Federated Lending Corporation

How to avoid overpaying for your first home mortgage

One of the challenges many first-time home buyers face is not knowing if they are overpaying for a mortgage. It is important to understand the various items that will impact your interest rate and the type of loan you will qualify for before you start shopping for a home. Some of the factors you should consider to understand how to avoid overpaying for a mortgage include:

• Your credit score — if you have not taken the time to correct mistakes on your credit report, you could be facing higher interest rates. This could mean your mortgage is costing more than it should.

• Low down payment — many first time home buyers do not understand the higher their down payment, the less they will pay in interest. Keep in mind, the bigger the loan, the more risk the lender is taking.

• Fees associated with loan — before you start shopping for a home, speak with your loan officer. There are numerous fees that may be associated with your loan including application fees, appraisal fees and credit report fees. Find out what these fees are so you will be prepared.

• Closing costs on the loan — in addition to mortgage fees, there will be other costs that you may have to pay. Items like homeowner’s insurance, property taxes and filing fees can deplete your savings if you are not paying attention.

• Loan points — many first-time home buyers are unaware there may be two different types of points associated with their mortgage. First, there are origination points which are charged as a fee and then there are interest rate points. You may be able to pay points for an interest rate deduction.

The Art of Negotiation

There are some costs associated with a mortgage which are non-negotiable such as appraisal fees, property taxes and insurance. However, other fees like application fees, loan origination fees and interest rate points which may be negotiable. Talk to your loan officer to determine whether you can have some of the fees reduced before you agree on a final mortgage offer.

Down Payment Impact

First time buyers should also be aware of the various aspects of mortgage which are impacted by a down payment. For example, not only will a higher down payment potentially lower your interest rate, if you put down at least 20 percent you will avoid paying mortgage insurance premiums. Be sure to discuss this with your lender, these premiums can be very expensive and will have to be paid until such time as your home equity equals 20 percent; making a larger down payment can save you significant money.

If you have applied for a loan and you are now asking yourself ” Am I overpaying for my home mortgage? ” Contact Federated Lending in Bucks County, PA and let us review your current loan offer and help you make a decision as to whether you can lower your overall costs with a different loan program.