Useful mortgage tips for homebuyers

Homebuyers may benefit from knowing the following mortgage tips:

Paying one extra month’s principal and interest along with your first scheduled payment will normally result in one year off the term of a 30-year fixed-rate loan.

Some lenders allow you to recast your loan amount if you make a significant principal payment. This allows for a reduced monthly payment. This is ideal for people who purchase a new home while still owning the one they just moved from. Once they sell and put the proceeds into the new loan, they can have it recast to a lower payment.

Some lenders allow you to choose between 15 and 30 years for the term. So, for instance, if you want to refinance but you don’t want to extend it out another 30 years vs. the 26 years left on your current loan, you can choose a 26-year term.

Many people think a 15-year term loan would be twice the payment of a 30-year term. On a $150,000 loan amount, the 30-year payment is $739.18 vs. a payment of $1,094.65 on a 15-year term. This is a difference of $355.47 per monthly payment.

You can request the insurance and property taxes to be waived from your payment. In years past, there was normally a charge of ¼ point at closing to have this option. Plus you would need to have a loan to value of 80 percent or less. Now some lenders do allow for higher than 80 percent loan to value when allowing the taxes and insurance to be paid directly by the borrower.

You can significantly reduce the number of years of your repayment when you pay one half of the mortgage payment every other week vs. a full payment once a month. It helps with planning your budget as well when the borrower’s pay periods are every two weeks.

You can qualify for lower interest rates based on your credit score. One way to increase your scores is to open a couple of credit cards at your local bank or credit union. Then use them for a small purchase each month and pay on time each and every month. The other way to increase your scores is to make sure your current credit card accounts are paid down to one third of the limit allowed. This shows you have discipline to wisely use your credit accounts.