If you are planning on purchasing a home in San Diego, there are a number of different ways that you can save. A lower interest rate can help you save thousands of dollars over the life of your loan. The additional savings you can gain from a lower interest rate can be put towards a number of different things, including your retirement account or your children’s college education.
Continue reading if you are planning on purchasing a new home for several tips to help you save.
Get Pre-Approved & Lock In a Rate
If you are in the market for a new home, getting pre-approved is essential. Not only will a pre-approval give you an idea on how much you can spend on your home purchase, it will also give you a competitive edge in negotiations. Pre-approval is especially important in a housing market as competitive as San Diego where half of all homes are sold over list price and more than 70% of sales are multi-offer transactions. Make sure that you are pre-approved, not just pre-qualified.
Once you are pre-approved discuss locking in an interest rate with your lender. An interest rate lock guarantees you a specific rate even if interest rates rise before you close on a home. Interest rate locks are most commonly 30-60 days long, but can be as long as 360 days. Determine how long you anticipate it will take to close on your home and lock in a rate for the appropriate number of days. In today’s market interest rates can quickly change, so locking in a low rate while it’s available guarantees you won’t miss out.
Avoid Private Mortgage Insurance
In order to avoid paying for private mortgage insurance (PMI) on your loan, you will need to put at least 20% down. Fortunately, if you do not have a down payment of 20% available there are still a number of loan programs you can qualify for and later eliminate PMI.
You can later eliminate PMI by:
Requesting that your lender eliminates PMI as soon as your mortgage reaches an 80 percent loan-to-value ratio.
Build equity more quickly by making bi-weekly mortgage payments or making an additional mortgage payment each year.
Keep an eye on comparable sales in your area and if you suspect that your home has appreciated, request an appraisal to determine if you can eliminate PMI.
Refinance to Take Advantage of Lower Interest Rates
As a homeowner you should always keep an eye on the current market and when interest rates change. Refinancing to a lower interest rate can help you save thousands of dollars in interest payments on your loan. Many lenders offer no-cost refinance options, which include zero out-of-pocket costs and zero points and fees. As homeowners’ financial situations change, some even choose to refinance to a shorter loan term (15 years versus 30 years), which enables them to pay off their mortgage in half the time and save thousands in interest.
To learn about more ways you can save on your mortgage payments, contact a local mortgage lender.
Article courtesy of Prospect Financial Group, Inc.