Borrowers have options to help save money on a mortgage. You may have heard about points when discussing mortgage loans. Many people are confused about the topic but buying points can actually lower your interest rate throughout the course of your loan. Buying points isn’t realistic for everyone and you should weigh your options before making a decision.

What Are Mortgage Points?

Buying points on a mortgage means you are paying upfront a percentage of the loan at the time of closing. For those who choose to buy points, the interest rate of the loan is reduced. With the lowered rate, the amount of the monthly mortgage payment is less for the borrower. The more points you buy, the lower rates and payments become.

Points are based on the amount of the loan you are seeking and not the sales price of the home you are buying. For each point you purchase, it equals 1% of the loan amount. For instance, if the home you are looking to buy costs $300,000, the amount of each point would be $3000.  For each point purchased, the interest rate will be reduced by a quarter of the percentage point in most scenarios. However, you should note that point amounts will be different amount lenders and be influenced by the bond market. Generally, consumers will pay for half of a point up to 4 or 5 points towards their mortgage.

Making a Decision

There must be a pro and con list devised to decide whether buying points makes sense for you. If you know you are going to be in your home for a long time, buying points makes sense because you will end up saving a lot of cash over the long haul. If you plan to sell or refinance in 2-3 years, buying points has no benefits for you.

Is It Affordable?

Your home purchase may be the biggest investment you make in your lifetime and new homebuyers will have a lot of other expenses to consider outside of mortgage points. From the initial down payment to the costs for moving, it may not be financial reasonable to put out more money towards point buying. You’ll need to tally how much your expenses for closing and moving will cost before making a decision to buy points upfront.

Many people opt to hire a professional moving company to help assist with the big furniture, the heavy lifting, and the transportation. However, consumers who are desperately in a hurry to get the job done are often the target of non-upstanding companies who promise one thing and deliver nothing.

Here are some ways to help prevent being the victim of a moving scam:

Go Beyond the Phone Book

There is probably a lot of listings in a local phone book for moving companies but the phone book won’t give you very much information about the reliability or the pricing for a moving company. Use the internet to get moving tips and read other consumer reviews if there are any available and contact the Better Business Bureau in your area to get information about any complaints against the company. This also goes for companies that offer storage units.

Request Estimates from Several Companies

While it may be a bit of a pain and time-consuming task, it would best to get an estimate of moving costs from at least three different companies. Compare the prices from each. If any appear to be similar, you may have to ask for some references to make the final decision. It is also important that you do not take the lowest price because of the low price. Make sure the estimate is complete and includes all of the services you will require during the move.

Get it In Writing

After choosing a company, do not do another thing without a contract that spells out all of the details of the move. Make certain the charges match the estimate and that no hidden costs have been slipped in while you were not looking. Especially keep your eyes open for fees regarding normal moving materials such as packing supplies, protective coverings, and the like. They should have all been included in the original price. A contract is also important because it provides proof of the move. Otherwise, a moving truck could drive away with your stuff ad you may have a hard time proving what happened.

Inquire About Damage

Sometimes the most professional movers can break some of your items. What matters most is the claims process that allows you to get back money for the damages. Before approving any contract, make sure you understand how their claims process works.

Don’t Pay Everything In Advance

Some moving companies will require a down payment in order to initiate the moving process. If a mover requests the entire amount, or at least a large portion of the cost, upfront before the move has been completed, it should throw a big red flag.

A home warranty is essentially a warranty that protects the homeowner in the event a major home system or appliance needs to be repaired or replaced. This may include heating, cooling, plumbing and electric systems as well as major appliances such as refrigerator, stove, washer or dryer. When a home warranty plan is purchased, there is a yearly premium that must be paid, usually between $200-$500 which covers the maintenance, repair and replacement of items covered in the contract. This can come in handy when buying a home and in some cases is even included with the seller or real estate agent covering the initial cost. Home warranties are not just for new home owners, in fact some families choose to have a home warranty plan in place to make things easier and save time when an item breaks or is in need of repair.

If you are unfamiliar with home warranty plans and wonder how they work, it is really very simple. After purchasing your plan you basically call the service provider whenever any item covered under the contract needs attention. This may be an air conditioner that no longer works or a hot water heater that goes on the brink, as long as these items are covered under the warranty. After receiving your call, the service provider will then contact the appropriate technician with whom they have an established relationship. The technician will contact you, the home owner and make arrangements to come to your home for the needed repairs. As long as the repair or action needed is covered under your warranty, the only cost for the home owner will be a service fee which is generally less than $100.

