For the most part, you just need to use common sense to find a cost-effective home loan. Saving up for a large down payment and avoiding an oversized house are surefire strategies to minimize the amount of money you need to borrow and potentially eliminate the need for private mortgage insurance.
If allowed without any penalty, making extra payments can reduce your loan principal more quickly, which can save you a lot on interest over the long term. However, there are less popular but effective ways to make a conventional mortgage in Albuquerque or any other major city more affordable. Strongly consider taking the less-traveled paths below to decrease your out-of-pocket mortgage-related expenses.
Do Not Buy FICO Scores
It is imperative to know how creditworthy you are before talking to any lender, but paying for FICO scores is not exactly a wise move. First, you do not know the specific scorecard your prospective mortgage company uses to assess your creditworthiness. Second, you can get your credit scores from numerous sources these days at no cost. They may be generic, but creditors utilize practically similar weighed factors to calculate FICO scores.
Rather than being too concerned about what FICO thinks about you, you should focus your energy on make sure your credit reports have no incorrect information instead. Any inaccuracy can pull your FICO scores down, so review them beforehand and spot for wrong items. TransUnion, Equifax, and Experian provide a free copy of your credit reports. If you think there is something is amiss, you can file a dispute to the credit-reporting agency itself, to the creditor that responsible for the mistake, or to the Consumer Financial Protection Bureau.
Find Your Own Home Insurance
A monthly mortgage payment generally consists of four components, and one of them is insurance. If a portion of your payment goes to cover homeowners insurance, make sure you have a say in the policy you will get. Like other financial products, the rate of home insurance varies from company to company. Shop around to find the cheapest policy you can buy. Find out the criteria set by your prospective lender to choose a product that meets the minimum insurance requirements.
Keep Your Property Taxes to a Minimum
An inflated assessment of your prospective house’s value can effectively increase your property taxes. Do your research to learn about the prices of comparative pieces of real estate in the neighborhood. If you think that the worth of the house you intend to purchase is less than its assessment, request for a review or a new appraisal. If the ultimate assessment decreases your property’s price, it creates a domino effect. It lowers your annual tax bill as well as the amount of money you need to borrow.
Negotiate for a Lower Interest Rate
Last but not least, initiate the negotiation. Many homebuyers do not know they can negotiate interest rates and other aspects of a mortgage. If your credentials are good and you received better offers, use every ace up your sleeve to get a more favorable deal. If your prospective lender refuses to budge even if you have a strong case, take your business elsewhere.
Reducing the cost of buying a house needs work, but it is worth the trouble. If you succeed, you can enjoy decent savings regularly that add up over time.