For families looking to purchase a home, good news has arrived interest rates are slowly starting to descend. As time goes on purchasing power for family’s home searching will rise. So, the benefit of this is a lower monthly payment, potentially qualifying for a larger priced home by market forces. Here are some things to consider if you’re going to be getting pre-approved to purchase a home…
If you are desiring to purchase a home, and it boils down to a cost benefit how do you purchase a home while at the same time setting yourself up for the maximum benefit to refinance? Here’s how-Let’s say you can get an interest rate at 6.7 5% on a 30-year fixed and it’s going to cost you one percentage point of your loan amount and your loan amount is let’s say $300,000. If the comparative interest rate does not contain that discount point the rate is 7.5%. You have some considerations to evaluate. More specifically here’s what the math will boil down to. If you set that additional point to purchase the interest rate down and then you can refinance, and you refinance and pay closing costs you will lose money. In other words, the interest rate when you go to refinance has to be so significant and so large that it offsets the monetary loss you paid to get the lower rate in the first place. Another strategy might not be to consider spending the extra cost and getting the lower rate, but rather to take a slightly higher interest rate and pay little or no points knowing you’re going to be able to refinance anyway. This is what most banks and lenders are selling would be good mortgage borrowers in this market.
There is a better way…
Can the mortgage company you’re working with can do the purchase loan for you, service the loan for you and when comes time to refinance the loan, do it without fees . Let’s say you take that 6.75 interest rate and you pay the one point in order to secure the rate. When you go to refinance and let’s say the rates go down to say 6% and you can lower your interest rate 75 basis points lowering your monthly payment a few hundred dollars per month and it doesn’t cost you anything because the lender you’re working with is servicing your loan and paying the closing costs for you that becomes win not only for the lender, but also for you because you’re saving money using the old financing strategy of other people’s money OPM. This is a wonderful way to use the lender’s money to help you chip away at your debt and help you reduce the interest expense on your loan. Not all, but most mortgage companies will let you refinance every six months. Doing so if rates are going down and there’s a net tangible benefit every six months for example could absolutely unequivocally benefit you and heavily reduce the interest expense on your loan as long as you have a proactive mortgage professional taking an active approach into watching your loan and identifying opportunities for you to save money with no costs.
This is a proven strategy that will ensure that you save thousands over the course of time on your loan. However not all mortgage companies take this type of approach. Arguably ,70% of mortgage companies in America today will originate your loan and then you will never hear from that company or mortgage professional ever again and unfortunately, it’s a disservice that exists within the mortgage space. You want a loan officer who takes an interactive financial consultative approach to helping you manage your mortgage over the course of time and helps make you aware of market opportunities you can decide on. Another thing you might want to give some consideration too is will the lender allow a float down on your mortgage. A float down essentially allows you to secure a lower interest rate usually one time between when you lock in your interest rate and the close of escrow on your mortgage loan. The float down allows you to get a lower monthly payment after locking in a rate during your loan process. It also helps lower your debt to income ratio which could be problematic in the future particularly the debt ration was high from the start and any change occurs in the process.
If you’re looking for a mortgage loan and you’re looking for someone to take a proactive approach to helping you manage the cost of your mortgage, while giving you a complimentary quote and offering you a float down start today by getting a complimentary pre-qual.
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