JACKSONVILLE, Fla. \u2013 First-time homebuyers can save thousands over the life of a loan by \u201cbuying down\u201d their interest rate before closing, and consumers who want their cash to work harder are increasingly turning to high-yield savings accounts, local financial advisers said.<\/p>\n
Justin Drost, who recently bought his first home in Arlington, said he benefited from a first-time homebuyer program that included down-payment assistance and help with closing costs. He warned other buyers to watch credit and large purchases during the year they plan to buy.<\/p>\n
\u201cYou don\u2019t want to be applying for big lines of credit,\u201d Drost said. \u201cI\u2019d say about two strong years of working hard and saving\u201d helped him qualify.<\/p>\n
Drost said one thing he wished he had known sooner: extra cash can be used to buy down the mortgage rate through the lender \u2014 a move that might have prompted him to save more before closing.<\/p>\n
How buying points works Ashleigh Robinson, digital marketing manager for First Florida Credit Union, said paying for mortgage points \u2014 essentially prepaid interest \u2014 can be worthwhile if you plan to keep the loan long term.<\/p>\n
\u201cYou just need to make sure that you are looking ahead of closing \u2026 so that you can get the lowest possible rate,\u201d Robinson said. \u201cHaving the lowest rate possible is going to save you potentially thousands of dollars over the life of the loan.\u201d<\/p>\n
Robinson urged borrowers to weigh small rate reductions \u2014 even a quarter-point or a half-point \u2014 because they add up over a typical 30-year mortgage.<\/p>\n
Common guidelines for first-time buyers<\/p>\n
Aim for a credit score of at least 620.<\/p>\n
Avoid large purchases, such as a car, in the year you apply.<\/p>\n
Don\u2019t open major new lines of credit during the buying process.<\/p>\n
Maintain a steady work history.<\/p>\n
Why high-yield savings accounts are popular Robinson also said she\u2019s getting many calls about high-yield savings accounts, which offer interest rates well above the typical 0.05% offered by standard accounts.<\/p>\n
\u201cThese high-yield accounts are vehicles for the average consumer to actually get a meaningful interest rate on their money,\u201d she said. \u201cIt\u2019s to grow while still maintaining a level of accessibility for when they need it.\u201d<\/p>\n
She recommended setting up automatic transfers \u2014 even modest amounts such as $50 per paycheck \u2014 so balances grow through compound interest. \u201cYou\u2019re going to earn interest on your interest,\u201d Robinson said. \u201cThat is going to help that account grow exponentially until it is a meaningful amount of money to help you reach your goals.\u201d<\/p>\n
Steps to get started Robinson advised consumers to track spending, cancel unneeded subscriptions and move whatever they can into a designated savings account. Start small if you must; even $10 or $20 a paycheck can build over time and be increased later.<\/p>\n
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