If you can be flexible, open-minded, and patient when purchasing a home, you will save a boat-load of money. Plan your purchase to allow yourself time to save money and wait for various money-saving opportunities. Let’s explore the top ways to save money on your home purchase.
Save money on your home mortgage
There are a few ways to save hundreds of dollars monthly and tens of thousands over the life of the loan.
Lock in a great rate
A few factors that will dictate what interest rate you are able to secure. Having a high credit score, great credit history, and a low debt-to-income ratio are factors in your direct control. You will also benefit from being patient and locking in your interest rate when Federal Reserve rates are lowest. Lowering your interest rate by half a percentage point will save you big money throughout the life of your loan.
A 20% down payment
You can avoid paying Private Mortgage Insurance (PMI) by saving a 20% down payment. Coming in with a 20% down payment will also make you eligible for a loan product with the lowest rates. PMI typically costs between 0.5% to 1% of the entire loan amount annually.
Shop around
Not all lenders are created equally! Different lenders will have different interest rates they can offer. They also charge variable fees for processing a mortgage, loan origination fee, loan application fees, etc. Do your ‘due diligence’ and get quotes from 3 or 4 lenders to get the best deal. Doing this will save you a lot of money.
Flexibility on location will save you money
Homebuyers often have a specific area or neighborhood they want to buy their home in. Flexibility with where you decide to buy your home can save you money.
Tax rates and special assessments
Property tax rates and assessments for a home can vary from neighborhood to neighborhood. You may want to live in a specific community where homes have high property tax bills. Considering similar homes in adjacent areas with lower taxes can pay off big time.
HOA fees
Homes in some neighborhoods are subject to fees assessed by a Home Owner’s Association (HOA). These HOA fees are usually paid by the homeowner monthly. HOA fees can range from under one hundred dollars a month to several hundred dollars per month. Save that monthly HOA payment by finding a similar home in an adjacent neighborhood that is not in a Home Owner’s Association.
Buy your home when the market is slow
Just like any other commodity, home values are subject to supply and demand. In most real estate markets throughout the United States, Spring and Summer months are when prices trend upward. By waiting until late fall or early winter, you may score a purchase price that is 2-5% lower than you would have paid in the Spring.
Buy a home that needs work
You have probably heard the advice “buy the worst (or smallest) home in the neighborhood”. This is actually great advice. Often times, location is the most important thing to a buyer. Buying a fixer-upper in your preferred neighborhood can really pay off in the long run. You will pay less for the home since it is not in move-in condition, but you will still reap the benefits of owning a home in a well-appreciating area.
Hire an experienced local Realtor®
Working with a great real estate agent will bring value that you cannot put a price on and their service is FREE to you! That’s right, having a Realtor® represent you in the purchase of your home won’t cost you a penny, but it will potentially save you a mint. Let’s look at a few ways that your buyer’s agent can save you money on the purchase of your next home.
Showing you all of the options
A good real estate agent will show you homes that you probably wouldn’t have thought to consider. As mentioned previously, you can save a lot of money on your next home if you are willing to be open-minded. Your Realtor® will walk you through all of your options and help you find a home that meets your criteria and your fits in your budget.
Negotiating a great deal for you
If your agent is a tough negotiator, you are going to come away with the best deal possible. They will negotiate directly with the seller’s agent on things like purchase price, home repairs, buyer credits, home warranties, transaction time-frames, and so much more. If you are working directly with the agent that is representing the seller, they will be negotiating on behalf of the seller and not in your best interest primarily. If you have your own agent, you can be assured they will negotiate hard for you and you only.
Working with the right agent is so important, therefore, you will want to ask your friends and family to refer one to you. Before selecting an agent, be sure to research them to ensure that they specialize in selling homes in your local area and that they have a good track record.