6 Ways to Save When Buying a New Home
Buying a home is so exciting and fun, but it can also be pretty stressful, as well. Why? Well, a home purchase is one of the most expensive purchases that you will make in your entire life, but there’s good news – you can also be smart about it and save money along the way. There are so many ways to save when buying a home and today, I want to share a few ways with you. Here are a few ways to save when buying a new home:
Your interest rate is everything
Securing a great interest rate is not hard to do right now, but one thing to keep in mind is that prices are starting to go up again. Honestly, the low-interest rate is 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 beforehand will help you get a great interest rate, so do your research before looking into purchasing, if you have that flexibility!
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 300,000 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, utilities, and renovations.
Avoid the dreaded PMI
One great tip when it comes to saving? Avoid a PMI at all costs. Recently, things have been a bit more flexible, but in the past, if you borrowed more than 80% of the value of your home, then you would normally have to pay for Private Mortgage Insurance (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% (or whatever percentage your lender tells you) down payment, if you are able to. If you are not able to meet this percentage, get creative and talk to your lender about potentially refinancing once you have enough equity in your home. The sooner that you can get the PMI taken off, the better.
Splurge on some aspects
When we talk about saving here, it’s not always about saving money. Time is money and sometimes, saving time is as important, if not more important, than saving money. A great way to save time, stress, and possibly money, too? Hiring professionals to help you through the process. For example, Fresh Start – The Moving Crew are local residential movers, commercial movers, and long distance movers in Worcester MA. They are one of the most trusted moving companies in Worcester, all around New England, and the surrounding areas, according to reviews, and they say,” we always handle with care.” Fresh Start can take the packing and/or moving process of your plate, which is sure to save you time, effort, and lots of stress. A few other professionals that you will want to consider: a great lender, a real estate agent who knows how to negotiate, and maybe some well-reviewed contractors, if you are doing any home improvement projects.
Consider 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.
Make extra payments, when possible
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?
