Borrowing resolutions: Easy tips for trimming your borrowing costs

With 2007 in full swing, you may have already started thinking about the months ahead with a New Year’s resolution of purchasing a new home. Of course, with this idea comes the excitement of owning your own property, but also the reality of paying for such an investment. Luckily, there are several easy borrowing resolutions you can make to help ease your home buying woes and trim your overall payment costs, including:

Save for a down payment
Placing a sizable down payment on your home will not only lower your monthly mortgage bills, but may also earn you a more competitive interest rate. If you have money already stored away, consider using part of it on your down payment. If you are starting from scratch, look at your monthly expenses and cash flow to figure out ways to begin saving. (For easy saving tips, read How to save money everyday.)

Create a budget
The old saying, “house rich, cash poor,” sums up when home ownership becomes more of a financial burden than first anticipated. An easy way to avoid this situation is to create a budget of all your monthly and annual expenses. This will give you a better idea of how your finances measure up and provide insight into the mortgage amount you can afford. There are several different computer applications that can help guide you through the budget process. Or, if you prefer the help of a real person, set aside some time to talk with your financial planner on the subject.

Check your credit
Your credit score plays a major role in your borrowing and interest rate eligibility. All Americans are entitled to one free credit score a year as required by the federal government. A credit score of 720 or higher should fetch you a strong interest rate. If your credit record is less than perfect, work directly with the credit bureau that provided the report to figure out the problem. All of the major bureaus – Equifax, Experian and TransUnion – have contact information on their Web sites. Be sure to check your credit before applying for a loan. (To read more about improving your credit score, visit the Improving Your Credit section of the Smart Borrower Center.)

Know your market
When the time comes to begin looking for a home, it is smart to become familiar with your market. A REALTOR® can serve as a valuable resource in this process, helping you navigate and manage your home search. A REALTOR® can provide comparable home prices in the areas you are looking, as well as local property tax values and prior home ownership information. All of these facts will help you place a winning offer on the house you want. (To learn more about savvy home buying, visit Is the house worth the price?)

Do your loan research
When it comes to home loans, one size does not fit all. There are many borrowing options to choose from, so you want to find the loan that best suits your specific situation whether that’s a fixed, adjustable-rate or interest only mortgage. This includes looking at your budget and deciding what type of payment you can afford or want in conjunction with your other expenditures. (For more information on what type of mortgage is right for you, read Finding a mortgage that fits your life.)

Compare mortgage lenders
There is no shortage of mortgage lenders, so taking the time to shop around could make a significant difference in your mortgage rate and closing costs. When looking for providers keep in mind any hidden charges, such as points or origination fees and always ask for a good faith estimate. Also, make sure that the company is reputable, researching the organization and their history.

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Smart borrowing can make all the difference in you keeping your New Year’s resolution of buying a home. By following these simple borrowing tips, you may be able to ease some of your lending worries, while making an investment you can enjoy each and every day in the year ahead.

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