How do I Find a Mortgage That Will Lower the Monthly Payment in Relation to the Income Level?

Lower mortgage payments with special loan programs.

A mortgage payment is a large chunk of a family's monthly expenses. Unemployment and other financial struggles can make paying this expense difficult. Securing a lower interest rate or taking advantage of special loan programs can make mortgage payments more affordable. A borrower must first figure out what she can afford and which mortgage program is the best fit for her circumstances.

Instructions

1. Find out how much of a mortgage you can afford. According to CNN Money, most lenders use a conservative estimate for a housing-payment-to-income ratio. This percentage is 28 percent of your income. For example, if a family's monthly income is $3,000, the monthly mortgage payments are $840 or less. Ask lenders about securing a lower interest rate to drive down monthly payments.

2. Compare mortgage interest rates. Online comparison tools, such as Yahoo Real Estate or Bankrate, will assist in finding the lowest interest rate. Make a list of the companies offering the lowest rates and contact them to learn more about their mortgage loans.

3. Ask your current lender to match the best interest rate. Refinancing with your lender is usually cheaper than choosing a new lender. Your mortgage holder is motivated to keep your business and may offer low or free closing costs and a streamlined process. If your lender can't match the best rate, consult other lenders.

4. Qualify for loan modification programs. If a lender isn't willing to refinance your mortgage, ask about loan modification programs. These programs were created to assist borrowers with financial hardship. If total debt (including mortgage and all other debt obligations) exceeds 55 percent of the gross family income, you may qualify, according to CNN Money. Borrowers approved for this loan program are elibgible for lower mortgages with payments in line with their incomes. Payments typically are 31 percent or less of total gross income.

Tips & Warnings

• Ask lenders if the published rate includes purchasing points. Lenders usually advertise the lowest interest rate. This rate, however, often includes purchasing points. When a borrower purchases points, she pays a fee to secure a lower interest rate. This fee can be hundreds of dollars, depending on the total loan costs. Ask the lender for a fee disclosure, listing all fees associated with the loan.

• Most financial institutions use risk-based lending. If you have a poor credit score, it's difficult to get a lower interest mortgage. Understand your credit worthiness by ordering a credit report and score (see Resources).

References

• CNN Money: Mortgage Help, Do you Qualify
• CNN Money: Affordable Home Calculator

Resources

• Bankrate.com: Find Mortgage Interest Rates
• Annual Credit Report: Find Credit Score