Before you check out the top three steps to save at least $10k on your mortgage(below), make sure you get registered to receive the most current real estate market reports for the Santa Clarita – Valencia CA areas. We want to work hard for your trust and eventually your Santa Clarita real estate business.
When it comes to buying a home, we all want to save as much as possible. That includes during the tenure of our mortgage. Most home mortgages, new ones, before the last fall of the real estate cycle – before 2007, involved multiple loans. There were also a lot of the ARM – Adjustable Rate Mortgages which some had prepayment penalties, almost a crime in of themselves.
Today, most mortgages are 30 years fixed which originate in the Santa Clarita Valley. We see a lot of these come across our desks when we are working with home sellers. There are a few ARM’s that are floating around. Those home sellers will either need to do a mandatory refinance. (or) Do a nonmandatory re-finance to save them money when those rates increase, as they have. (or) Selling their home also works to get rid of those types of Adjustable Rate Mortgages.
We are going to speak of Origination Loans. These are new loans in Santa Clarita Lending verbiage. Re-finances are the ‘other type’ of loans where mortgage brokers or banks are called to help with. As an aside – A Refinance with your current mortgage holder maybe not the best way or cheapest. Contact your local Mortgage Broker in the Santa Clarita. If you don’t have one – call me and I’ll make the intros.
Improve your FICO score
This is the number one way you can help save over $10,000 on your mortgage. FICO, Fair Isaac Corporation, that was the first company to offer a “credit risk” model corresponding to a particular score. I guess FIC did not sound good. – BTW – Bill Fair and Earl Isaac were the founders. Now you know more than most Realtors 🙂
You will want to obtain a copy of your credit report. You want to have it in your hot little hands. Some lenders will tell you that they cannot give you a copy of your credit report. I’d say then move along to a different lender and ask them up front before any information is exchanged, “will you give me a full copy of my credit report?”
There are several online systems, which are not as detailed as a Lender’s pull of your credit report, available for free that state they will give you a copy of your credit report. BE wary of anything that is FREE – sometimes you pay for it in other ways. Selling of your personal and private information for one.
Within the lending guidelines – there will be various grades corresponding to your credit score. Your credit score comes from three bureaus. Therefore, you will have three scores. You want these scores to be as high as possible so you are able to get the best interest rate when buying a Santa Clarita home with us.
If you have a 625 credit score, you may be only needing an increase of 25 points to get you into Class A credit, ask your lender. A change like 25 points may not be very hard. In fact, if you had other mortgage people run your credit, a rapid rescore done by the lender you finally choose, may increase your credit by at least that much. That is if those multiple credits pull lowered your credit score, sometimes this happens but is easily fixed.
If you have more detrimental things on your credit, they may take more time to fix but will be worth it if you are looking at an increase over the going interest rate and a penalty conveyed interest rate.
A Santa Clarita lender that is worth their salt will walk you through numerous scenarios so you can get your best possible interest rate. Just ask them and if they won’t take the time, call me and I will introduce you to someone who will.
Buying down your rate
During the time you are buying your home, getting items finalized, signing about a thousand different pieces of paper, you may want to have a discussion with your chosen Santa Clarita real estate lender.
Ask them about buying down your rate. It may be cheaper than you think and save you thousands of dollars on your mortgage in a short time. Not to mention how much it can save you if you take the 30 years it takes to pay off a typical home mortgage.
If you are given a 4.75% interest rate. It may cost $3000 to buy it down to 4.5% – Then all you have to do is the math. Or have your lender do the math to see how much that change will save you over the next 5 years, 10 or more, to establish whether it’s worth it or not.
Most people move after 5 years. If you think you will, then buying down the interest rate may not be worth it. If you have bought the home you are going to live in for the rest of your life and won’t be moving, then maybe it is.
Extra payments to Principal
A little adds up quickly. Most of your payment is going to be interest when you first obtain your mortgage. That will remain the same for the first several years of your mortgage. In fact, when you sign loan documents, you will see how much money you are paying over, in interest, then what you agreed to pay for the home if you would have had cash.
If you are able to save a little each month, send in that as an extra payment on your mortgage. Make sure you designate that on the check to be applied to principal. Then call the mortgage holder and make them look at your account and tell you where that “extra” payment was applied. If they say principle and interest, let them know that you wanted it to do only to principle and that was an “extra” payment for the month of ________.
Get a name and make sure you compare your records with your statement to ensure that it did come off of principal and was not included in the interest and principal payments.
Don’t forget this last step, if they messed up, then they will fix it. Remember to write “to principal” in the memo section of your check and to call to verify proper application of funds.
These three tips will really pay off during a 30-year mortgage, and most will pay off big before you get to 30 years. I’m Connor MacIvor with the Santa Clarita real estate company at REMAX. We are glad to present to you our local real estate and Santa Clarita Blog.
When you are ready I’ll be there for you and yours. I will take the time to ensure you are well advised, educated and that you have your own personal real estate game plan. I want your business, but I always aim for my client’s trust first. Take care and let me know when you are ready for my consultation and representation.