Are you shopping around for a mortgage loan? Are you looking for the best deal? Fortunately, you don’t have to choose a lender blindly. Like you, many home buyers want to spend the least amount of money when purchasing a house. This goes further than negotiating a low sale price, as buying a home also involves interest and other fees.
There’s plenty of information available to help you get the best loan package – it’s all about knowing where to look and having a strategy.
1. Shop around for the best interest rate
Don’t choose a mortgage lender simply because you like their commercials or feel that the bank is stable. A good track record is important, but it’s just as important to shop around and know your options. Interest rates and fees vary by lender, and if you don’t compare your options, you might get hit with a higher rate.
“One lender isn’t every lender. One lender may lead you to believe that there are no better deals. But if you don’t find a satisfactory interest rate, shop around,” says real estate expert Travis Gilpin.
Request a mortgage quote from at least three different banks. Compare the interest rate and fees, such as the loan origination and other closing costs. This impacts how much you’ll pay to get the loan, plus your costs over the life of the loan.
2. Skip the 30-year mortgage term
A 15-year or 20-year mortgage term increases your monthly payment, but you’ll pay less interest and pay off the mortgage faster. Plus, shorter terms help you build equity faster, which can reduce private mortgage insurance sooner.
3. Make one extra mortgage payment a year
Surprisingly, this simple move has an amazing way of reducing a 30-year mortgage term by nearly eight years. You can go with a bi-weekly payment schedule and make half your home loan payment every two weeks, or simply double your mortgage payment on your anniversary date.
Another easy approach: increase each monthly payment by 1/12. This is also the equivalent of an extra payment each year, thus reducing the total cost paid for a home.
4. Don’t overspend
A simple way to save on your mortgage loan: don’t overspend. I know, this can be hard, especially if you find your dream house. And even if a mortgage lender decides that you can afford a more expensive house – even if you just barely qualified for the loan – going bigger can have a major impact on your pocket. This can affect how much you’re able to save, and without a lot of disposable cash, it’s harder to take care of repairs and other unexpected expenses.
5. Put down a larger down payment.
You will need a 5% down payment when purchasing a house. But if you have the resources, don’t stop with 5%.
A larger down payment reduces how much you have to borrow, helping you acquire a better mortgage rate. And if you put down at least 20%, you don’t have to pay private mortgage insurance, which might save you a couple hundred dollars each month.