A home purchase is one of the most expensive purchases that you will make in your entire life, but you can also be smart about it. There are so many ways to save when buying a home and today, I want to share a few ways with you. Here are 6 ways that you can save when buying a home for your family:
6 Smart Ways to Save Money when Buying a Home
1. Secure A Great Interest Rate
Securing a great interest rate is not hard to do right now. Thanks to COVID (maybe the only good thing to come out of it), interest rates have plummeted and it’s definitely a great thing for home buyers and for home owners that are looking into refinancing their current home, as well. Honestly, it’s great for people buying cars, too. Securing a great interest rate doesn’t just fall into your lap, however. You have to make sure that you have great credit to start with. This means that you need to take a peek into your finances before buying a home. Do you have debt that you can reduce? If you said yes, make sure to try your best to tackle that before you look into financing for a home. Anything that you can do to increase your credit score will help you get a great interest rate, so do your research beforehand!
2. Buy Below Your Top Price
This might be obvious to some, but a great way to save when buying a home is to buy a home that is not at the top of your budget. When you secure financing, they will typically give you a price range that you can buy within (or maybe just the top price that you can spend). Pro tip: do not spend that top price! You have to think about it a bit: if you are spending 200,000 on a home, that is not the only thing that you will have to spend money on. The price of a home does not end at your mortgage. You will have utilities to pay, and then of course, you will have things to inevitably repair along the way. If you buy a home at the top of your budget, you might have a hard time being able to afford these repairs.
3. Avoid A PMI
One great tip when it comes to saving? Avoid a PMI at all costs. If you borrow more than 80% of the value of your home, then you normally have to pay for Private Mortgage Insurance (aka. PMI). The PMI typically costs between .5% and 1% of the loan amount, which adds up over the length of your loan. A 20% down payment will help you avoid that PMI, so if you are struggling to pay the 20% down payment, maybe consider shopping for lower-priced homes. Credit.com says, “some lenders still offer 80/10/10 programs. This structure allows you to borrow only 80% on the primary mortgage, so you don’t have to pay for PMI, and then borrow another 10% as a second mortgage loan — sometimes from the same lender. You generally need a credit score of 700 or higher to qualify.” Overall, the best way to avoid a PMI is to figure out a way to meet the 20% down payment, if you are able to.
4. Find A Great Real Estate Agent That Can Negotiate
The best way to save when buying a home? Find a great real estate agent that can negotiate for you! For example, if you want to buy a historic home in the Jacksonville area, Erin E. King is your go-to guy. “Erin, who previously worked in financial services and holds an MBA with an economics focus, brings a deep understanding of buying and selling historic homes. He enjoys sharing that knowledge with clients, from how to fit a 21st century lifestyle into a historic home and where to seek financing for renovation with a home purchase, to accurately pricing homes in Historic Districts such as Riverside historic real estate, Avondale, Ortega, Springfield, Murray Hill, and San Marco. Erin, who prides himself on close attention to detail and quick response to clients, has put together a support team of contractors and other professionals who help transactions go smoothly.” Coldwell Banker Vanguard Realty, Erin E. King MBA can help you negotiate so that you are finding a great deal, in the area you want, if you are searching in the JAX area. Finding a great realtor that can do that for you is key when it comes to saving money when buying a home.
5. Property Taxes
While property taxes are not technically part of the loan, your loan payments more than likely include money that is being put into your escrow account to cover property tax bills and insurance, so the amount that you are paying towards your property taxes does matter. If there has been a large jump in your property taxes, or if you think that your home is worth less than the assessor says, you can always ask for a review to see if that is a way that you can save some money. If this is a success, your lender should adjust your monthly payment to reflect the lower annual bill, or you might get money back at the end of the year.
6. Make Extra Payments
If you are able to, make extra payments towards your loan. If you received cash for Christmas or a bonus at work, put that to good use because it will save you a lot of money in the long run! If you pay an extra $1,000, the balance of your loan will be $1,000 lower than it would have been for every remaining month. For example, if the interest rate on your loan is 5%, you’ll save $50 in interest every year until you make the final payment. That adds up – and imagine if you made a few $1,000 extra payments.
There are so many ways to save when buying a home (and when you already have a home) and these are only a few of my tips! Do you have any tips that I can add to the list?
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