Are you trying to afford that dream house?
The loan amount, or as we think about it, the amount of debt you are entering, can seem overwhelming. The easiest thing to do is not to think about the amount of money you are borrowing, but about the monthly payment. The lower the mortgage payment, the more house you are able to afford. One of the ways to save thousands of dollars on your mortgage is by reducing your costs before you even begin the loan, which creates a lower monthly payment for the life of the loan.
Save Money Before Your Mortgage Even Starts
One of the easiest ways to be able to afford more house is to focus on reducing your mortgage payment and the fees rolled into the loan from the very beginning. Small savings from lower interest rates rapidly add up when considering the life of a 15- or 30-year mortgage. Here are eight ways to jump start saving money on your mortgage.
8 Ways to Save Money on Your Mortgage
Shop various lenders price
Comparison shop mortgage lenders to see who has the best rate and terms based on your credit score and income. If you are already affiliated with a bank or have another loan, ask them if they have a discount for current members or if you become a member.
Receive actual quotes for your situation
When comparing lenders, it is important that you review the good faith quote and not compare the advertised price. Rates are based on numerous factors, and are very individual. You want to shop the lowest rate you can receive, not the lowest rate the bank offers.
Review the APR
When you are shopping, compare the APR, not the rate that the banks are advertising. The APR is the true cost of the loan. By comparing the APR, you can compare apples to apples.
Consider a 15-year loan
If you plan on paying your mortgage off early, you should use a mortgage calculator to compare monthly payments between a 15- and 30-year loan. While you can always pay off your loan quicker, by locking into a shorter loan your rate could be significantly lower.
Look at all the types of mortgages
Compare all the types of loans that you are eligible for (VA, FHA, conventional loan, etc.). If VA and FHA interest rates are significantly lower than conventional rates, the lower payment could make the loan cheaper, even with the fees associated with the different types of loans.
Inquire about special programs
Inquire about all mortgage programs available. Many institutions have special programs open to military, firefighters and other specific situations.
Evaluate your needs based on the length of the loan
If you know you will be refinancing, selling, or terminating the loan sooner rather than later, a shorter loan might save you considerable money.
Compare appraisals, credit check, postage and other fees
Review the fees (appraisel, postage, and credit check) that you are being charged. If you want to go with a certain lender but notice that their fees are higher than other lenders, you can always negotiate.
The most important thing to remember when trying to save money on your mortgage is that mortages are calculated based on current economic conditions and your individual situation. The mortgage payment of a loan on Monday may be different from the same loan on Friday, so getting mortgage quotes on the same day with the same variables (downpayment, loan amount, interest rate, mortgage term) – and preferably at the same time – is advised. This is easiest to manage with the help of online marketplaces like LendingTree, which offer real-time rates and custom quotes within just a few minutes.