5) SHOULD YOU PAY POINTS? A point is equal to 1% of your loan amount. You pay a point to receive a lower interest rate on your loan. If you get a low enough rate, paying points can be worth it.
6) SHOP AROUND. Work with a mortgage broker or check out a few mortgage websites: www.e-loan.com, www.bankrate.com.
7) PRE-APPROVAL 6 MONTHS BEFORE BUYING A HOME. Get pre-approved for a loan from the bank or your mortgage broker. It gets the process going faster and in a competitive market, it gives you the edge.
8) MINIMIZE YOUR DEBT. Avoid big-ticket purchases so not to add to your debt load.
9) SAVE MONEY ON TAXES. Points paid for a first-time home (not for refinancing) can be deducted in the year your home was closed.
10) BE CAREFUL OF COSTS. Don’t ignore transaction costs and watch closing costs very carefully. There are also many hidden costs of home buying: moving, minor renovations (especially if you are buying an older home). Make sure you are prepared.
11) DIVERSIFY, DIVERSIFY, DIVERSIFY. Don’t tie up all your assets in your home.
12) PAY YOUR MORTGAGE AUTOMATICALLY. Get it taken from bank account automatically every month. You don’t ruin your credit and don’t forget to pay every month on time.
13) REFINANCING?
- Shop around for interest rates.
- Start with the bank that currently holds your mortgage. It may give you a good deal just to keep your business.
- Avoid paying points. When you refinance, you can deduct only a portion of the points each year, so it’s usually not a good deal.
- Don’t try to outsmart the market and wait for interest rates to hit their low point. If the numbers make sense for you, go for it.
14) PMI INSURANCE. You will have to pay monthly PMI insurance if you put down a down-payment less than 20%. Once you are paying your mortgage for more than a year, ask your lender to reconsider.
15) BAD CREDIT? DON’T HAVE ENOUGH FOR A DOWN-PAYMENT?
- You can use your investments or securities as collateral for buying a home.
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