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Unless you’re putting down the full price in cash for a Los Angeles County home for sale, you’re going to need a mortgage. Lowering that payment is the most important thing you can do to lower your housing expenses. Follow these tips and you’ll save money either every month or over the total cost of the loan.

Applying for A Mortgage
Despite advertising to the contrary by financial institutions that promise you the lowest rate, all mortgages are not created equal. Lenders determine what terms to offer you based primarily on your credit score. This number tops out at 850 and is calculated from your credit report, a compilation of your monetary obligations, like credit cards and car loans, and payment history. The closer your score can get to that high number, the better your terms will be. Scores at 600 or lower are considered poor and may make it hard to get any kind of a loan.

To get the best rates, raise your credit score by improving your credit report.

1. Get your score and credit report for free at Credit Karma, preferably at least a year before you intend to apply for a mortgage.
2. Look for any mistakes and ask the merchant and credit reporting agency to correct them, which by law, they must do.
3. If you aren’t already, start paying all your bills on time. Late payments have a high negative impact on your score.
4. Start paying off your debts, so you minimize the amount of credit you use. Lower balances push up your scores because it means you don’t owe much money to anyone.

Once you get the mortgage, the name of the game becomes lowering your monthly payments or minimizing the overall cost over the life of the loan, as described by the next strategies.

Increase Your Optional Payments
Lowering your mortgage rate minimizes the payment you’re required to make each month, which improves your cash flow and your budget. However, increasing your optional payments can save you a lot of money over the life of the loan. The following are three ways to do this.

1. Make one extra payment each year, so you’re writing 13 checks instead of 12. Because this extra money goes over and above what you owe the lender, the whole amount gets applied to the principal. Your loan gets paid off faster, which reduces the interest you pay and the overall cost of your mortgage.
2. Increase the monthly payment by a set amount, such as 10 percent. As with the previous strategy, the extra money goes to the principal, which eliminates it faster.
3. Pay bi-weekly, instead of monthly. If your lender balks at this, you can set up automatic transfers every two weeks for half the mortgage amount from your savings to your checking account. Then pay the mortgage with the full amount from your checking account at the end of the month. This results in 26 half-payments, or 13 full payments, which produce the same result as in the first strategy.

Because these increases are optional, you can stop them when times are tight with no effect on your credit score or loan.

Refinance
If you’ve just gotten your mortgage recently, refinancing is not going to benefit you because you probably already have low interest rates. However, if your mortgage is older, it’s likely that lower interest mortgages are now available.

If you want more information on the cost of buying a home and financing that purchase, or if you want to check out our homes in person, please contact us.