Here are some tips that may save you money on a mortgage
Get a 15-year mortgage: When it comes to 15-year loans vs. 30-year loans, you’ll typically be offered a lower rate for the shorter term, this make make a 15-year loan seem worth it, as you’ll pay off your home faster and you’ll pay less in interest, but 15-year loans have higher monthly payments; if that will stretch you too thin, consider buying a less costly home or opting for a 30-year loan.
Make extra payments: A great compromise between a 15-year and 30-year mortgage is to get a 30-year loan that lets you make extra payments on principal without any penalties. Then you can make larger payments each month and you’ll pay off the loan sooner.
Shop around-Do your homework: Consider whether an adjustable-rate mortgage (ARM) is best for your situation. If you’re planning on being in the home a short period of time, five years or less, an ARM can make a lot of sense with today’s low-interest-rates, it will lock in low rates for the first few years of the mortgage. If you think you’ll be in the home long-term, it can be better to lock in a low rate for the life of the loan.
Don’t buy more home than you can afford: If you start looking at homes that cost around $400,000, it’s not unusual to find yourself suddenly considering ones that cost $450,000. If you spend more than what you can really afford, you’ll be stretched thin financially and this can lead to trouble in cases of a job loss, major medical situation, etc. A rule of thumb is to spend no more than 25% to 30% of your gross monthly income on housing (including property taxes and insurance). It is even smarter to spend no more than 20% of your gross monthly income on a home mortgage.
Put 20% down: Paying less than 20% down on a new home means you’ll have to take on an extra loan in the form of private mortgage insurance (PMI), which will increase your monthly payment. A lower down payment may also result in a higher interest rate. Additionally, if your home’s value drops, you could be left with negative equity-you owing more for your home than what it’s worth. Remember, true friends accept you for who you are, not how big your home is!
For more tips on how to prepare for your home purchase, please contact me anytime!
Providing Solutions Because…Your Move Matters!
Michael L. Brownstead
First Sergeant, U.S. Army (Retired)
ABR, GRI, MRP, SRS, REALTOR
Keller Williams Realty
1002 Raintree Cir., Ste. 100, Allen, TX 75013