Strategies that lead to a lower monthly payment
When it’s time to relocate, finding the right home is one of the biggest tasks you’ll face. Choosing an experienced mortgage team is just as important, especially if you want to keep your monthly payments low.
Here are some of the actions you can take and choices you can make to secure a loan with manageable monthly payments.
Other ways to increase your down payment include cutting out unnecessary expenses for a short time to grow your savings, paring down vacation plans, selling an unneeded asset, and holding off on any major purchases that aren’t urgent.
It’s okay if you can’t make a 20% down payment — you won’t be stuck with PMI forever! In most cases it will be automatically removed when you’ve paid off 22% of your mortgage. You sometimes can request that PMI be removed when you hit the 20% mark.
When choosing a more affordable neighborhood, you’re also likely to save money in property taxes since they’ll be based on the home’s value. In addition, communities have varying tax rates. If you choose a location with a lower tax rate, that will contribute to lower monthly payments. (FHA loans require taxes to be included in your monthly payment and held in escrow; some conventional loans require it, while it’s optional in other cases.)3
In case you’ve recently paid off a major chunk of debt, or you’ve corrected an error on your credit report, you may want to ask your loan officer to do a rapid rescore. This is a way to quickly update your score to reflect the good progress you’ve made.
If you don’t have a credit history (because you don’t have debt) — or you need to improve it — a service like Experian Boost™ can be a useful tool. It links to your bank to show that you have a history of paying regular bills (streaming services, utilities, etc.) on time from your checking account. You may want to consider a rapid rescore after adding a Boost-type service.
When the fixed rate period ends, your payments start to include the “adjustable” rate, which is based on a fluctuating industry benchmark plus a pre-determined margin above that rate. In most cases, the rate adjusts every 6 months for the remaining term of your mortgage.
1 PMI requirements vary by loan type.
2 This is not a complete list of costs and fees related to getting a mortgage. Please see your loan officer for complete details.
3 Property tax requirements vary.
4 Premia Mortgage, LLC dba Premia Relocation Mortgage is an FHA Approved Lending Institution and is not acting on behalf of or at the direction of HUD/FHA or the Federal government.
5 Premia Mortgage, LLC dba Premia Relocation Mortgage does not offer credit repair services.
Here are some of the actions you can take and choices you can make to secure a loan with manageable monthly payments.
Make a larger down payment
Even a modest increase in the amount you put down can save money over the life of the loan. If your parents or grandparents want to support you with funds for the down payments, you’ll need to provide a gift letter. Your loan officer can help make sure you have the right documentation for the mortgage application.Other ways to increase your down payment include cutting out unnecessary expenses for a short time to grow your savings, paring down vacation plans, selling an unneeded asset, and holding off on any major purchases that aren’t urgent.
Make a 20% down payment
This is listed as a separate option since 20% is a key milestone in home financing. FHA loans4 require that the borrower carry private mortgage insurance (PMI), known an mortgage insurance premium (MIP) for FHA loans, in order to protect the lender if the homebuyer can’t pay the mortgage. This is not homeowner insurance. Conventional loans often include the same provision.1It’s okay if you can’t make a 20% down payment — you won’t be stuck with PMI forever! In most cases it will be automatically removed when you’ve paid off 22% of your mortgage. You sometimes can request that PMI be removed when you hit the 20% mark.
Choose a more affordable neighborhood
A $30,000 down payment for a $375,000 house means you’re borrowing $345,000 (plus closing costs and fees if they’re rolled into your monthly payment). This represents an 8% down payment. However, that same $30K becomes a 10% down payment when choosing a $300,000 house, meaning you only need to borrow $270,000 (plus fees).2When choosing a more affordable neighborhood, you’re also likely to save money in property taxes since they’ll be based on the home’s value. In addition, communities have varying tax rates. If you choose a location with a lower tax rate, that will contribute to lower monthly payments. (FHA loans require taxes to be included in your monthly payment and held in escrow; some conventional loans require it, while it’s optional in other cases.)3
Improve your credit score5
Homebuyers with higher credit scores can often get lower interest rates. The most important thing you can do is to always make every payment on time, including auto loans, college loans, credit cards, and any other obligations you have. Make sure your cards aren’t maxed out and avoid taking on any new debt. These things take time to improve your credit score and typically appear on your report in about 30–60 days; it can sometimes take a bit longer before these updates have an impact on the score itself.In case you’ve recently paid off a major chunk of debt, or you’ve corrected an error on your credit report, you may want to ask your loan officer to do a rapid rescore. This is a way to quickly update your score to reflect the good progress you’ve made.
If you don’t have a credit history (because you don’t have debt) — or you need to improve it — a service like Experian Boost™ can be a useful tool. It links to your bank to show that you have a history of paying regular bills (streaming services, utilities, etc.) on time from your checking account. You may want to consider a rapid rescore after adding a Boost-type service.
Consider an adjustable-rate mortgage (ARM)
A hybrid ARM is a blend of a fixed-rate and variable-rate loan. This type of mortgage is structured with a lower fixed interest rate during the initial term (usually 5, 7, or 10 years), and then it changes to the adjustable rate.4When the fixed rate period ends, your payments start to include the “adjustable” rate, which is based on a fluctuating industry benchmark plus a pre-determined margin above that rate. In most cases, the rate adjusts every 6 months for the remaining term of your mortgage.
Bringing it all together
Even though relocating is exciting, it can start to feel like you’re overwhelmed with information. We’re here to help you sort out all those details, so you can have a positive homebuying experience. Contact us any time you have questions or want to learn more.1 PMI requirements vary by loan type.
2 This is not a complete list of costs and fees related to getting a mortgage. Please see your loan officer for complete details.
3 Property tax requirements vary.
4 Premia Mortgage, LLC dba Premia Relocation Mortgage is an FHA Approved Lending Institution and is not acting on behalf of or at the direction of HUD/FHA or the Federal government.
5 Premia Mortgage, LLC dba Premia Relocation Mortgage does not offer credit repair services.