For first-time homebuyers in Passaic County, NJ, reducing their mortgage rate can help them decrease the amount of their monthly payments and make more room in their budget for things such as property repairs and renovations.
As of August 2023, the Garden State’s 30-year fixed mortgage rate is at 6.85%; slightly lower than the national average of 7.12%. But don’t despair — there are ways to get a better rate. Here are a few essential tips to getting lower mortgage payments:
Lenders will look at your credit score to determine how likely you are to default on your loan. A higher score indicates that you’re less likely to, which makes you a better risk and ups your chances of getting offered a lower rate. You will want to check your credit report and make sure it doesn’t contain any errors. If there are any, get those straightened out right away. (Check out the Consumer Financial Protection Bureau’s quick guide on how to do it.) It’s also important that you keep your credit utilization ratio at 30% or lower, so pay down as much of your credit card debt as you can and avoid making big unnecessary purchases before applying for a mortgage.
FIND OUT IF YOU’RE ELIGIBLE FOR A FIRT-TIME HOMEBUYER PROGRAM
There are quite a few state and national programs that offer first-time homebuyers the chance to get anything from a low-down payment or low-interest loan to down payment assistance. In New Jersey, for example, the New Jersey Housing and Mortgage Finance Agency (NJHMFA) Down Payment Assistance Program provides qualified buyers with up to $15,000 in down payment and closing cost assistance. NJHMFA also has a First-Time Homebuyer Mortgage Program and a Police and Fireman’s Retirement System Mortgage Program. You can learn more about these programs here.
On the national level, institutions such as Fannie Mae, Freddie Mac, the Department of Veterans Affairs (VA), the Federal Housing Authority (FHA), and the U.S. Department of Agriculture (USDA) offer a wide range of programs. It pays to find out if you’re eligible.
INCREASE YOUR DOWN PAYMENT
If you can, it’s a good idea to put more money into your down payment. If you can set aside at least 20% of the purchase price, you have a better chance of getting a loan with a lower rate. It’s also less likely that you’ll be saddled with private mortgage insurance.
REFINANCE TO A LOWER INTEREST RATE LATER
Still can’t find a loan with a rate that you like? You can always just get the best mortgage you can for now, and refinance later. Refinancing replaces your current mortgage with a new one that has a lower interest rate.
Keep an eye on mortgage rate drops and consider buying down your rate with mortgage discount points as well. Refinance programs such as the FHA streamline refinance, VA Interest Rate Reduction Refinance Loan (IRRL), and USDA streamlined assist refinance are also options you can explore down the road.
RENT OUT THE EXTRA SPACE
Should you have unused space in your new home, renting it out can also help towards reducing your monthly mortgage payment. The income you get from renting out a spare bedroom or a basement you don’t use can also cover bills, repairs, renovations, and other household expenses.
Learn more about the mortgage process in New Jersey’s Passaic, Morris, Essex, and other nearby counties by talking to a dedicated Realtor and lifelong New Jerseyan like me, Frank DeZao. Just give me a call at 201.953.9376 or send me an email here to get started.