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4 Ways to Get a Low Mortgage Payment on a New Home Purchase

by Mike

The following is a post by Crystal.

If you’re in the market to buy a new home you know how important it is to get the best deal possible in order to keep your monthly payments affordable. However, there’s a lot more that goes into configuring your monthly mortgage payment than the sale prices of the house. Mortgage rates, PMI, homeowners insurance premiums and property taxes weigh heavily on what you will be paying for your home each month. Here are some tips to help lower those factors of your payment:

  1. Shop your interest rates- Don’t talk to just one lender. Do your research and find out which banks are offering the best interest rates right now. A .25% difference may seem insignificant but it definitely adds up over the years. Keep in mind that having multiple lenders pull your credit report can be detrimental to your score. So, it’s best to compare their ‘base’ rates up front and then only have the lender that you choose to move forward with run your credit.
  2. Avoid PMI if possible- PMI or Personal Mortgage Insurance is an insurance premium that banks may charge you to insure your loan. Typically under a conventional mortgage lenders will require you to pay PMI if you put down less than a 20% down payment. For an FHA loan, PMI is always required. Sometimes paying PMI is unavoidable. However, if you can get a loan without PMI it will reduce your monthly payment amount considerably. For example, an FHA loan for $260,000 with 15% down will typically carry $200/month in PMI.
  3. Homeowners insurance- Since homeowners insurance is often escrowed and paid as part of your monthly mortgage payment most homeowners overlook the expense. The truth is, home insurance can vary greatly from one lender to the next and if you are paying inflated premiums you may be paying much more each month than necessary. Shop your rates regularly and always make sure you are taking advantage of a multi-line discount which will reward you with lower rates for packaging your home and auto insurance with the same company.
  4. Tax Grievances- It is your right as a homeowner to contest your property taxes if you think they are too high. Your best bet is to use a lawyer who has a high success rate at winning reductions. Typically, a tax grievance attorney will only take on your case if they think you will win. In addition, they will only charge you if they win and will usually just take half of your first year’s savings as their payment. Each additional year’s savings are yours to keep after that.
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{ 2 comments… read them below or add one }

Money Beagle

We don’t have escrow and therefore handle our own taxes and insurance. In my former residence I had escrow for these things, and some years I would get a refund for overpayment and others I would have to pay when they underestimated payments. Both of these scenarios annoyed me to no end. Now, I can much more accurately estimate my costs, plus I get to earn interest as I save it up to make the appropriate payments. If you can afford the down payment that would let you bypass escrow, by all means do so.

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Mike

Hey Money Beagle! Ii couldn’t agree more. We have escrow with our current home and I hate it for the same reasons. With our next mortgage I’m going to make sure we don’t have escrow. I’d much rather be earning interest in my ING account throughout the year.

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