November 8th, 2017 7:41 AM by Jackie A. Graves, President
mortgage probably will be part of the biggest purchase you’ll ever make. A few
simple, smart moves can save you tens of thousands, even hundreds of thousands,
of dollars over the life of the loan.
Try these nine ways
to save — from a little to a lot — on your next mortgage.
Look at your credit
score up to a year before you apply for a mortgage or start shopping for a
home. FICO is the score used most often by the mortgage industry. There’s no
need to pay to see it: Instead, read “8 Ways to Get Your
FICO Score for Free.”
Raising your score
makes you eligible for a better interest rate on a mortgage. It could take as
long as a year to improve that score.
FICO (the Fair Isaac
Corporation), the company that invented the score that bears its name, has a loan savings
calculator that shows how much you can save by improving your
credit score. The calculator displays six ranges of credit scores, from highest
(760-850) to lowest (620-639). Alongside the scores are typical mortgage
interest rates currently offered to borrowers with those scores.
We tried the
calculator at the end of October. To borrow $300,000, for instance:
How’s that for a
money-saving difference? Having one of the highest credit scores shaves $282 a
month off the mortgage payment compared with a score in the lowest bracket. The
total bill for a bottom-rung credit score is more than $100,000 in extra
interest paid over the life of the mortgage.
Try using the
calculator yourself to see the savings differences at various credit score
ranges. It’ll make you a believer.
your credit score is a slow process, but you can speed up things by using the
tips outlined in “Boost Your Credit
Score Fast With These 7 Moves.” Also check out “Ask Stacy: Will Paying Old Debts Improve My Credit
The three major
credit-reporting agencies — Equifax, TransUnion and Experian — compile credit
histories on us all to help lenders and merchants decide whether they should
lend us money or credit, and at what rate.
The information in
these reports is the basis for your score. Unfortunately, errors are surprisingly
You have the right to
one free annual copy of your credit history from each agency. For more about
getting your score — and about recent changes to credit scores — check out “How the Latest Credit Report Changes Impact Your Score.”
Check your credit
reports for problems or errors as soon as possible before applying for a
mortgage, as it takes time to fix mistakes and to make an improvement in your
Meet with several
lenders to discuss your borrowing situation. If you are starting the loan
search process early, don’t quickly give lenders permission to pull your credit
history: Too many inquiries can hurt your credit score, so wait until you’re
ready to apply for a loan.
Besides, your free credit score
will allow them to help you understand how much you will be able to borrow, and
what you need to do to prepare to apply. They can also give you helpful tips on
improving your credit score.
Meeting with several lenders
will help you understand the process and get a feel for which you’d like to
work with. Do the same with online lenders. Comparison shopping for lenders can
save you money, as lenders’ mortgage offers vary widely.
There’s no reason you can’t
keep an eye on the market and see what’s available. However, try not to start
shopping seriously until you’ve got financing lined up.
Falling head-over-heels in love
with a home you can’t afford and then stretching finances perilously thin to
buy it can be a costly financial mistake. Just ask all the people who lost
homes in the recent housing crash because they had mortgages they could not
zimmytws / Shutterstock.com
Lenders will offer to help you
become “pre-qualified” for a mortgage. Pre-qualification won’t help you buy a
home or get a mortgage. It just means a lender gave you an estimate of how much
you can borrow, and at roughly what rate.
Preapproval, however, is a
whole different ballgame. Preapproval means you filled out the application for
a mortgage loan and gave the lender permission to pull your credit score. Then,
the lender agreed to loan you a certain amount of money — conditioned on
approving the property you have chosen.
A preapproval gives you an
advantage when shopping for a home. In a competitive market, your preapproval
letter from a lender lets sellers know they will not need to wait for you to
apply for a mortgage. You are already approved and can make the purchase
Get preapproved when you are
ready to shop for homes. Not all lenders issue preapproval letters, but having
one can be a nice advantage.
Dirima / Shutterstock.com
While you are in the middle of
applying for a mortgage and buying a home, avoid doing anything that might
affect your credit score. Opening a new credit card or credit account can
affect your credit score and possibly lower your interest rate. Wait until
after you have signed your mortgage papers.
Idutko / Shutterstock.com
You are safe making multiple
mortgage applications or allowing even numerous mortgage lenders to inquire
about your credit score — called a credit “pull”– within a period of around 30
days, FICO says:
Looking for a mortgage, auto or student loan may cause multiple
lenders to request your credit report, even though you are only looking for one
loan. To compensate for this, FICO Scores ignore mortgage, auto and student
loan inquiries made in the 30 days prior to scoring. So, if you find a loan
within 30 days, the inquiries won’t affect your scores while you’re rate
shopping. In addition, FICO Scores look on your credit report for mortgage,
auto and student loan inquiries older than 30 days. If your FICO Scores find
some, your scores will consider inquiries that fall in a typical shopping
period as just one inquiry.
Also, checking your own credit
score or reports will not hurt your credit score.
Iokov Filimonov / Shutterstock.com
Once you find a home, you might
want to start shopping for furniture and appliances, window coverings and home
improvements. Don’t purchase these items on credit — or apply for new credit —
until after your mortgage loan has closed. New purchases affect the amount of
credit you have available and can change your eligibility or the cost of your
mortgage. So, hold off until your mortgage is a done deal.
By Marilyn Lewis – To view
the original article click here