Purchasing your first home may very well be one of the best moments of your life. But, before making this decision, you need to be sure that your finances are in order – as being a homeowner comes with numerous additional expenses.
No matter how well off a person is, saving money is always desirable. If you want to cut down on the funds you part with, consider the following money-saving tips:
– Opt for a shorter-term mortgage
The most popular home loan option is a 30-year fixed-rate mortgage, but opting for this means you will be paying interest on the principal balance for three decades. To save some money, consider a 15-year loan, as this cuts the amount of time you pay interest in half. However, you need to be sure you can afford the higher monthly payments – as the money you save won't mean anything if you fall behind and end up in foreclosure. But, if you can take on more expensive payments, you could save a significant amount of money in the long run.
– Avoid private mortgage insurance
When going through the mortgage process, you will need to show a lender you are able to put a certain amount of money down for the house you are purchasing. The more you are able to pay upfront, the better – as you can secure better loan terms by borrowing less.
In fact, you should aim to have a down payment of at least 20 percent, which would enable you to avoid private mortgage insurance. This is a security policy that lenders require for people with small down payments due to the risk that is taken on. Generally, it will make mortgage payments $50 to $100 more per month, so avoiding it can save you a lot of money throughout the duration of your home loan.
– Meet with multiple providers for homeowner's insurance
Buying a home will likely be the biggest financial commitment of your life, so you will want to protect your investment. Homeowner's insurance is the best route to take, but this can be a costly expense. For this reason, you should meet with multiple providers to ensure you are getting the best possible rate available. Additionally, you need to consider taking the necessary steps to qualify for a lower rate, such as installing a security system or removing your in-ground pool.
– Boost your credit score
When applying for a mortgage, one of the biggest factors lenders will consider is your credit score.Therefore, it would be beneficial to do everything you can to boost this figure before submitting your application. With a poor credit score, you will likely be offered a poor rate and terms on your home loan – or be declined altogether. To secure a favorable rate, you will need a score of at least 700, so do what you can to get it that high before buying a home. By obtaining a low rate, you can save a significant amount of interest over the life of your loan.
– Make extra mortgage payments
One of the biggest expenses that comes with owning a home is mortgage interest. To help reduce the amount you have to pay, it might be a good idea to make extra mortgage payments each month. However, be sure you inform your lender that you want your payment to be put toward the principal balance, so they don't deduct it from your next month's payment.
To receive a free quote, simply visit www.capwestmortgage.com/quote or call (866) 614-5959 to speak with a CapWest Mortgage representative today.