To Cut Mortgage Costs
Ready to plunk down your hard earned cash for a slice of the American pie?
Make sure your financing is low fat. Buying a home is likely the most expensive,
long range financial commitment most of us ever make. The more homework
you do before heading out with a real estate agent or before making an
offer on a home, the more likely you are to stretch your mortgage budget.
Here are six ways to get the most bang for your money before you step out
the door to shop.
To get pre-approved, a lender pulls your credit report, verifies your income,
and takes other preliminary underwriting steps to come up with a maximum
allowable loan amount, which usually doesn't change. The lender also commits,
in writing, to making that loan if a purchase occurs within a set amount
of time. Lenders charge for the service -- generally from $20 to $50 --
but it's worth it. Pre-approval puts you in the strongest possible bargaining
position with sellers and their real estate agents. Those who are in a
hurry to move a property often will accept a lower bid from a pre-approved
buyer because they can be certain the deal will go through.
Buy down the rate
If you've got the cash now and want to lower your payments, you can "buy
down" your mortgage rate. In exchange for more money upfront, lenders
are willing to lower the interest rate they charge, cutting the borrower's
payments. Buydowns can be temporary or they can last the life of the loan.
The purchaser can negotiate the deal directly with a lender, but sometimes
a home seller arranges the buydown as an incentive to attract buyers.
Trim closing costs
Of course, the mortgage rate isn't all that determines a monthly payment.
Closing costs add significantly to the final bill, so borrowers should
try to minimize them as well. Upon request, lenders will provide you with
a "Good Faith Estimate" which details all of their closing costs
and proposed interest rate. Get good faith estimates from mutiple lenders
to determine who will offer you the lowest closing costs while still maintaining
a good interest rate. Request that the GFE's be given assuming no loan
origination fee so that it will be easier to compare interest rates and
closing costs accurately from various lenders