This Article Is About Saving Money On Mortgage On Purchase And Refinance Loans
A home purchase is a very happy and exciting time for home buyers. Saving money on a mortgage is the last concern buyers may have on their minds. However, mortgage borrowers do want to avoid home buyer mistakes and avoid future regrets. There are several tips for saving money on mortgage. By taking these simple advice and pointers in saving money on mortgage and housing payments it may save homeowners tens of thousands of dollars during the term of mortgage loan. In this article, we will discuss and cover ways of saving money when getting a mortgage.
General Mortgage Process And Saving Money On Mortgage
When a home buyer or homeowner needs a mortgage loan, they will contact a loan officer to see if they qualify. One of the main important things loan officers will do is what is the maximum amount borrowers will qualify for. The last thing on the borrowers’ minds is saving money on mortgage.
Here are the simple general steps of the mortgage process. Contact loan officer. The loan officer will have the borrower complete a 4-page mortgage loan application. This is commonly referred to as 1003. The loan officer will interview the borrower and go over 1003. They will make sure that the income, credit, asset, and debt information listed in 1003 is accurate. The loan officer will run a tri-merger credit report.
The loan officer will review docs such as the following:
- two years tax returns
- two years W2s, 30 days paycheck stubs
- bank statements and verified funds
The loan officer will cross-check information from the 1003 and credit report. Will run file through the Automated Underwriting System for automated approval. Pre-approval will be issued on the maximum loan amount that the borrower will qualify. The borrower will go and shop for a home. Get executed a real estate purchase contract and submit it to the loan officer. The loan officer will complete the mortgage package and submit it for mortgage processing.
How Much House Can I Afford Versus How Much Can I Qualify For
Most loan officers will only get a borrower on the maximum loan amount a borrower can qualify for and NOT how much house can the borrower afford.
Borrowers do not think that just because a loan officer will issue a pre-approval letter for a certain amount, that monthly housing payment may be too much for them. It may be too much house for buyers to afford.
Here is how loan officers qualify you:
- There are income and debts that lenders require
Here is how debt to income ratios are qualified on borrowers:
Lenders will take the sum of the total of all minimum monthly payments such as the following:
- minimum credit card payments
- car payments
- student loan payments
- installment loan payments
- child support payments
- co-signed loan payments
- PLUS proposed P.I.T.I. (which is the principal, interest, taxes, and insurance payments of your new home mortgage)
- divide it by monthly gross income
- That percentage yields your debt to income ratio
The loan officer will not take into consideration monthly grocery bills:
- child care bills
- private tuition bills
- medical/health insurance bills
- extracurricular activities
- or any other bills that do not report on the credit report
Just because lenders qualify borrowers for a home loan payment does not mean they can afford that mortgage loan payment and housing expenses:
- Borrowers always need to ask the question, How Much House Can I Afford?
The Right Time To Think About Saving Money On Mortgage
When is the right time to think about saving money on mortgage? The answer to when is the right time to think about saving money on your mortgage is the earlier the better. All home buyers should set the priority in saving money on their mortgage prior to entering into a real estate purchase contract. The sooner you think about saving money on mortgage, the better prepared you will be and make the home buying process and mortgage process less stressful. Just because you have great income and high credit scores, that does not mean that you do not have to think about saving money on your mortgage. Having the lowest interest rates possible on your mortgage loan is the number one way in saving money on your mortgage.
How Lenders Determine Mortgage Rates
In order to have the lowest interest rates possible on your home loan is to have the highest possible credit scores.
Here is how lenders determine mortgage rates:
- Mortgage lenders will classify a borrower with higher credit scores as being a lower risk borrower and will offer a lower mortgage interest rate than borrowers with lower credit scores
Higher credit scores, yield lower mortgage rates. Lower credit scores mean higher risk and higher mortgage rates.
Strategies On Saving Money On Mortgage
Applying for a mortgage and mortgage process is a process and borrowers should think about not just preparing in getting qualified for a mortgage but also saving money on your mortgage. It does take time to be able to qualify for a home loan if you do not meet the minimum qualification requirements now so it is wise to consult with a mortgage loan officer way ahead of you planning on officially applying for a mortgage loan.
Here are some strategies for preparing for a mortgage and saving money on mortgage:
Make a habit of making sure to always make minimum monthly payments on time such as the following:
- minimum credit card payments
- installment loans
- car monthly payments
- student loans
- any monthly minimum payments that report on the credit report
One 30-day late payment can plummet credit scores by 60 or more FICO points. Derogatories on the credit report will remain on the credit report for at least 7 years from the date of last activity, DLA. Late payments in the past 12 months are often a deal killer. This is because most lenders will not approve a home loan with late payments in the past 12 months. Late payments after bankruptcy, foreclosure, deed in lieu of foreclosure, and a short sale is normally a deal killer. Please contact us at 800-900-8569 or text for a faster response or email us if you had late payments after bankruptcy and foreclosure. The Team at Gustan Cho Associates may be able to help you. Having low credit card balances will optimize credit scores. Maxed-out credit cards will plummet credit scores. Never close out an active credit card revolving account. Having open credit tradelines is a must for a healthier credit score.
Down Payment And Closing Costs On Home Purchase
Let’s say that a seller wants a bottom-line price of $100,000 on the sale of their home. FHA will allow up to a 6% seller’s concession. The seller of this home can inflate the purchase price by 6% of the $100,000 purchase price, or $106,000. Sellers can give the home buyer $6,000 as a seller’s concession to the home buyer to be only used for closing costs. Can use sellers’ concessions for closing costs only. Not the down payment.
Typical Closing Costs
Examples of closing costs are:
- one year’s homeowners’ insurance premium that the home buyer needs to purchase and be paid at closing
- title charges
- recording fees
- tax stamps
- attorneys fees
- appraisal fees
- escrows (2 months property taxes and 2 months homeowners insurance)
- discount points to buy down the mortgage rates
What Happens With Overages Of Sellers Concessions
The seller cannot give a kickback to the home buyer any overages of seller concessions. Any seller concession overage needs to go back to the sellers. However, most loan officers will use any seller concession overage in buying discount points to buy down the mortgage rates. Borrowers should think about buying down the mortgage rates with the seller’s concession credit they get from the home seller. A lower mortgage rate can be thousands of dollars of savings over the course of the mortgage loan term. Homebuyers planning on getting ready for a mortgage and need a loan officer for some tips and advice on saving money for mortgage, please contact us at 800-900-8569 or text us for a faster response. Or email us at email@example.com. We are available 7 days a week, evenings, weekends, and holidays. Gustan Cho Associates issues pre-approvals 7 days a week. Gustan Cho Associates has a five-star national reputation for closing loans in 21 days or less and not having any overlays on its government and Conventional Loan Programs.
September 20, 2021 - 6 min read