A word of caution for individuals considering a home warranty plan. Each company as well as individual contracts have certain requirements and exclusions, therefore it is important to read the fine print and fully understand exactly what is covered before agreeing to the contract. A common complaint from home owners is that despite having a home warranty plan, they find many repairs are not included, often making the contract less than valuable in the event of a costly repair or replacement. The right circumstances covered by the right plan may render a home warranty plan worth the money invested in the yearly premium but it is important to know which circumstances are covered before moving forward.

Provided you have an excellent credit rating and can get pre-approved financing, you’ll have room to employ negotiation tactics to ensure you get the best deal on the home you want to buy. Those with a poor financial background may not have as much wiggle room so it is best to improve your financing options and your credit score before looking into homeownership.

Here are the negotiation considerations to make during the buying process:

Closing Costs
Sellers often pay the closing costs, especially for a first-time buyer. Right now, sellers are looking to sell and they might be more open now to paying the closing cost for you. It certainly does not hurt to ask.

Closing Dates
There are all kinds of situations that can crop up during the home buying process. For instance, the current owner may need a time extension to move or you may need to take possession of the house fast. In either case, you can try to negotiate a deal that works to your benefit. Some sellers will agree to pay for a buyers housing expenses (rent extension, hotel costs) for delaying the process. Other sellers may be willing to let you move in and rent the place if you are not yet ready to sign on for the mortgage.

Maintenance and Repairs
Homes on the market will need to be inspected. The seller is typically responsible for major repairs that are necessary but as a buyer, you can negotiation an allowance for the cost of other more minor repairs to be done by the seller as well. Some points might b the replacement of old flooring or a new paint job. The only time this will not work is when the owner has chosen to sell the house ‘as in’.

Building Negotiations
If you are purchasing a ‘to-be-built’ home, don’t cancel out the opportunity to negotiate details with the builder. You may want to see if they would be willing to finish a basement, add a deck, or other finishes as part of the deal. Not all builders will go for the idea but if you have thoughts, it’s best to share them. You might not get the full deal but even a discount in cost can be a big savings.

The rule to be eligible for the homebuyer’s tax credit is to have a binding contract on a home in place by April 30th and the sale must be closed by June 30th in order to get the credit. Buying a home with the purpose of cashing in does seem like a good deal but there are other factors to consider when making this all-important financial decision.

Consider there was no tax credit for the moment. Would your decision to buy a home still make sense? If you are able to buy a home that you can really afford and the home is something you like, it may be the right time to buy. But if you are doing it just for the sake of saving a few thousand dollars, the consequences could cost you much more. You’ll not only struggle to afford housing payments for a house you now own, you may find that you settled for a house you are not entirely happy living in. You don’t want to regret buying something as costly as a house.

Consider the after costs. While you get the nice tax credit one year, what happens after that? Can you afford the upkeep of a home in addition to the taxes, insurance, and mortgage you’ll be paying? If you don’t think you can keep up with the responsibility, financial and physical, you might consider renting for a longer period of time.

In the grand scheme, the credit is small. If you bought a home that cost $150,000, the $8000 tax credit is only a small portion of that amount (5%). Consider a 5% discount on a new car or other big ticket item and the benefits may not sound so attractive. You have to look at the big picture before settling for a home just for a decent refund.

How prepared are you? A lender is well aware that time is counting down so if you rush in to getting credit for a mortgage, the lender may actually see that as a negative mark against you. Today’s lenders are looking for much more responsible borrowers who can prove good money management skills. If you are rushing to buy for money reasons, the lender may not be as willing to lend the credit. Additionally, since there is a deadline in sight, you are not guaranteed a smooth transaction when closing the deal. If you haven’t yet begun the process, you may not be in time to meet the closing deadline of June 30.

Consider all that is involved with a home purchase and forget about the tax credit in the equation. Make a financial decision that is in your best interest of your financial future and not just what you can get this year. A home is a big responsibility and purchasing a home for the wrong reasons can cause much more grief than its worth in the end.

Here are some of the more common expenses and what to expect when buying a home:

Credit Report Fees
Lenders will need to order a verified copy of your credit report and score before making a lending decision.

