10. Shop Around -- On Interest Rates And Beyond
For most homeowners, the most expensive component of a home is the interest expense on a mortgage. Before you begin shopping for a home, your first step is shopping for a mortgage. A natural first place to begin is your current bank that you already have a relationship with, but it certainly shouldn't be your last.
Make sure to check Bankrate.com and other online resources to compare rates. A $500,000 home with a $400,000 30-year fixed rate mortgage at 4.5% interest rate will cost about $329,600 in interest payments. By saving just a quarter of 1% and sourcing a loan with the same conditions at 4.25%, the total interest cost declines nearly $22,000.Many buyers fail to realize how much interest they can avoid paying with a little extra effort. While variable interest mortgage rates start out lower than a fixed rate mortgage, I recommend first-time buyers pick a fixed rate unless they intend to sell within a few years. The fear of losing your home because of rising mortgage payments is an added stress most beginning families don't need.
Depending on your situation, you may qualify for a government loan program. Never assume you can't qualify before inquiring. Many lenders don't participate in special financing and have little or no incentive to tell you about them. When it comes to finding the best loan for you, surfing the Internet is your best bet in finding the information homebuyers need.
While not as drastic as the total amount of interest payments, make sure you understand the total costs you will have to pay at closing. Also, know that many, if not all, closing costs are negotiable. In many states, buyers can select any title insurance company they want, although they rarely request a title company other than what their bank selects. Shopping for title insurance isn't glamorous, but is often worthwhile.