Are high interest rates holding you back from buying a Columbus home? Don’t be discouraged! With good planning and comparison shopping, you can save considerable money on mortgage interest. Here’s how!
Raise your FICO score. If you don’t have a FICO score in the range of 800+, there’s room for improvement! The best mortgage rates go to borrowers with the best credit scores. If you have outstanding debt balances, reduce them or pay them off as much as possible. The amount of debt you carry is a major factor in your FICO score, second only to timely payments! Check your credit history at the official credit bureau website, annualcreditreport.com. Visit MyFico.com for credit score info.
Look for mortgage buydowns. Motivated sellers may offer a buydown as a buyer incentive. A buydown is basically pre-paid interest, paid by the seller. It lowers your mortgage interest rate for a temporary period. For example, a 2-1 buydown reduces your interest rate for the first two years of the mortgage. The rate would be 2% lower during the first year, then 1% lower the second year. The rate would reset to the full locked-in rate by year three.
Make a larger down payment. There are mortgages allowing down payments of 3%, or even zero percent! But when you make a larger down payment, you have “more skin in the game,” leading to better mortgage offers. Also, a down payment of 20% eliminates requirements for private mortgage insurance (PMI), and the costly premiums that go with it.
Consider paying points. Points are pre-paid interest. If you pay points up front, you can obtain a lower interest rate for the life of the loan. Each point represents 1% of your total loan amount. On a $300,000 mortgage, one point would cost $3,000.
Be sure to understand how much of a discount you’re getting for the money. Paying one point may only provide a 0.25% reduction in your interest rate, depending on your mortgage type and lender.
Consider an Adjustable-Rate Mortgages (ARM). Adjustable-rate mortgages have a fixed interest rate for a set period, which could be 3 years, or 5 years, or more. Afterwards, the interest rate resets each year according to a specific benchmark in the financial markets. This presents a risk if rates are higher in the future – because your mortgage payments could go up.
You could potentially escape the ARM loan’s annual reset by refinancing into a fixed-rate mortgage, which would eliminate rate surprises.
Wait for lower rates. This is a reasonable strategy, but timing the market is tricky! Rates could come down in the future, but exactly when, and by how much, is impossible to predict. Meanwhile, home prices may continue to rise, eating away at your purchase power. And once rates drop, other home buyers who waited out the market will flood back in, increasing home buying competition.
Comparison shop for your mortgage. Seek out mortgage pre-approvals from at least three lenders during the same timeframe. Compare not just the rates, but the fees and costs of your financing.
When you work with Exclusive Buyer’s Brokers, you receive a fiduciary level of service. We help you review your mortgage offers, and help you identify the best financing for your needs! It’s one of the many ways we are different from other brokerages.
Before you begin your home buying journey, give yourself the advantage of expert insights and strategies! Read our free e-book, “How to Buy a Home like a Pro!” There is no obligation, and the wealth of knowledge is yours to keep.
As Exclusive Buyer’s Brokers, we serve your best interests at all times! Unlike real estate agents and brokerages who represent sellers, as an Exclusive Buyer’s Broker, we only represent you, the buyer, getting you the best price and terms with no conflict of interest at all times. Understanding this distinction could literally save you thousands of dollars not only on the purchase price and terms, but also on seller concessions and home inspection issues, whether you are a first-time homebuyer or an experienced homeowner!
Contact us with your home buying questions! Remember, we are with you every step of the way…all the way home!
Andrew ShowExclusive Buyer’s Broker, CEBA-M, MCNE, CSP, PSA,e-PRO, CREM, ABRM, AHWD
Buyer’s Resource Realty Services www.BuyersHome.com
Serving Metro Columbus, Ohio with Exclusive Buyer’s Agents
7100 North High Street, Suite 204, Worthington, Ohio 43085
614-888-4110 | 888-888-4110 Toll Free | 614-839-4110 Fax