Homeowner’s Insurance
Insurance is always required when borrowing the money to purchase a home. You’ll likely need to purchase policy coverage before closing on the home.

Appraisal Fees
A perspective homeowner will need to pay for an appraisal to ensure the home is selling at fair market value and so taxes on the home can be calculated.

Document Fees
The lender or mortgage broker may charge you for document preparation time in order to prepare the loan.

Escrow Fees
An escrow account holds the money as the buyer and seller work out an agreement during the closing process. You may also need to have portion of your mortgage payment go into the escrow account to pay for insurance and property taxes.

PMI (Private Mortgage Insurance)
If you do not have a large enough down payment towards the home, you may be required to purchase Private Mortgage Insurance. In some cases, you’ll need to pay a year’s worth of insurance up front or you might be able to roll the payment into your monthly mortgage payment.

Property Tax
There may be instances where property taxes are owed to the seller who has already paid for taxes during the time period you were the owner.

Title Insurance
This is a type of insurance that will cover you in the event the person selling the home doesn’t actually own the home or any information provided for the title was false.

There are a number of other instances that may warrant a fee paid out by the new homeowners. You can discuss these fees with either your loan officer or the realtor you are working with on the sale. The more money you are able to save in preparation for your loan, the better off you will be at the time of closing and moving into your new house.

The program is divided into two main arms; the Home Affordable Refinance Program (HARP) targets home owners who are current on their payments but need help to decrease monthly installments, whereas the Home Affordable Modification Program (HAMP) is for home owners who have fallen behind on their payments and do not qualify for refinancing.

There are several stipulations attached to each program to help home owners determine which one better suits their needs. These stipulations are outlined below.

Eligibility for the Home Affordable Refinance Program (HARP)

You may be eligible for this program if;

1. You are up-to-date on your mortgage payments.
2. Your mortgage is held with either Fannie Mae or Freddie Mac.
3. The outstanding balance on your mortgage is not more than 125% of the value of your house.
4. You can prove you will be able to handle payments under the refinance. (To prove this you can get a letter of good faith from your current lender.)

It is important to note that signing up for refinancing does not guarantee that your monthly installment will decrease. The refinanced payment may be less if your current loan interest is substantially higher than the refinanced rate, but it may be slightly more or the same if your mortgage includes interest only payments but the advantage would be savings over the term of the loan.

Eligibility for the Home Affordable Modification Program (HAMP)

You may be eligible for HAMP if;

1. You are the owner of a 1-4 unit home with outstanding balances of less than
   1. 1 Unit: $729,750
   2. 2 Units: $934,200
   3. 3 Units: $1,129,250
   4. 4 Units: $1,403,400;
2. Your first lien mortgage was originated on or before January 1, 2009.
3. Your monthly mortgage is more than 31% of your gross monthly income.
4. You have proof of a financial hardship that hinders the payment of your current mortgage facility, such as job loss, health problem or other circumstance.
5. You are behind on your mortgage payments (although this is not a strict requirement as faithful payment of your mortgage does not necessarily disqualify you from this program).

Makinghomeaffordable.gov has a wealth of information on this program as well as more general information to help home owners understand how mortgages work.

Here are the top five tips for staying in the know about your first home:

Secure Financing
While it is exciting to start working with a realtor and visiting new homes, your first priority should be money. Have your budget on hand and decide how much you can afford to pay. Contact a loan officer and discuss your financial situation. Once you have been preapproved for an amount, you’ll be able to shop more realistically and save yourself a lot of time and hassle. Experts note that a good ratio of house payments in relationship to your income is one-fourth, meaning that no more than ¼ of your income should be dedicated to the mortgage, taxes, and insurance. You may be pre-approved for more than that but it is unreasonable to go outside of your budget.

Understand the Costs
Obviously your mortgage payment is a big consideration in the process but too many times new homeowners forget the rest of the expense of owning a home. There are down payments and closing costs to consider right away. Plus, you’ll need to factor in the utilities, home maintenance fee, and any potential repairs necessary. Be sure to understand how much insurance, taxes, homeowner association fees, and the like will be added on for your new home.

Check Out the Neighborhood
You may find the perfect house in a not so perfect place but because you think you are in love, you may neglect to consider the big picture. Real estate experts suggest sitting down and making a list of what you really want in a home and a neighborhood. There are many factors to consider such as proximity to the places you go most often, the commute to work, the distance and transportation to the local schools, and how the other neighbors relate. These are very important because committing to live in the new area means facing these issues daily.

