Tips for Lowering Your Mortgage Payment

Your total mortgage payment consists of the principal, interest, property taxes, homeowners insurance and mortgage insurance (if applicable). If you’re considering buying or refinancing your home, there are some ways that you may be able to lower your total mortgage payment.

Improve your credit score. One of the factors in pricing mortgage rates are credit scores. Credit scores are bracketed with higher credit scores receiving improved interest rates. There are currently 5 brackets in the 700 range for credit scoring with conforming financing. Improving your credit score is not the same as improving your credit. In fact, some actions that are financially better for you, like paying off a debt to moving debt to a lower interest rate may actually hurt your credit scores. Before you take action with your credit, please consult with a mortgage professional who can provide advice on improving your credit score.

Increase your down payment. A larger down payment creates a lower loan amount, which would provide a lower payment. It may also help to improve your interest rate depending on the amount of down payment and the loan type. Currently, there are 9 different loan-to-value brackets with conforming pricing.

Reduce your monthly debts. Debt-to-income ratios (DTI) may impact the interest rate. If your debt-to-income ratio is on the higher end, it may cause the interest rate and private mortgage insurance (if required) be higher as pricing is “risk based”. Some debts may not be required to be paid off if they are installment and have less than 10 months remaining.

Do you qualify for special mortgage programs? Fannie Mae and Freddie Mac have special mortgage programs that limit the amount of “loan level price adjustments” on mortgage rates. Fannie Mae HomeReady and Freddie Mac Home Possible are programs that provide improved interest rates and reduced mortgage insurance premiums. To qualify for these programs, the home needs to be located in specific areas or the borrower needs to meet certain income limit requirements.

Buy your interest rate down. Interest rates are often priced with points (discount points). The more you pay in points, the lower your interest rate may be. However, you need to consider if the amount you’re paying in points is worth the reduced payment. I recommend determining how long it will take to break even on the additional cost of paying for points. If you’re planning on refinancing or selling in a few years, it may not be worth paying the additional costs for the lower rate.

Negotiate with the seller to buy your interest down. Sellers can often contribute towards closing costs, including doing permanent interest rate buy downs by contributing funds towards points as mentioned above, or by offering to do a temporary rate buydown. A temporary rate buydown (often referred to as a 3-2-1 or 2-1 buydown) lowers the mortgage payment the first 12 months; then the rate increases by 1 point for the next 12 months until the rate adjusts to the actual note rate. This takes place as the amount the seller is paying is actually subsidizing the principal portion of the payment. Whether or not the seller will pay for points may depend on the type of market we’re in. You may find yourself in a position where you may need to offer above the list price to have in order to have the seller agree to contribute towards closing costs and/or your rate reduction.

Do you have private mortgage insurance? If you currently have private mortgage insurance, it’s possible that your home may have appreciated enough to where you may be able to have this removed from your payment. If the mortgage servicer is not willing to remove the private mortgage insurance (pmi), you may be able to refinance into a new mortgage (depending on what current rates are).

Whether you should pay off a debt or do a larger down payment depends on your personal financial scenario. A mortgage professional can help you create a strategy to help you be in the best position for buying a home. Sometimes this may include applying additional funds towards paying down debts instead of going towards the down payment to improve the total monthly cashflow. This is a part of my job that I probably enjoy the most – helping people plan so their mortgage works well for them! Before you take any actions, please do consult with a mortgage professional.

If you’re thinking of buying, refinancing, remodeling or selling a home, I’m happy to help you!

Mortgage Market Update for the week of May 13, 2024

My apologies for being a week (plus one day) behind on my weekly update. Last week I was on vacation in California visiting my wonderful sister-in-law. I’m back to work now! Please let me know if you need any assistance with your mortgage or real estate needs.

Searching for your Dream Home? Consider a Renovation Mortgage.

If you have been finding the current lack of inventory a challenge, you may want to consider a renovation mortgage. A renovation mortgage (or rehab loan) allows you to finance improvements to the property beyond the sales price of the home. The renovations begin after closing and there are no restrictions on the types of improvements. You can even use this on your existing home as a refinance if you love your location and neighbors and just want to make changes to your home. [Read more…]

Predicting Mortgage Rates is like forecasting Weather

Trying to predict mortgage rates is very similar to forecasting our weather in our beautiful Pacific Northwest. There are economic indicators with data that result in mortgage rates going down or raising higher just as there are weather patterns and pressure systems that typically indicate sunnier days or a storm approaching. Sometimes the reports that are being relied on can conflict with each other making it more difficult to make an accurate prediction. [Read more…]

It’s FED Day! [Live post]

Around 11:00 PST today, the FOMC (Federal Open Market Committee aka The Fed) will wrap up their two-day meeting with an announcement on any adjustments they are making to the federal funds rate. Although the Fed does not directly control mortgage interest rates*, the changes to the funds rate and the Fed’s commentary influences the direction of mortgage interest rates. Mortgage rates are based on bonds (mortgage-backed securities or MBS) and are traded, just like other types of bonds. Markets will react to the Fed’s actions and this will impact mortgage rates. Commentary or signs that inflation is not getting into check will push mortgage rates higher and indications that inflation is taming and that the Fed will lower the funds rate soon will help lower mortgage interest rates. [Read more…]

Are you considering an ADU?

Have you been considering a “mother-in-law” apartment or backyard cottage? This type of dwelling is technically referred to an accessory dwelling unit aka “attached dwelling unit” (ADU) or detached dwelling unit (DADU). [Read more…]

Mortgage Market Weekly Update for April 29, 2024

This is a BIG week with the wrap up of the two day Fed meeting and the Jobs Report… want to know more? Check out my latest video.

Mortgage Rate Update for the week of April 22, 2024


Want to know what’s up with mortgage rates? Check out my latest video!