The average mortgage is the amount of money home buyers borrow to purchase a house. It varies based on factors such as credit score, down payment amount and loan type. Lenders typically make money by charging interest on mortgage payments. A portion of each payment goes towards repaying the original loan (known as principal), while any remaining balance is reduced until it reaches zero at the end of the term (15 or 30 years).
Buying a home is one of the largest financial commitments you’ll ever make, and it can be intimidating. But there are steps you can take to reduce your monthly payments, such as paying off high-interest debts and increasing the size of your down payment.
1. Snag a Better Rate on Your Mortgage
A useful approach for finding out your mortgage rates is using sample rates. These are averages from multiple lenders and often provided by Zillow or another real estate website. However, these may not reflect actual offers when applying for a mortgage as they depend on assumptions made by lenders about their “sample” borrowers.
2. Explore Discount Points With Your Lender
Some mortgage lenders provide various discounts on their rates, such as a lower interest rate or reduced closing costs. These discount points can save borrowers significant money over the life of their loans.
3. A Higher Down Payment Can Make a Difference
Mortgage lenders usually require at least 20% down to qualify for a loan, and making that much cash upfront helps the homebuyer sidestep private mortgage insurance, which can be costly if there’s only small down payment made.
4. Location Affects Mortgage Cost
Your house’s location can have a major effect on how much you pay each month for your mortgage, according to Walsh. A mortgage in Hawaii, Mississippi or Idaho would take up 18.9% of household income while homeowners in Connecticut, New Hampshire and Minnesota typically spend only 13.2% of their annual income on housing costs.
5. A Larger Down Payment Will Put More Money in Your Pocket
Your down payment amount affects both monthly mortgage payments and the interest rate on your loan. Putting down more than 20% not only saves you money on interest payments, but it also boosts your credit score.
6. Don’t Be Afraid to Shop Around
Purchasing a home is an important financial decision, so you want to find the best deal for you. Our mortgage calculator can estimate how much you can afford and your total monthly expenses (including property taxes, homeowners insurance and other charges)).