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| Trim
Closing Costs & Get The Best Rate |
The purchase of a home is likely the largest and most significant
financial decision most people will ever make, and finding
the right lender for your home loan is just as important
as finding the perfect home. A good lender could save you
hundreds or even thousands of dollars in closing costs
upfront as well as thousands of dollars over the life of
the loan with the lowest interest rate possible. It really
pays to do
some
research and "shopping" around.
Trim closing costs
Upon request, lenders will provide borrowers with what's called a "Good
Faith Estimate" which details the closing fees charged by a lender and
their proposed interest rate. A wise borrower will get good faith estimates from
multiple
lenders
to determine
who is offering the best all around deal. It is not necessary to have each lender
pull
your credit, however.
Once
you know your credit score, you can simply inform the lender of your score
and ask for a Good Faith Estimate based on that score. You
should
request
that
the
Good
Faith
Estimate
be
given
assuming no loan origination fee so that it will be easier to compare interest
rates and closing costs accurately
from one lender to the next. If you do not understand how to accurately compare
GFE's, ask an experienced real estate
agent for assistance.
Buy down the rate
If you have extra cash on hand and plan to remain in the home you purchase for
a
while,
you may want to "buy
down" the interest rate to lower the monthly payment. In exchange for an
upfront fee, lenders are willing to lower the interest rate they charge thus
cutting the borrower's payments. Buy downs can be temporary or they can last
the life of the loan. The buyer can negotiate a buy down directly with his or
her
lender, but sometimes a home seller arranges the interest rate buy down as an
incentive to attract potential buyers. If a buyer only plans to be in a home
for a short period of time, a buy down may not make sense. An experienced
mortgage professional can help determine if a buy down makes financial sense
based
on
individual plans and circumstances.
Get pre-approved
To get pre-approved, a lender will pull a potential buyer's credit report, verify
income, and take other underwriting steps to come up with a maximum
allowable
loan amount for that buyer. The lender also commits in writing
to making the loan if a purchase occurs within a set amount of time.
Pre-approval puts a buyer in the strongest possible bargaining position with
sellers. 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 reasonably
certain
the deal will go through.
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