rate, which, in turn, will reduce your monthly payment and the amount of interest you’ll pay over the life of the loan. For example, to borrow $50,000 at an interest rate of 8.5% with zero or no points, you’ll pay $385 a month. However, if you’re willing to pay one point up front to borrow the money, your interest rate would be lowered to 8.25% and you’ll pay only $376 a month. Over the life of a 30-year loan, you would save over $4,000 in interest payments. Raise that figure to two points, and the interest rate is lowered to 8%. Your monthly payment drops to $367, saving you $7,000 over the life of the mortgage.
The Alexanders are now in the final stages of closing on their first home. They’ve spent at least a year and a half looking for the house of their dreams and then applying for a loan. “They [the bank] can be real rigid about the things you need to submit, the documentation they need, even how you submit materials,” says Brian. The Alexanders estimate their closing costs will amount to 10% of the cost of the home.
Despite the time, energy and cost that it can take to buy a piece of the American Dream, in the end you’ll probably feel the process was worth it. As you begin your search, here are a few additional tips to keep in mind:
Feel comfortable with negotiating. Almost everything is negotiable– purchase price, financing and closing costs. Don’t be intimidated. The worst that can happen is the seller or the bank will say no.
Get a lawyer. Make sure your lawyer works out a “contract of sale” that stays valid long enough for you to finance your loan. If you get rejected by any lending source, you’ll want to have enough time to start the process again. Your lawyer can also keep your “deposit,” usually one- half of the down payment, in an escrow account payable to the seller, until you’ve had the home’s physical condition inspected and agree with its findings. A lawyer can also execute the title and deed searches and get the tax assessments on the property.
Have your lawyer review all papers banks or lenders ask you to sign. Let him or her keep copies of all documents you submit to potential lenders. It may also be handy to have a lawyer around when you’re ready to close on your mortgage, in case you feel you are being discriminated against.
You should also have a lawyer at the closing, when you’re signing all kinds of documents you’ll feel intimidated about reading.
Wait for the deal that’s best for you. Don’t forget, it’s still a buyer’s market. Get in the driver’s seat and stay there, whether you’re dealing with a seller, broker, bank or an insurer. Soon you, too, will join the ranks of proud homeowners!
Homing in on Housing Resources
Here are some organizations, books, Web sites and software that can provide you with more information:
U.S. Department of Housing and