Buying a home is by no means a cheap endeavor. In addition to the house itself, there are dozens of other related expenses that add up. And while there’s no way around some of these costs, there are certain areas where savvy home buyers can save a considerable amount of money.
Save Money With These Helpful Tips
Housing affordability is a hot topic in many American real estate markets at the moment. But just because you qualify for a mortgage, doesn’t mean you can actually afford to buy a particular house. In order for it to fit your budget, you need to be aware of the different areas where you can save.
Here are a few suggestions:
1. Shop Around for the Best Mortgage
Convenience should not be the biggest determining factor in selecting a mortgage. With the ease and availability of applying for home loans in today’s market, there’s no excuse for not shopping around for the best rate and terms. Depending on your situation, one loan could save you thousands compared to another (seemingly) similar loan.
2. Save Up Money for a 20 Percent Down Payment
The bank may only require you to put 3.5, 5, or 10 percent down on a home, but there’s something to be said for putting a hefty 20 percent down payment on the property. Not only will this lower your monthly payments, but it will also prevent you from having to pay private mortgage insurance (PMI).
PMI typically costs 1 percent of the entire loan amount on an annual basis. On a $300,000 home, this means you could pay as much as $3,000 per year (or $250 per month). Once you reach the 20 percent equity threshold, this payment goes away.
3. Hire the Best Real Estate Agent You Can Find
Most people think all real estate agents are the same – especially when you’re buying – but this simply isn’t true. More experienced agents understand the market and can save you thousands of dollars in purchase negotiations.
4. Scrutinize Closing Costs
Most people just assume that closing costs are set in stone – but this isn’t necessarily the case. Like just about anything else in the home buying process, they can often be negotiated.
“First off, there are a handful of services included in your closing costs that you can choose,” Houston-based Green Residential points out. “For example, the borrower generally has control over things like surveys, title searches, radon testing, and pest inspections. Secondly, you can compare lenders and see how their loan processing fees differ. With a little diligence, you may be able to save thousands.”
There are also some fees that you may be able to get rid of altogether. Ask for an itemized list of closing costs from your lender. If you see vague things like “funding fees,” ask for an explanation. These could be empty costs that you can push back on.
5. Shop Around for Insurance
Home insurance isn’t quite as price-competitive as auto insurance, but it’s still possible to save as much as $1,000 per year in premiums simply by shopping around. Always compare at least three different companies before zeroing in on one.
“While shopping for a cheaper insurer, consider buying your homeowners and auto coverage from the same company for as much as a 30 percent savings,” Consumer Reports explains. “And be aware that most insurers use credit-based insurance scores to set premiums and eligibility for coverage. In general, the better your credit score, the lower your premium.”
6. Pay for a Thorough Home Inspection
In an effort to save money, it’s tempting to skip a home inspection, but this will actually cost you more in the long run. A thorough home inspection form a licensed professional will identify problems hidden beneath the surface – problems that could cost thousands to repair in the future. When spotted prior to closing, you may be able to negotiate these into the purchase price.
Don’t Be a Sucker – Do Your Research
No matter your financial situation, there are always options for cutting costs and saving money. When it comes to purchasing a home, scrutinizing things like mortgage rates, down payments, real estate agents, closing costs, insurance, and home inspections could save you thousands. Don’t neglect the power of research and negotiation.