For most people, a home is the highest-value asset you’ll ever purchase. That can make the process pretty intimidating — after all, you’ll want to ensure that you’re getting a good deal, that the company you work with to finance the mortgage is honest, and that your home is likely to appreciate over time.
There’s no simple method that works for everyone. However, there are plenty of tips and tricks that you can use to help make sure that you get the best deal possible when buying your next home. Below, you’ll find 5 of our favorite methods for saving money during the homebuying process.
Check them out, and be sure to share with your friends to help them get the deals they deserve the next time they’re in the search for a mortgage.
Start by saving for a down payment
Your down payment is the sum of money that you pay before you start making regular mortgage payments. Ideally, a down payment should be around 20% of the price of the home, but these days, many banks and lending agencies will allow you to make a down payment of less than that amount.
While that may seem tempting, there are some good reasons to wait a while and ensure that you have the full 20% before committing to purchasing a home. Here are a few of the benefits:
A bigger down payment often means a lower interest rate. Your interest rate is part of the cost of your mortgage, and by having a large down payment, you can often lower that rate — which means paying less over the long-term.
A full 20% down payment also means you’ll likely avoid paying mortgage insurance. Private mortgage insurance (or PMI) is an amount you pay on top of your mortgage that helps your lender feel more secure if you have a low down payment. If your down payment is high, you can often avoid PMI.
Sellers may be more willing to close at a lower price if they know they will be getting a larger amount up front. Having a full down payment is a huge help in the negotiating and haggling process (more on that in a later section).
It’s frustrating: you want to purchase your home and move in right away, and the idea of waiting another year or two to grow your savings so you can hit 20% doesn’t sound great. But trust us, it’s worth the savings in the long run.
Work on your credit score
The next way to save money is by having a solid credit score. If you don’t know, your credit score is basically big financial institutions’ way of measuring how trustworthy of a borrower you are. If you have a great track record of borrowing money and paying it back on time and in full, you’ll have an awesome score. If not, then your score might need some work.
If you do find that your credit score is a little rough around the edges, don’t panic. There are always ways to repair your credit, like consolidating and repaying debts, for example.
What does this have to do with buying a home? Well, the higher your credit score is, the lower your interest rate is likely to be. The strategy here is pretty similar to having a high down payment: basically, if you’re a trustworthy borrower, companies are more likely to let you borrow money at a lower rate.
Always shop around for financing
home
If you’re new to homebuying, you might not realize that the first place you get a quote is not always the best place where you’re likely to find financing. While heading down to a trusted credit union or local bank is always a good idea, it’s still smart to get multiple quotes and compare rates from different agencies before signing anything.
It’s always smart to have multiple options on-hand. Some places might offer low rates, but you might not realize that the rate isn’t fixed; they could hike it up after a couple of years. Other banks might have high closing costs or fees associated with their mortgages that you’d rather avoid.
Plus, if you get a quote from one institution, then take that quote back to another one you’re more interested in working with, the second one might actually lower their rate to match the better quote. That brings us to the next strategy.
Don’t be afraid to haggle
People get nervous about haggling — they think it’s rude, or that it may wind up with them getting a worse deal. While it’s important to be polite, it’s equally important that you make sure you get a fair deal, and often, haggling is an important part of that.
As mentioned before, there are ways to make it easier. For instance, if you already have financing in-hand, and you’ve saved up for a full 20% down payment, the sellers may be willing to shave a few thousand (or even tens of thousands) off the asking price.
The key is to offer, hear their counter-offer, assess whether you’re willing to take that, and then offer again. One risk that’s worth noting, however, is that if someone is willing to pay at or above asking price, you may lose out. Ultimately this will depend on how competitive the market you’re buying in might be.
Additionally, if the home needs work, you can always haggle on the cost of labor, having the seller pay the repair costs, etc. Don’t be afraid to haggle to get exactly what you want, within reason of course.
Invest in growth
Lastly, something many people might not realize is that one way to save money is to make money. How does that apply here? Think about it this way: if you purchase a house for a low price in an area where prices are falling, your equity will be low. It’s smarter to purchase a slightly pricier house in an area where housing costs are increasing, which will mean that, over time, your equity will increase too.
The higher cost now ultimately means you’ll have more money in your pocket later on — which is the goal of savings, after all. Remember, before purchasing your next home, be sure to use these 5 tips and help lower the cost of your mortgage.
Author Bio
Samantha Rupp holds a Bachelor of Science in Business Administration. She is the managing editor for 365 Business Tips as well as runs a personal blog, Mixed Bits Media. She lives in San Diego, California and enjoys spending time on the beach, reading up on current industry trends, and traveling.
