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Francis Vayalumkal
Finance | Financial advice

By Francis Vayalumkal

Buying a home is one of the most expensive, long-ranging financial commitment most of us ever make. The more homework you do before heading out with a real estate agent or making an offer on a home, the more likely you are to stretch your mortgage budget.

Here are few ways to get the most for your money before you step out the door to shop.

Pre-approval first

Get pre-approved for your mortgage loan rather than just pre-qualified. Hopefully, you will have already made sure your credit is in good shape. If not, start several months in advance.

With pre-approval, the lender pulls a credit report, verifies a borrower's income and takes other preliminary underwriting steps to come up with a maximum allowable loan amount, which usually doesn't change. The lender also commits, in writing, to make the loan if a purchase occurs within a set amount of time. In a pre-qualification, the customer provides the information, but the lender doesn't check it for complete approval and there's no assurance that the loan will be approved.

How about those ARMs?

Short on cash? Consider an adjustable-rate mortgage (ARM). ARMs feature lower monthly payments at first, something that might help marginal buyers get into a home.

Based on's weekly national survey of lenders, the interest rates offered for ARMs tend to be about 1.5 to 2 percent lower than the average 30-year fixed rate. Someone borrowing $150,000 on a one-year ARM at 5.47 percent would have monthly payments in the first year of $849. The same-sized loan with a 30-year fixed-rate mortgage at 7.01 percent would cost $999 a month.

If the one-month, six-month or one-year adjustments are too volatile, consider a longer-term ARM, such as a 5/1 or 7/1 that features an initial fixed period of five or seven years.

Consider a buy down

If you've got the cash now and want to lower your payments, you can "buy down" your mortgage rate.

In exchange for more money upfront, lenders will lower the interest rate they charge, cutting the borrower's payments.

Look for builder incentives

Those looking to buy a new home instead of a previously owned one may find that the builder will provide the incentives. Builders will sometimes offer a few thousand dollars to consumers to put toward mortgages. Someone can use the money to buy down the loan rate for a couple of years. That would help people who don't have much money now but expect to earn more later.

Watch out for those closing costs Of course, the mortgage rate isn't the only factor that determines how much financing will set you back. Closing costs add a significant chunk of change to the final bill, so borrowers should try to minimize them, too.

You shouldn’t always have to pay discount points or origination fees. Usually, these are major expenses to the borrower and you should always find out from your preferred lender or call around to avoid paying points and origination fees.

Consumers have less control over the fees for other closing events because lenders and brokers negotiate them with various third-party providers. Somebody can't call up the lender's title insurance company, for example, and demand that it charge mortgage providers less for its services. But shoppers can take the Good Faith Estimate document, or GFE, they receive during the loan application process and compare it with those from a couple of other companies. If a credit report costs $110 at one lender and $20 at another, but the second lender's deal is better overall, point out the discrepancy and ask the preferred company to lower its charge.

A little extra care can save you lots of money at closing and through the life of the loan. Do your homework before you buy your home.

Francis Vayalumkal is a loan officer at Market Street Mortgage and can be reached at (813) 971-7555 or via e-mail at

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