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Top 10 Tips for Cheap Money

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  1. Know before you go. You can get a free credit report at www.annualcreditereport.com, a service provided by the three main credit repositories. Look for mistakes on your report. Lower credit scores will raise your interest rate.
  2. If there is a mistake on your credit report, don’t try and fix it on your own. Instead, provide your documentation showing the information on your report is in error and let your mortgage company fix it. They can do in one day what might take a month or more doing it yourself.
  3. There are online companies that offer to provide you with your credit score. Mortgage lenders pull a credit report specific to the mortgage industry and can be different than the score you’re provided. Most lenders today ask for a minimum credit score of 640.
  4. The best interest rates are reserved for those with credit scores above 740 and lenders can raise or lower a rate for scores as low as 640 in increments of 20 points.
  5. Mortgage lenders ask for at least 20 percent down but you can get a slightly better rate with 25 percent down. More down payment means a better cash flow.
  6. Don’t pay discount points for a lower rate. One point is one percent of your loan amount and will reduce a 30 year rate by about one-quarter of one percent. Work with your loan officer but usually paying points isn’t offset enough with lower payments.
  7. Get mortgage quotes from at least three different lenders but when you get quotes, get them on the same day, the same time and for the same loan type. Rates can change daily and it’s confusing to try and compare a 20 year loan with a 15 year. Always compare apples to apples.
  8. Rates are lower for shorter term loans but the monthly payments are higher. A payment on a 30 year loan will be lower than one for a 15 year but the interest paid on the 30 year mortgage will be much higher.
  9. You can start out getting rate information from your bank but the best mortgage rates will be available from a mortgage banker or broker. A mortgage banker is a lender who does nothing but mortgages. A mortgage broker is a business that matches up a buyer with a lender.
  10. Negotiate to have the seller pay for your closing costs, keeping cash in your pocket. You can use the savings to buy down your interest rate or keep the funds for your next transaction.