So you’re buying new home and want to get the best deal possible.
Besides getting a good deal on a house there are many other things that can save you money.
In this article we’re going to explore the different ways to save money when buying a house.
1. Use an Experienced Local Real Estate Agent
A good Realtor will save you a lot of time, money and heartbreak. They’re experience in the home buying process and real estate contract expertise is vital for getting the best deal on a home and ensuring the process goes smoothly.
While some first-time buyers may try to save some money by not using an agent, this will hurt more than help. In fact, you, as the buyer does not pay the commission to the Realtor, the seller does. A Buyers agent commission is figured into the contract, sellers expect any buyers to have their own agent.
A real estate agent will be able to negotiate various things in the contract to protect you and save you money you may never even heard of. You can get referrals to good local agents from friends and family, or by using sites like Trulia and Zillow.
2. Get Loan Quotes from Multiple Lenders
Interest rates will vary from lender to lender so it’s recommended you get loan quotes from at least 3-4 different mortgage companies. Lenders charge various other fees for processing a mortgage, loan origination fee, loan application fees, etc. In the loan estimate you will be able to clearly see the fees charged.
Not only can you use these loan quotes to help you negotiate lower fees and rates. But they give you a chance to speak with different loan officers to see who you’re the most comfortable with.
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3. Have 20% Saved for the Down Payment
Unless you’re coming to the table with a 20% down payment you’re going to be stuck paying for mortgage insurance. Private mortgage insurance (PMI) is insurance on the mortgage loan itself. If a borrower defaults on the loan, the lender is reimbursed for the funds lost.
FHA loans will require mortgage insurance regardless of the amount of your down payment. One of the drawbacks of FHA loans is that mortgage insurance is usually required for the life of the loan. May people will refinance out of an FHA loan into a conventional one once their LTV ratio is below 78%.
4. Increase Your Credit Score
The higher your credit score the cheaper your loan will be. Lender fees and interest rates are tied directly to your credit rating. There are a few simple things you can do to improve your credit score quickly before applying for a mortgage loan.
Pay Down Your Credit Card Balances
The balance on your credit cards vs the credit limit is called you credit utilization ratio. This ratio accounts for 30% of your overall FICO score, only your payment history (35%) has a higher impact on your credit rating.
It’s recommended to keep your balances below 15% of your credit limits to maximize your credit score.
Don’t Apply for New Loans or Credit
New accounts and hard inquiries make up 10% of your credit score. When you open a new account your credit score will take an initial drop for a couple months. When you know you’re going to be applying for a mortgage in the near future it’s best to hold off on buying that new car or credit card.
5. Find a House that Needs some Work
You are probably looking for a home that is going to sweep you off your feet and doesn’t need any work. The problem is, so is everybody else. Homes that have lots of upgrades and custom features will cost much more than a home that needs some love.
Finding that diamond in the rough can be a great way to save a bunch of money. Adding custom fixtures and lighting is relatively easy to do. Painting walls and adding your own personal touch can be very rewarding while saving you cash.
6. Get the Right Type of Mortgage Loan
Depending on your situation some loan programs are better than others. For instance, Veterans can qualify for a VA loan and not have to put any money down or pay mortgage insurance.
If you’re not buying a home inside a major metropolitan area then you may qualify for a USDA loan. The Department of Agriculture created USDA home loans to help low-to-median income buyers become homeowners in rural parts of the country.
Not only do these mortgage loans not require a down payment but mortgage insurance on USDA loans is much lower than other types of loans at just 0.35% of the loan amount. This could save you hundreds, if not thousands of dollars annually.
7. Purchase a Home in Winter
The time of the year can also dictate the housing market. Spring and Summer months often demand the highest prices because this is when most consumers are in the market to purchase. Waiting to buy a home in the winter months can save you as much as $20,000 according to NerdWallet.
Randall has over 15 years of experience in the mortgage and credit industries. He spends a chunk of time helping consumers understand their credit, advise them on how to increase their credit, and lending his mortgage expertise to help them find the right type of loan. Randall lives in Dallas, Texas with his two sons.