Mortgage rates vary depending on the current economy. A strong economy brings about higher loan interest rates, while a weaker economy sees lower loan interest rates. When loan interest rates dip, it may be time to buy or refinance a home. Consider a few simple tips that may save you money when buying or refinancing a home.
Shop around. If you are buying a home, chances are you’ve already done quite a bit of shopping around to find the perfect place to live. Shopping for multiple quotes for mortgage rates can be a great way to save money because every lender may offer a different deal. Shopping around for rates also applies to refinancing. Your current bank may offer an incentive deal for refinancing. Start the comparison process there. For new home buyers, your current lending institution is a good place to get a first-rate quote as well. The Federal Reserve offers a mortgage shopping worksheet to help consumers compare mortgage rates and recommends making lenders compete for your business so you get the best rates possible.
Choose the right mortgage. The mortgage your neighbor just signed may be a great deal for him, but may not be the right fit for your financial needs. You may want a longer term or a 30-year loan with smaller monthly payments, while he prefers a 15-year note with a higher monthly payment. Typically, if you can put down about 20 percent of the home’s purchase price, a lender will offer you a lower mortgage interest rate and lower monthly payments. Discuss your options with a lending officer.
Only buy what you can afford. It may sound like a no-brainer, but one of the best ways to save money when buying a home is not to over-buy. CNN Money suggests buying a home that is about two and a half times your annual salary. If you are not sure how to factor your house-buying or refinancing budget, consider using an online mortgage calculator.
Negotiate fees. Buying or refinancing a home involves various fees. Every lending institution should give you an estimate of these fees. If it can’t or won’t, walk away. Fees may include title insurance, appraiser fees, lender’s fees, recording fees and credit report fees. There also will be a fee for the title company or attorney at closing. You may be able to negotiate some of these fees. For example, if you are longstanding customer of the lending bank, it may waive the credit check fees and reduce the lending fees. Never be afraid to ask for discounts and waivers.
Buying or refinancing a home can be stressful. Reduce financial stress by shopping around, knowing your budget and speaking up to obtain the best rates possible.