You Don’t Have to Pay THAT Much on Mortgage

Mortgage loan documentsA home mortgage is often the next highest expense you’d have next to income taxes. The most commonly given advice on shopping around may not get you the best rates. Mortgage programs alter their rates depending on a variety of factors.

Whether you’re buying a house in Krum, TX or an apartment in Sacramento, CA, you’ll find a variety of mortgage lenders willing to work with you.

The Credit Score

Your credit score determines how high or how low your mortgage rate will be. A score of 760 or higher means you’ll get the best rates. A minimum of 620 is needed to qualify for a regular mortgage. However, certain government programs can deem you qualified even with a credit score as low as 500.

The difference between the best score and the minimum can be as much as two-fold so try your best to better your credit score before acquiring a mortgage. You can do this by paying your bills and other loans promptly. Consistency is key — lenders want someone who can reliably pay back their loans.

Bigger Down Payment

The more money you put into buying a house, the better your mortgage rate is. A person who puts in a down payment of 20% is considered a much lower risk than someone who puts in 5% or even less.

On a more practical note, a down payment of 20% allows you to avoid paying private mortgage insurance, that particular service is required for any loan where the equity is less than 20% and can add anywhere between USD 100 and over on your monthly amortization.

Go Short or Medium

One final option you have is to shorten the term of your loan to 10 or 15 years. This will mean that you’ll have a higher monthly amortization, but it also means you’ll pay less in interest. If you intend to sell the house after seven or so years then opting for a shorter-term loan could be in your interest.

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