments low so that all of your money doesn't go straight to your house and you become house poor. There are a lot of different things you can do to keep your payments low if you know what you are doing. Here are a couple tips.
1. Put Down A Large Down Payment
The amount that you put down in your down payment will greatly affect how much you owe each month. This is because it will affect the amount that the principle balance actually is. If you can put down $50,000 on a $250,000 home then you will only have a loan balance of $200,000 which will mean you pay a lot less each month. Second, when you put down more than 20% on the home you avoid having to pay private mortgage insurance (PMI) each month. PMI can greatly increase your payments and is only there to protect the lender, should you default on the loan. It doesn't help you at all.
2. Refinance The Home
When you initially purchase a home you may have had to take a larger interest rate to get into the house. Perhaps that time your credit score wasn't great, or you were self-employed so you had to do a balloon or state income loan. In this case your interest rate would be higher. Even just a couple points higher in an interest rate can significantly affect how much you owe each month in your payments. Thus, as soon as you can you should consider refinancing the loan. This should especially be considered when interest rates are low. You will find that you can save money each month by simply going through the loan process one more time.
3. Pay Your Own Closing Costs
When you get the loan you will be approached about the lender paying your closing costs and absorbing it into the interest rate, or you can pay the closing costs yourself. When you have the lender absorb the costs it will increase your rate so that you could be paying hundreds of dollars over the life of the loan and in your monthly mortgage payment. This is why it is best if you can pay for closing costs yourself, if you are trying to keep your payments low.
By doing these simple things you can keep your mortgage payments low. For more information, contact companies like ABA Rental Properties Inc.