Thursday, April 23, 2009
Strategy to Lower your Monthly Payment
When buying a home, most people try to negotiate to get the lowest price while some negotiate to get the lowest payment. What's the difference you ask? If you lower you sales price your monthly payment will certainly drop. But if you use a "loan rate buy-down" strategy your monthly payment will drop even more. I have reviewed this with several mortgage professionals and the concensus is clear. If you ask the seller to pay your closing costs so you can a lower your interest rate (pay your loan "points") you will save 7 times more in your monthly payment than you would have saved if you asked for the same amount in a price reduction. This is after taking into account changes in property taxes as well! Lenders are offering very low cost rate buy-downs compared to what they have historically charged. But there's another benefit to the buyer. Qualifying for your loan will be easier. Make sure to have your agent articulate the benefits to the seller so they understand what they have to gain as well. Happy house hunting!