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| 6
Ways To Slash 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.
Get pre-approved
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.
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