Studying list prices or putting in a lower bid on a house will certainly save you money, but Americans could save even more money by shopping around for a better mortgage rate.
Half of home buyers only look at one lender before they apply for a mortgage, personal-finance website NerdWallet found. The report was based on data from the National Survey of Mortgage Originations and the American Housing Survey, as well as multiple surveys it conducted that each had more than 2,000 respondents in December 2017 and January 2019.
If those home owners had compared mortgages at five lenders before they applied, NerdWallet calculated that they could each save $430 in interest in the first year alone, assuming they took out a 30-year fixed-rate mortgage on a $260,000 home. When that figure is added up across all sales, Americans would save $776 million in a year.
And those savings could go a long way in making America’s first-time home buyers feel more stable after taking the leap into homeownership. One in four American home owners said they didn’t feel financially secure after purchasing their current home — and more than one-third of first-time buyers felt this way.
Also see: This is the best place to buy a home in the U.S.
Beyond being squeezed on their mortgages, home buyers also face steep competition to purchase their dream home. More than half (60%) of people who bought a home in the last five years had to make more than one offer before closing, and 45% said they had to offer above list price to place the winning bid.
Recently, however, the housing market has begun to shift in buyers’ favor, and mortgage rates have fallen significantly from recent highs since the start of 2019. The average rate on a 30-year mortgage dropped to a one-year low of 4.35% last week. In 2018, the 30-year fixed-rate mortgage averaged 4.54%. As a result, timing is critical when considering the financial impact of a home purchase, said Holden Lewis, NerdWallet’s home expert.
“Home buyers have been on a dizzying, twisty journey,” Lewis said. “Because so much of the home-buying experience depends on timing and location, it’s not surprising to see a wide array of sentiments across recent and prospective buyers.”
Another factor making the home-buying process more stressful: Misconceptions. Nearly two-thirds (62%) of Americans believe that it is necessary to have a 20% down payment to purchase a home, the survey found. In reality, nearly one-third of current home owners put 5% or less down when they bought the home they now live in.
A bigger down payment isn’t necessarily a bad thing: It reduces the size of your mortgage, for starters, and can help you get a better rate. But at a time when Americans are finding it hard to save, forgoing a large down payment could get them into homeownership sooner.
Source : MTV
