Buying a house is a big investment—in time, money, and emotional energy. In addition to finding the right home in the right location, you need to secure the right financing. Need some help with that? New Home Inc. has 5 ways to save money on a mortgage with these simple tips.

1. Talk to multiple lenders.

You have a lot of options in home mortgages. Between lenders and programs, take your time and shop around. A recentLendingTree studyestimates that buyers in major metropolitan areas could save an average of $84,301 over the term of the loan—$2,810 a year and $234 a month—by exploring the offerings of several lenders. 

Why should you shop around for a mortgage?Lendershave their specific criteria for how they allocate mortgages. Some might have more flexibility with the credit score. Others work hard to uncover programs that accommodate a wider variety of loan customers—like the credit-challenged, people with a small down payment,  or first-time homebuyers.

A professional lender will spend time learning about your personal and financial situation. They’ll talk about plans that could impact your mortgage choices, like job growth and security, paying off debts, starting a family, or planning for retirement. There is no such thing as a one-size-fits-all home mortgage and a smart, hard-working lender will prove their worth and help you save money on a mortgage.

2. Learn about the float-down option.

Are you worried about interest rates changing after you lock in your rate? Are you hesitant about locking in a rate so you keep waiting? A float-down might be the solution. With this option, if the interest rate decreases after you’ve locked it in—while you’re shopping or during underwriting for your home loan—you can still get that lower rate.

According toRealtor.com, a float-down is like “your get-out-of-jail-free card when shopping for a great home loan.”

Depending on the lender, you might pay an upfront fee for exercising a float-down, which is a one-time option. And the lender might require that the rate drops a certain rate, like 0.5%, before you can use the float-down. 

Find out how much you could save with incremental rate drops, starting at 0.25%, to make sure the savings is worth the cost. And be clear on the requirements and limits before you decide.

3. Compare adjustable rate mortgages and fixed rate loans.

How long are you planning to stay in your new home? A fixed rate mortgage assures that your monthly payment stays the same for the life of your home loan (usually 15 or 30 years). On average,Americans stay in their homes for about eight years, twice as long as the 2006 statistic of just four years.

Afixed rate mortgageis the most common loan choice, because it provides certainty. Your payment will never go up, while, presumably, your income does. If the interest rate drops below the rate you’re paying, you can refinance.

If you’re planning your next home to be a short stay, you might benefit from choosing an adjustable rate mortgage (ARM), which typically offers a lower rate in the early term of the loan. Although adjustable, the interest rate isn’t going to jump up and down with market fluctuations throughout the year. Ordinarily, the interest rate will be adjusted annually—but be sure to clarify that detail with your lender.

With anARM,you might save a point or more in your interest over a fixed-rate mortgage. Ask the lender how much the rate can increase year over year. Then decide if a short-term loan is a good way to save money on a mortgage. 

If you do commit to an ARM and later decide you want to stay in your home longer than you had planned, you can convert to a fixed-rate mortgage.

4. Make an extra payment each year.

There are 12 months in the year but 52 weeks. If you plan to make a payment every four weeks instead of monthly, you’ll make 13 payments a year. You can make it easy by paying half your monthly amount every other week (bi-weekly). Apply that payment to the principal and you’ll lower your debt and save on interest. Use thismortgage payments calculatorto see how an extra payment can benefit you. 

5. Buy down the interest rate.

Arate buydowncan be just what you need to make buying a home more affordable. This financing tool allows either the buyer or the seller to prepay points to lower the interest on a home loan. The upfront cost can deliver significant savings. 

For every 1% of the home loan you pay in discount points, you lower the rate by 0.25%. That might not seem like a big deal, but it can be. Let’s take a look at a rate buydown scenario.

You’re planning to buy a home for $450,000 with 5% down ($22,500), which means your loan amount is $427,500.

At a 7% interest rate, your monthly principal and interest (P&I) payment is $3,002.

Now, if you buy discount points and lower your interest rate to 5.8%, your monthly P&I is $2,666—a savings of $336 per month and $4,032 per year. That’s a total savings of $120,960 over the course of a 30-year, fixed rate loan.

Not all sellers or builders offer the rate buydown option, so be sure to discuss it when you’re searching for a home. 

Move up and buy down

AtNew Home Inc., we understand that buyers are feeling challenged by interest rates. Right now, we’re offering a $20,000 rate buydown for all contracts signed through the end of August 2023. This rate buydown offer is available on all of our new construction homes, including townhomes, that are purchased this month.

You have a choice of home builders in Raleigh, NC, and we want you tochoose the best builder for your new home—one who is willing to help you make your dream of homeownership come true. And we know affordability is a major factor. 

Value is also important, and New Home Inc. builds plenty ofincluded featuresinto each home, items that many home builders in Raleigh NC consider to be an “upgrade”. We offeran enclosed, climate-controlledsmart door delivery zoneto protect your packages, an electric vehicle charging,smart home automation package,whole home air filtration system, and so much more.