Consider Your Lifestyle
While many people do buy a ‘starter’ home when just starting out, it is still a big commitment. If the house only has 2 bedrooms, you really need to consider how many kids you plan to have. That is just one factor in the equation. You’ll need to think about where you see yourself in a few years down the line. Some folks may find they are better off renting in the beginning so they can maintain flexibility for careers and such. But if you think you are ready to settle down, plan ahead for the future and don’t just live in the present.

Are You Ready?
A home is not only a huge financial responsibility it also takes a lot of work. Be sure you understand what it will take to keep things running smoothly. If you have a big yard, are your prepared to cut so much grass? It may sound like a simple question but if you are too quickly overwhelmed by the daily tasks of maintaining a home, you might want to wait. If you are ready to devote your time and money to the investment, call up a realtor.

Here are 6 tips you need to know if you want to sell fast:

Find Your PR Person
If you plan to use a realtor, pick one that is enthusiastic about your home and has a track record for being a great sales person. You don’t want someone who will let you languish in the MLS listings. Be sure your realtor knows your area well and has ideas to share about making a fast sale that benefits you.

Get a Home Inspection
A professional home inspection is good for two reasons. For the seller, the inspection can point out potential problems that can mess up a sale. Owners will then have time to tackle the problems before a buyer even knows something was wrong. For the buyer, a pre-sale inspection can build confidence that no major problems exist and that sellers have nothing to hide. A professional inspection runs about $400-$500.

Tackle the To-Do’s
Even the best of homes can generate a list of little things that need to be done around the house. Little repairs like squeaky doors and a new paint job need to be done immediately. If you are capable of the repairs yourself the costs should be minimal. Go over the house with a fine toothed comb. The longer we live in a place, the less obvious small repairs are to us.

Clean Down and Dirty
You need to prepare your home by cleaning like a fiend. From big items like wall-to-wall carpets getting a steam clean to the tub grout getting a toothbrush treatment, you need to clean every nook and cranny in the house. The windows should be shining on the inside and out and all smells should be eliminated. Replace carpets with too many spills or pet accidents.

Get Rid of You
Go through the house and start packing away your personal items. Family pictures, mementos, and knickknacks need to be the first to put into storage. While your house should remain homey, the idea is to get potential buyers to envision themselves living there so give them room to picture their stuff hanging on the walls or placed on the built-in bookcases. If you plan to repaint, use neutral colors and keep clutter in the house to a minimum.

Don’t Forget the Great Outdoors
You may spend a lot of time focusing on the inside of the home but don’t forget the outside. Clean up the garden, the front lawn and the backyard. Remove all of your personal stuff from the outside. Do some minor landscaping to make the house look great in publicity photos buyers are browsing online. Plant flowers, trim the bushes, and keep the grass cut and tended to. Make sure sidewalks and driveways have cracks repaired.

Common Factors

There are several factors which most homeowners or buyers are aware of when considering the value of a home. The following common factors affect home prices and value.

• Convenient location- You guessed it-one of the number one factors in determining home value is location. Homes that are in a desirable location have more value than similar properties located in a less desirable locale. Consider school districts, distance to shopping and other amenities as well as points of interest in the area.
• Community- The value of your home is directly affected by the properties on the same street and community. Well maintained homes in a nice location will bring higher property values. Inventory in your neighborhood will have an impact on your homes value. How many homes in the area are vacant? If there are many houses that are for sale or currently not occupied, this will affect your property values as well.
• Upgrades- Remodeled or renovated properties (when done properly) have higher property values than homes that need updating or lack the extra pizazz renovations can bring to the table.

Uncommon Factors

While the previous common factors are generally widely understood, there are also less common- even hidden factors which can affect the value of a property. There is term that is currently being used to describe people who hold mortgages that are higher than the current value of their home. Underwater borrowers as they are called, represent one-third of all mortgage holders and can affect your property value in a negative way. As the homeowners debt rises they could face foreclosure which will hurt not only their financial situation but also the property values of those in the surrounding area. Although there is nothing you can do about the financial position of your neighbors you can at least understand how it might affect your own financial situation.

Thousands of dollars can be lost if you buy the wrong home or sell at the wrong time. By understanding what conditions go into calculating home values, you can make informed decisions when buying or selling a property.