3 Ways You Can Save on Your Mortgage

Qualifying for a mortgage these days can feel like going into battle. What was once considered a high credit score is now considered low, which means higher interest rates and not so favorable terms and conditions. There are ways you can save on your mortgage and three of these secrets are unveiled here.


1. Ramp up your credit worthiness
Your credit history and credit score are the two main things that lenders look at these days. With all of the turmoil in the mortgage industry, lenders are being very picky about who they will and will not loan money to. This means you have to keep your credit history clean and your credit score high. The higher your credit score, the lower your interest rate, the lower your down payment, and the more affordable your payments. You can learn more about how to make yourself credit worthy in Credit Scrutiny: What You Can Do to Make Yourself Look Worthy to Creditors.

2. Avoid origination fees and discount points
Origination fees and discount points are fees charged by the lender to buy down your interest rate. It may sound like a sweet deal since you get a lower interest rate, but each point you pay costs you 1 percent of your loan amount. If you do the math, it's not usually worth the thousands of dollars it costs for an interest rate that's one eighth or a quarter of a point lower. Situations do vary, but it's usually wise to stay clear of paying points as part of your closing costs.

3. Shop around
Getting a mortgage is a major financial decision--one you shouldn't take lightly. Comparison shopping is imperative to make sure you're getting the best deal possible. Compare at least three mortgage lenders before choosing the one that is right for you. And be sure to compare apples to apples by comparing closing costs and interest rates for each option. For a true comparison, compare the annual percentage rates (APR) instead. The APR is the annualized cost of credit that includes the interest rate and closing costs. The lender with the lowest APR is costing you less than the other lenders--even if the interest rate is higher.

Even in this tough lending market, you can still save on your mortgage. Make yourself credit worthy, avoid costs you don't need to pay and shop around. Implement these three tactics in your next mortgage and you'll save time and money.