Borrowers can save money on their mortgage if they do a little research in the beginning of the loan process. The first step is for borrowers to review their credit and take the necessary steps to improve their credit score. The credit score is an important factor in determining what program you qualify for and what rates you will receive.Determine which loan program is best for you. As an example, do not pay for 30 years of expensive rate protection if you are only going to be in your home for six or seven years.
If you are certain that you will not be refinancing in the next 2-3 years, but may possibly move within that time frame you may still want to add a "soft" prepayment penalty to your loan. A soft prepayment penalty is only assessed if you refinance your home, and is not imposed if you sell your home. A "hard" prepayment penalty is always charged if you refinance, or move within the prepayment term.
If you are going to be in your home for two or three years, get a mortgage with a pre-payment penalty of two or three years. Your rate will be better and your payment will be lower.
Shop around between two or three different companies to make sure you are getting a fair deal. Pay attention to all of the numbers so that you can compare "apples to apples". One company may be quoting you a lower interest rate but you may be paying points for that rate and it may not be the best deal for you and your specific situation.
No matter how good the offer is, make sure you're working with someone you like and feel comfortable with. If the mortgage company you're working with feels sleazy, but you're working with them as they had the best offer, you're probably in for some trouble when it comes to finalizing the paperwork. Ask the company you want to work with for customer references and follow up to make sure they treat their customers right.
Also, to save money in the long run, a nice option is to get on a bi-weekly payment plan- cutting the amount of years to pay on your existing loan yet keeping your payments the same every month.
If you currently have a 30-Year Fixed Rate Mortgage, making an extra payment every year can shorten the 30 years mortgage to about 25 years and save on the overall interest payments. Making a 13th payment every year can save approximately 20% in total interest on average. Depending on the mortgage size, this can amount to tens hundreds of thousands of dollars.
Does your credit score have room for improvement? The difference between a 600 credit score and a 700 credit score could end up being hundreds of dollars per month. Be sure to carefully review your credit report for errors that could be damaging your score. Many times these errors can be corrected in time to qualify you for a better money saving mortgage.
