Buying a house, especially buying your first house, can be one of the most exciting and daunting prospects as well as one the largest purchases you will likely make in your life and the largest arrangement to borrow money you will likely ever experience, when you come to get a mortgage. One of the main worries during the house buying process is money, buying a house, whether it be your first one or not, is very expensive. However, this does not mean you can’t follow some simple steps to save money.
When you are going to buy a house, you should make sure you understand all the expenses that come with this process to make it easier to know where you can save money. Particularly if you’re a first-time buyer, you’ll want to find lots of ways to cut the costs when buying your first home. Read our quick guide which shows you some tips and tricks on how to save money when buying a house.
Ways to Save Money When Buying a House
Just like lots of other things in life, buying a house isn’t free. There will be many expensive costs during the process that you just can’t avoid. Nevertheless, there are some steps which have alternative routes which could help save you lots of money.
Below, here are some steps you can follow both before and during the house buying process which could help reduce the overall cost of the procedure:
Improve Your Credit Score
Your credit score is one of the main things that can impact the lender fees and interest rates that you are required to pay. When applying for a mortgage, a lender will check your credit score and as a result of having a bad credit score you will seriously affect your overall chances of getting a house.
The higher your credit score, the more likely you also are to qualify for a lower interest rate. Ways to improve your credit score include closing any old lines of credit you no longer use, setting up automatic payments each month as well as avoiding taking out new accounts during the process.
Make a Down Payment
By making a down payment of at least 20% you can save money in the long term. Although this may not be an easy feat, this can have the potential to lower your overall monthly mortgage payment. A sizeable down payment can also help you avoid the need for private mortgage insurance (PMI). Some people may even choose to get a loan in order to increase their down payment as the savings on the mortgage and property can be quite big. You may for example look to borrow $5000 to increase your down payment on a future home.
Buy During the Winter Months
Many consumers purchase homes in the spring and summer months and, as a result, this is generally the most expensive time to buy a home. There are many reasons for this, but buying a house is generally more appealing in the summer. Not only will the property look better during these months (so great for sellers in terms of marketing the property), but it will also mean it is easier to move home as the weather is also better.
However, moving in winter can be just as doable. What’s more, the value of the property you buy will likely be lower if it were to be sold in the summer. So, purchasing a house in winter can help save you some money.
Negotiate Any Closing Costs You Can
Closing costs can be pricey if you pay for them all by yourself. Common closing costs include attorney fees, interest, title fees, lender fees and appraisals. Luckily, many closing costs are negotiable so do not be afraid to negotiate with the seller to pay a portion (or even all) of the closing costs.
First-time buyers should also keep in mind that asking questions and looking for negotiations is never bad – at the end of the day, you’re the one who will be paying.
Consider a Short-Term Mortgage
Always choose the best mortgage to suit your needs. While longer-term mortgages, like 20-30 years, can result in lower monthly payments, they also mean high interest overall. You may want to opt for a shorter mortgage to help you avoid more interest long-term.
You should also make sure to always use an experienced real estate agent when looking to purchase a house. Not only is this a far safer option, but it can also help you save money in the process. By using a dependable and experienced real estate agent they will be more likely to know the area and market well and so can save you time and money as a result.
This is particularly important for first-time buyers who should always try and find referrals for good agents from trusted sources, like friends, family and local residents, or through well-rated online real estate agent sites.
Other Money Saving Tips For Buying a House
So, hopefully by now you’ll have a broader idea of where you can save lots of money during the house buying process. Nevertheless, we’ve got more for you. Let’s see some other steps you can take to help you be better prepared for buying a home.
When buying a house – preparation is everything. In this process, you can never be too prepared, and it is always important to understand what options are available to you as a buyer. First things first, always invest in a home inspection – although this will cost a few hundred dollars, it could save you thousands if there’s anything wrong with the home.
Set a Realistic Budget
Though this step seems somewhat obvious, lots of people forget to do this! Heading into the house buying process blind, and without a budget, will not help you save money at all. Not understanding all of the potential costs that may arise will also lead you into likely spending lots more money (that you might not be able to afford).
Therefore, be prepared and set yourself a realistic budget. This means deciding how much you can afford to spend on a house and sticking to this price range to stop you from straying too far over, while taking into account all of the potential add-ons.
Check Home Insurance
It is also worth checking if your dream home is possibly in a high-risk location. For instance, it might be located near a water source or at risk of flooding, or perhaps other natural disasters. By doing so, you may be required to purchase high-risk insurance which can be costly – and, is not something all sellers will disclose upfront!
Shop Around for Mortgage Lenders
For first-time buyers, shopping around for a mortgage lender is key. Although you may receive your first acceptance, and feel over the moon, that’s not to say you can’t find another mortgage lender that suits your financial needs. Shopping around for the right mortgage lender is important. Different lenders offer different interest rates and loan options, so it’s important to know what is available before settling on a lender.
Negotiate As Much As Possible
Finally, if you feel something isn’t right or you are nervous about the contract you need to sign when buying a house, make sure to negotiate with your seller. These are long-term contracts, so you must ensure that you are happy with the terms, remember, there is always room for negotiation to ensure that you are happy with the sale and payment plans tied into your house contract.
By asking all of the necessary questions, and negotiating where possible, you’ll be sure to save lots of money when buying your dream home.