Five Things to do to Save Money
Getting a Home Loan
(Excerpts from the "2002 Consumers' Guide to Saving Money on Home Loans" prepared by the Equal Home Finance Bureau.)

# 1 Prepare for Your Home Loan Years in Advance (Yes, we said "years").

# 2 Don't trust the mortgage professionals implicitly: Do your homework.

# 3 Mortgage loan sources vary greatly. Find the ones right for you.

# 4 Use creative financing to lower your interest rate.

# 5 Prepare to fight against excessive closing costs.

# 1 Prepare for Your Home Loan Years in Advance (Yes, we said "years"). Of course, you should begin SAVING for a home years in advance, but there are other things you should be doing years ahead that can help you dramatically lower your home loan costs. "Actively managing your credit better" is at the top of the list. Also at the top is a need for you to "Gather and collect important documentation and paperwork early." When you begin shopping for a home loan, and shopping for the home itself, you will find yourself with little time to do anything else. Unfortunately, many people rush out to the real estate agent and the mortgage broker inadequately prepared. This lack of preparation can lead to higher interest rates, higher closing costs, and higher loan balances than you deserve, had you taken the time to prepare.

# 2 Don't trust the mortgage professionals implicitly: Do your own homework. Mortgage professionals are in their business to make money, and it's a misconception that the brokers make their money from the lender and not from you directly. For many mortgage brokers and banks, the higher the interest rate they can convince you to take, the more money will go into their pocket almost as soon as you move into your home. However, armed with better information and mortgage loan shopping strategies, you can avoid these pitfalls. You can locate and negotiate the home loan deal that's best for you.

# 3 Mortgage loan sources vary greatly. Find the ones right for you. Mortgage brokers, mortgage bankers, private lenders, banks, thrifts, savings and loan associations, credit unions... how can a consumer sort through them all without taking a course in real estate finance? You can creatively find the best home loan source that matches your particular needs. Each of these sources has its own benefits and pitfalls. Credit unions can have the lowest pressure sales environment, yet be limited in their range of loan availability. Meanwhile, some mortgage brokers can be overly aggressive, yet maintain a relationship with the right lender who can work with a troubled credit profile. Instead of burying your head in real estate textbooks, a process for creating long and short lists of potential home loan sources can increase your ability to find the best home loan source for you. At the same time, the right process will save you time.

# 4 Use creative financing to lower your interest rate. FHA, VA, Freddie Mac and other programs exist. However, there is an adage that "Two loans are better than one" for many borrowers. This adage can provide massive savings in loan costs for the right situations. Two loans can sometimes be better than one when the home loan approaches the total value of the home. This adage also holds true when the loan is very large, regardless of how much equity you have in the home. By creatively packaging two loans to serve your financing needs for one home, you can save yourself literally thousands of dollars annually in interest and other costs.

# 5 Prepare to fight against excessive closing costs. Closing costs can vary wildly from county to county, state to state, and from loan source to loan source. Closing costs are the fees you pay at the point in time when you "close" on your home loan and the home becomes yours. An unscrupulous mortgage professional can "sneak" hundreds and hundreds of dollars of closing costs into your loan if you aren't armed with the knowledge of how to combat this. One way is to have your loan's interest rate cover the cost of the closing fees. Another way is to be exceptionally prepared and vocal about what closing fees you will deem "fair" and what ones you will deem ridiculous.

Each of the above "to do" items are taken from the "2002 Consumers' Guide to Saving Money Getting a Home Loan." The Equal Home Finance Bureau prepares this Guide. For more information, click here...

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