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Which Combination of Factors Would Result in the Lowest Monthly Mortgage Payment?

Figuring out how to obtain the lowest possible mortgage payment is important for buyers looking to maintain a strict budget. These five tips can be used separately or combined to help any home buyer reduce their monthly mortgage payment by as much as hundreds of dollars.
Figuring out how to obtain the lowest possible mortgage payment is important for buyers looking to maintain a strict budget. These five tips can be used separately or combined to help any home buyer reduce their monthly mortgage payment by as much as hundreds of dollars.

No matter how much money you make, no one wants to make a high mortgage payment each month — especially if you’re locked into a 30-year mortgage term. Purchasing a home with the right financial strategy in mind can help save you hundreds on your mortgage payment and tens of thousands throughout the length of your loan.

Before you jump at the lowest rate mortgage you can find, take a minute to review all of the factors that impact your mortgage payment amount and learn how you can take steps to reduce this payment, before you purchase.

1. Save for a Large Down Payment

The first tip is probably the most obvious, but it’s important for anyone hoping to reduce their monthly mortgage payment. Not only does paying more upfront decrease the amount you owe (thus, making your mortgage payment lower), but it also has other lesser-known, money-saving perks.

Higher down payments often help borrowers lock in better mortgage rates, which can reduce their interest payment each month. In addition, if you can save 20% or more of the home’s closing price for your down payment, you can likely avoid paying for private mortgage insurance, which can put a hundred or more back in your pocket each month.

If you don’t have the money saved for a large down payment, all of the benefits of doing so might be worth waiting to buy. But, if you don’t want to wait, there are still other tips you can use to reduce your mortgage.

2. Buy a Smaller House

If you’re considering purchasing a home you plan to live in for several decades, it can be tempting to search for one with a large number of bedrooms or impressive features that boost the home’s overall price.

However, if you’re looking for a smaller mortgage payment, you might want to start off with a smaller, more affordable home. It takes the average homeowner five years to be able to comfortably sell their home without taking a loss on it. If you’re paying a lower mortgage payment in the meantime, try making extra payments or paying a little more than the minimum each month to pay down more of the principal.

Doing this will make it more likely that after five years, you can sell, pay off your mortgage, and still make a small profit that you can use as a down payment on a larger home.

3. Drop Your Mortgage Insurance

While you won’t always be able to avoid private mortgage insurance (PMI), especially if you can’t afford a 20% down payment, once you’ve paid off 20% or more on your home, you can put in a request to have your mortgage insurance dropped.

Some PMI agreements automatically dropped the monthly PMI charge after you pay 20%, but others require you to make the request before dropping it. Reach out to your lender to learn more about your options.

4. Opt for an Adjustable Rate Mortgage

Many home buyers steer away from adjustable-rate mortgages (ARMs), because they can fluctuate and end up costing you more in interest than fixed-rate mortgages. However, there are some situations where adjustable rates might play to your benefit.

Some ARMs offer introductory period rates that remain fixed for a set period of time. Often times, these rates are lower than fixed-rate mortgages, to start. If you don’t plan on living in your home for more than 3-5 years, this could be a good way to get a lower mortgage payment, without worrying about rising rates in 10-15 years.

5. Improve Your Credit Score

Working to improve your credit score can open up new financing opportunities and help you secure better, lower rate mortgage options. Since your mortgage rate determines how much interest you’ll pay each month, a higher credit score can knock a significant portion off of your monthly payment.

In general, credit scores are ranked on the below scale:

  • 619 and below - poor
  • 610 - 699 - fair
  • 700 - 740 - good
  • 750+ - excellent

You might not be able to improve your score massively before applying for financing, but making small changes like paying down your debt and enrolling in automatic billing to avoid missing payments can be enough to help you jump to the next credit tier.


If you’re weighing your financing options in order to secure the lowest mortgage payment possible, talking to a reliable real estate agent is a great next step. Agents can provide financial guidance and advice, and can even recommend top lenders or local loan officers to speak with.

Clever Partner Agents can help navigate you through financing a home, and for buyers in qualifying states, can even offer a Home Buyer Rebate that can get you up to 1% back at the time of closing. Find out more by connecting with a Partner Agent.


Andrew Schmeerbauch

Andrew Schmeerbauch is the Director of Marketing at Clever Real Estate, the free online service that connects you top agents to save on commission. His focus is educating home buyers and sellers on navigating the complex world of real estate with confidence and ease. Andrew has worked on projects for the United Nations and USC and has a particular passion for investing and finance. Andrew's writing has been featured in Mashvisor, L&T, Ideal REI, and Rentometer.

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