Save Money on Your Mortgage in 2010

Save Money on Your Mortgage in 2010

Home ownership is a still an aspiration for Americans, even amid economic woes. The credit crunch and anticipation of a spike in interest rates complicates the home buying process.
Smart buyers capitalize on the market’s shortcomings by thinking of ways to save money on their mortgage. There’s no use in making whimsical decisions or listening to one lender. Buying a home easily ranks as one of the biggest investments of your life.

Don’t just shop homes, shop lenders too. Doing so shows you ways to save on your mortgage, and every penny counts. Seize every money-saving opportunity.

To help you save your hard-earned money, consider these tips:

  • Be A Credit Expert
  • Choose A Loan Type That Suits You
  • Find A Favorable Loan Length

Be a credit expert

Lenders look at your credit score to help assign an interest rate to your mortgage. You’re at a serious disadvantage if you’re one of four people whose credit report is erroneous. Inaccuracies may block you from getting a mortgage, and will make your interest rate soar.
You’re responsible for meticulously picking apart your credit report. If you find mistakes, document them clearly so you can make a case to the credit agency. Do not let inaccuracies ruin your credit score and mortgage terms. Otherwise you will pay for it.

Choose a loan type that suits you

Most conventional mortgages require down payments of up to 20 percent. Paying that 20 percent up front likely means you won’t have to pay private mortgage insurance every month.

However, a few government loans eliminate hefty down payments and PMI. Qualifying veterans and active-duty military members have access to the VA home loan program, which greatly reduces or removes down payments. The Department of Veterans Affairs insures these loans that are loaded with financial benefits. USDA loans serve mostly rural homebuyers, but like VA loans they often feature no money down.

Buyers who saved money for a down payment may be better off going for a conventional mortgage. Nevertheless, there’s no harm in finding out for which government-backed programs you qualify.

Find a favorable loan length

. Go for the shortest mortgage life that you can afford. First-time homebuyers spend years paying off the interest before they get a chance to chip away at the principal. You can get 15- or 30-year fixed-rate mortgages, while most adjustable rate mortgages run 5-1 and 7-1.

With interest rate increases imminent fixed-rate mortgages may be best, but it depends on how much money you have now and how much you’ll be making. Regardless, always shoot for the shortest mortgage. It will save you money in the long run. For example, financing $80,000 with 7 percent interest costs $42,000 less with a 20-year mortgage than with a 30-year one.

Pay in advance

Make an effort to put an extra $100 each month toward your monthly payment. No matter what these little extras save thousands in the long run, but might cost you in the short run assuming your mortgage has prepayment penalties.

Making these payments shorten the life of the mortgage and save you money. The savings for a 20-year, $100,000 mortgage with 7 percent interest are considerable. You’d save $20,000 and trim the mortgage by four years. When you send the extra payment, tell the mortgage holder that it goes toward the loan principal.

Do not settle for a lender who fails to work with you or doesn’t do everything to save you money. Be suspect of lenders who ignore your questions. It seems like common sense, but some prospective homebuyers get stuck with questionable lenders.

This site is for informational purposes only. It is not sponsored or in any way affiliated with the government. If you are in need of a mortgage loan, consult with a licensed mortgage professional. All fair housing and equal housing opportunity laws apply when applying for a mortgage or buying a home. Copyright 2012.