December 21st, 2018 8:55 AM by Jackie A. Graves
FREEHomePurchaseAnalysis Today'sMortgageRates FREEHomeRefinanceAnalysis
Buying a house will
likely be the biggest financial transaction of your life, and you can easily
spend more than you should along the way. No worries — we’ve got you covered
with six ways to cut the cost of getting and paying a mortgage when you buy a
One of these tactics
is best done as early as possible — before you start looking in earnest for
your next home. Other tips come later, after you’ve made an offer on the house
and have applied for a mortgage. Here’s how you
6 ways to cut mortgage costs:
1. Get preapproved
Get preapproved for your mortgage loan,
rather than just prequalified.
With preapproval, the
lender pulls a credit report, verifies a borrower’s income and takes other
preliminary underwriting steps to come up with a maximum allowable loan amount.
The lender also commits, in writing, to making that loan if a purchase occurs
within a set time. In a prequalification, the customer provides the
information, but the lender doesn’t check it and there’s no assurance that the
loan will be approved.
requires the home shopper to fill out a loan application and provide supporting
documentation about income, employment, banking activity, debts and assets.
Preapproval puts you in the strongest possible bargaining position with sellers
and their real estate agents. That’s important in today’s seller’s market,
where there are more would-be buyers than home sellers, giving sellers an
advantage in negotiations.
Look for builder incentives
to buy a new home instead of a previously owned one may find that the builder
will provide incentives.
incentives come in the form of discounted upgrades or reduced closing
costs when you use an affiliated lender. Homebuilders are reluctant
to offer price breaks on brand-new homes. That’s especially the case now,
during a seller’s market.
cutting prices of new homes, the homebuilder sometimes offers thousands of
dollars in discounts as an incentive to use the builder’s preferred lender and
settlement company. It’s always a good idea to shop for a mortgage independently, in
the hope of finding an even better deal than the builder and its affiliated
Look at adjustable-rate mortgages
mortgages, or ARMs, feature lower monthly payments at first. This
can help you get into a home when finances are tight.
in popularity after the housing bust, but they are gradually recovering. “It’s
happening because the price of homes is going up faster than incomes, and
affordability has stalled,” says Alan MacEachin, corporate economist for Navy
Federal Credit Union.
popular ARMs are 5/1 and 7/1 adjustables, in which the initial interest rate
lasts for five or seven years, and then adjusts annually after that. These
loans are suitable for buyers who plan to stay in their homes for five to eight
years, MacEachin says.
4. Use the Loan Estimate to compare
The Loan Estimate is
a three-page document you get after you apply for a mortgage. It contains a
wealth of information, including:
The Loan Estimate is
designed to make it easy to compare loan
5. Buy down the rate
If you have the cash
now and want to lower your payments, you can buy down your mortgage rate by
paying discount points.
It’s a simple concept:
In exchange for more money upfront, lenders are willing to reduce the interest
rate they charge, cutting the borrower’s payments.
A payment of 1 percent
of the loan amount is called 1 point. Generally speaking, a point will decrease
the mortgage rate by a quarter of a percentage point, although in practice you
might have to pay a little more or even a little less. Bankrate’s points
calculator will prove helpful.
6. Trim closing costs
You pay all sorts of
fees when you get a mortgage. Some are charged directly by the lender, and
other fees are charged by third parties, such as title companies and credit
You can negotiate some,
but not all, of these mortgage-related fees. You might even find that some
lenders are willing to negotiate their own origination fees. You will be able
to negotiate from a position of strength when you apply with competing lenders
and compare their fees.
third-party fees. In most states, you can save money by comparison-shopping for
title insurance. That can be a big money-saver. You can shop around for the
home inspection, survey and homeowners
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