Best Mortgage Practices
Before you start comparing houses, find a lender who can work with your financial situation and offer the most mortgage options. Five things to keep in mind:
PREQUALIFIED VS. PREAPPROVED
Mortgage prequalification gives buyers a sense of how much home they can afford. Preapproval requires documentation of the buyers’ financial stability and credit history. Being preapproved lets sellers know you’re serious and ready to buy.
COMPARE AND SAVE
Many assume their local bank will deliver the best mortgage rates and terms. But online banks can also have competitive rates. Websites like bankrate.com and nerdwallet.com use your ZIP code, credit score, and other loan factors to see a list of competitive and licensed lenders.
MORTGAGES ARE NOT ONE-SIZE-FITS-ALL
Ask your lender to explain the different mortgage options—such as fixed rate and adjustable rate—and help you determine the best financial fit.
NO-MORTGAGE OPTIONS
In 2021, 30 percent of home purchases were all cash buys. Some buyers are independently wealthy or investors. Others stockpile savings for years, choose to take out loans against retirement funds, or cash out stock options.
MORTGAGE SAVINGS
It can feel like a mortgage goes on forever. The simple step of making two extra payments a year—by paying half the monthly payment every two weeks instead—can shave years off your mortgage and save you thousands of dollars in interest over the lifetime of the loan. Check with your lender first to make sure it’s a viable option for you.
Ways to Save on Home Insurance
These tips can save money for first-time buyers and current homeowners.
SHOP AROUND
Like mortgages, it saves to shop around. Check out sites like hippo.com and policygenius.com to find the best coverage for the lowest cost in your area.
BUNDLE UP
Insurance companies offer discounts when you combine services. Auto and homeowners insurance are likely pairings, but recreational vehicles (ATVs and boats) and life insurance can also be combined.
ADD SAFETY AND SECURITY FEATURES
Putting in an alarm system, security cameras or installing an overhead sprinkler system, rather than just a smoke detector, may get you better rates.
GET THE COVERAGE YOU ACTUALLY NEED
Tragic stories exist of people being underinsured, but many people are overinsured and don’t realize it. Did you opt for a fine jewelry rider, forgetting that you have since gifted the family heirlooms? Did you mistakenly add earthquake insurance, although there hasn’t been one in your area in known history? The insurance you purchase needs to mesh with the reality of your risks and estimated losses. Look up weather risks, appraise any jewelry and art, and consider whether it is worthwhile to opt in or out of riders and additional coverage.
Other Costs to Note
EARNEST MONEY
Also known as good faith money or deposit. It’s a portion of the down payment buyers include with their purchase offer.
HOME INSPECTION
A report conducted by a licensed inspector that gives buyers a better understanding of the condition of the home and what should be fixed.
CLOSING COSTS
Fees and processing expenses for obtaining a loan, usually around 3–5 percent of the home purchase price.
MONTHLY FEES
Property taxes, association dues, and utilities (could include garbage removal).
The Key to Success in a Competitive Market
“Home buyers should be preapproved and flexible on closing and possession dates.”
—Katie Butler of Better Homes and Gardens Real Estate Reliance Partners in Sacramento, Yolo, and Placer counties
CAUTION: DON’T WAIVE CONTINGENCIES
Last year, some people felt compelled to waive contingencies (for financing, inspections, appraisals, and more) to make their offer look more desirable to a seller. Contingencies are safeguards for the buyer, so waiving them absolves the agent and seller from any responsibility.
SOURCE: BETTER HOMES & GARDENS® MAY 2022 ISSUE