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70 Ways for Home Buyers to Save Money When Buying a Home: Tip #24

A very important tip to save money whenand charge a fee that reflects their loss
buying a house is to never buy down thewith  the  buy-down.
interest  rate.
Buyers can pay any mortgage rate they want,
A buy-down is when you as the borrower, payas long as they pay the fee involved. This
extra money to the lender for a cheapermeans Sam could qualify for a 9% mortgage
interest rate on your loan than you wouldrate but could get a loan of 4% or 5% as long
normally qualify for. For this privilege theas there is a buy down fee paid. A buy down
lender will charge you the appropriate buyloans price depends on how long you want the
down fee. It sounds good but you can be sureinterest rate lowered, by how much, and how
that the lender will not let you do it unlessoften the interest rate will go up or down.
it was in their best interest. This onlyDon't  fall  for  this!
makes sense if you are 100% sure you will be
in the house for over 10-15 years. OtherwiseChances are that by the time you move, you
the math just does not compute. If you wantwill not have paid that much extra in
to pay less in interest, pay off the mortgageinterest to justify paying this fee. In
sooner  or  make extra payments to principal.addition, more money could be saved by taking
out an adjustable rate mortgage rather than
Banks and mortgage companies are always onpaying a buy down fee. Many people consider
the look out for providing the most generousbuying down the rate a good deal because they
looking terms as possible to their buyersplan on staying in the house for a long time
while  keeping  their  eyes  on  the  prize.and  because  they  can  afford  it.
The first rule of thumb with banks is thatYou have to allocate your money. Will the
they are in the business of making money.saved money be used for a new purchase, like
Despite low interest and mortgage rates,home improvements on your new property?
banks try to offer additional policiesChances are, you won't be thinking of this at
disguised as a deal (which it is) with thethe time. Buying down the rate is simply too
requirement that a fee be paid. One suchexpensive considering your home might not be
example  is  a  buy-down  fee.occupied  3-4  years  down  the  road.
The buy-down fee is requested when lendersThe buy-down fee should not be a savior for
offer a lower interest rate on your loan. Itanyone. Although rising interest rates is a
is typically paid during the closing period,cause for concern, waiting for them to drop
although it can also be paid as soon as youisn't the solution. Remember, you can always
apply or when you lock your rate with aapply for mortgage refinance if interest
commitment agreement. This is also known asrates go down. Also, sellers may offer to
collecting points. Because of the newfoundtake care of the buy down fee for you in
discount, lenders are forced to scramble inextenuating circumstances. This especially
discounting a percentage of the loan amountoccurs when the market slows down.



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