5 Tips to Save Money on Your New Mortgage

Buying a home and saving money don’t usually go hand in hand. At least, that’s the word on the street. Outside of the down payment, home buyers also have to factor closing costs, moving costs, and potential repair/upgrade costs into their budgets. But if you know where to look, home buying isn’t all “glass half empty” (or wallet, in this case). Here are 5 expert tips to save you money on your next mortgage.


#1. Put more money towards your down payment.

Putting more money towards a down payment sounds easier said than done. However, if your timeline allows it, this is a great opportunity to delay home buying to give you more time to save. Additionally, interest rates have seen historic lows recently. A larger down payment can give you access to even lower rates, while also helping you avoid mortgage insurance. It’s a win-win! While you’re saving, remember that your home buying budget needs to cover more than just the down payment.


#2. Actively work to improve your credit score.

Your credit score is one of the most important parts of your mortgage application. Depending on the type of mortgage you’re going for, the minimum credit score requirement will vary. But improving your score is always a good move, and there are a few ways to do it. One way is to reduce your debt utilization ratio. The lower the amount of credit you’re using out of the total available to you (ideally, less than 30%), the better. Another way is to responsibly manage your debt. Making your payments on time, paying off any outstanding debt, and checking your credit report at least once a year to correct any errors will go a long way with this.


#3. Reduce your debt-to-income ratio, a.k.a. your debt servicing ratio.

The debt-to-income ratio (DTI) is essentially how much of your income is already claimed by debt repayment. You can calculate it by dividing your gross monthly income by the amount that goes towards your debt each month. A DTI under 45% will fly with most lenders. You can improve your DTI by lowering your debt, increasing your income, or both. If you come into some extra cash, say with a tax refund, work bonus, or by selling things you don’t need, put it towards reducing your debt. And although switching employment isn’t usually recommended (as it can indicate a lack of stability to lenders), getting a higher-paying job or even adding a side hustle is a good thing. It will boost your income and, ultimately, your DTI!


#4. Do your mortgage research.


From A, B, C…

A is for “Adjustable Rate Mortgage.” But wait, there’s more. Do you know the difference between a fixed rate and variable rate mortgage? What about what “preapproved” and “prequalified” each mean? Or do they mean the same thing?! Brush up on your mortgage terminology so you don’t get lost in the jargon.

…to 1, 2, 3.

Whatever feelings you may have had about math in high school, it’s time to turn the page (and your attention) to mortgage math. Knowing how much house you can afford will not only save you money on your mortgage, it will also save you some much-needed time. Estimate your monthly payment and see how much house you can afford using the Raboin Realty Mortgage Calculator.


#5. Consider down payment assistance programs.

While you’re doing your research, here’s one more piece of homework. You may not know this, but there are over 2,500 down payment assistance programs in the United States. Unfortunately, there are also countless myths about down payment assistance programs. Many of these programs extend to mortgages, giving buyers some relief. And if this is your first time buying a home, you have even more options with first-time home buyer financial assistance programs.


Bonus Tip: Use a local expert to save money on your mortgage.

Mortgage experts like Valley Mortgage or First Class Mortgage, to name only a couple, can be an invaluable resource. What’s so special about these guys? In addition to their years of experience with mortgages, they bring a uniquely local perspective. So you can feel at ease knowing that they know the ins and outs of our one-of-a-kind Fargo-Moorhead real estate market.

As your real estate partner, we’re here to help you every step of the way. That includes working together to figure out how to save you money on your mortgage and other home buying costs.

Contact Raboin Realty today.