7 Ways to Save Money When Buying Your Next Home
When you’re buying a home, you have options. You don’t have to automatically accept the home for the price the seller is asking. Additionally, there are a few things you can do before and during the process to help you save money when buying your next home.
1. Save Money for the Down Payment
A healthy down payment will prevent you from having to buy private mortgage insurance in most cases which will save you money. You’ll also be paying down the principal of the loan which means fewer interest charges over time. This has another benefit of making your monthly payments significantly smaller.
You should discuss with your lender and realtor what a good down payment is but the general rule is 20% of the home’s price. This is a large sum of money but you can get there over time by saving a little each week. While it’s true that different programs can require a different down payment percentage, keep in mind the more money you can pay upfront, the more money you will save over the life of your loan.
2. Improve Your Credit
Your credit score will impact your interest rate so one of the best things you can do when buying a home is to improve your credit. Look for any errors and dispute them on your report so they are removed. Find out if you have any collection accounts or past due balances and do your best to take care of them.
When you’re getting ready to start looking at homes, limit the number of inquiries on your credit. Every time there is an inquiry your score takes a hit. If you don’t have much of anything on your credit, you may want to consider a credit card to boost your score. Just be sure to use it responsibly and pay it off each month.
3. Don’t Be Afraid to Shop Around
Most people think mortgage rates are set in stone by the market and can’t be changed. This isn’t true. Rates can vary slightly from lender to lender. Get a list of lenders in your area and schedule to talk with at least five. Take the time to meet with more if you can.
Remember even a 0.5% increase of the interest rate can add up to be thousands of dollars in the life of your loan. Talking to more than one lender will help you get the best rate. You can use an online calculator or talk with your lender to find out exactly what the cost of your loan will be and what you’ll be paying monthly based on different interest rates.
4. Ask About Your Options
There are different mortgage programs available and one option may save you money over another option. Also, check into the length of the mortgage. If you can afford the monthly payment with a shorter term, try to make that happen. Again, you can ask your lender directly or use an online calculator to find out how different lengths impact your monthly payment and total cost of the loan.
When you’re asking about the different programs and terms, be sure you understand everything. Don’t worry about asking questions that are “stupid” because there are no stupid questions! The more you ask, the more you know. An informed buyer is any good agent’s priority.
5. Bring in the Family
Sometimes too many opinions can be a terrible thing. When it comes to buying a house, having multiple opinions can save you money. Bring in your family and friends and have them walk through the home.
They might spot problems you didn’t because they will be more objective. Identifying problems before you put in an offer may give you negotiating power to get the price lower. You’ll also save money in the long run or be able to budget for the problem at least. In the worst case scenario, you may be saved from a possible disastrous purchase.
6. You Have Options for Homeowner’s Insurance, Too
Just like with car insurance, the cost of homeowner’s insurance can vary from provider to provider. Start with your current insurance provider and find out how much adding homeowner’s insurance to your current products will cost.
In some cases, it will make sense to have multiple companies because you’ll save money. In other cases, you may want to switch all your insurance products to a new company because of the cost difference in your new homeowner’s policy. Be sure to know how much coverage you want and ask about your different options. A good insurance agent will help you choose what makes the most sense for your situation and not just the most expensive policy available.
Don’t underestimate the power of negotiation. From the very first offer you make on the home, you should be negotiating. The only exception to this is if you find a home you feel like you must buy and there are other offers on the table. In this case, you want to come in strong with an aggressive offer to avoid potentially losing your home to a higher bidder. Still, you can negotiate on other factors such as having the seller pay closing costs or cost of repairs.
Bonus: Make Extra Payments When You’re Able
Bonus tip! Now that you know how you can save money when you’re working on purchasing your home, we wanted to give you a tip for continuing to save money after your purchase. When you’re able to, pay extra money towards your mortgage.
Talk with your lender and find out how best to make this payment and any details you need to know about paying extra. Even if you are only able to pay a little extra, it might make a difference in the long run by reducing your principal and allowing you to pay less interest.
Now that you know some of the best tips for saving money when buying a home, we hope you’ll put them to good use! Remember, (almost) everything is negotiable and it never hurts to ask!