How to Reduce Your Mortgage Closing Costs

We’re hoping to buy a house within the next year, so today’s post over a Wise Bread about mortgage closing costs was perfect timed!  There was some great information, including a few things I had never heard about.  Specifically, I’d never heard of “points/prepaid interest” in relation to mortgages–and according to this post, those are the single largest closing cost!  Check it out for yourself:

8 Ways to Reduce Mortgage Closing Costs

Advertisements

Proposed Changes to Mortgage Lending Practices

ImagePhoto Credit

An article was recently written about proposed changes to lending practices in the mortgage industry.  Some of the changes include:

  • Creditors would have to take into account borrower’s income and employment
  • Monthly payments would be calculated based on highest payment during the first five years of the loan
  • Teaser rates wouldn’t be able to mask the true cost of the mortgage
  • Lender would need to consider borrower’s ability to repay the principal and the interest of the loan
  • Borrowers’ total debt payments could not exceed 43% of their pretax income

I think it’s great that the Consumer Financial Protection Bureau is taking steps to rein in an out-of-control lending market, but are these steps severe enough?  Forty-three percent of your income is a pretty hefty amount.  I had always heard and read that the amount of money spent on housing costs should not exceed 30% of your pretax income, which seems much more reasonable to me. Forty-three percent is a little to close to 50%, and giving away 50% of your income every month sounds like a bad idea.

Any thoughts?