Buying a house in one of the most significant and life-changing purchases that most people will ever make, so it is important that you get the best value for money. In many cases, your real estate agent will be able to offer you some great money-saving tips but since many of them work on commission, this may not always be as in-depth as you would like.
Despite the rising cost of property, there are multiple ways in which you can save a lot of money when you are buying a home and in this article, you will learn how.
Whether you are looking to take out a longer 30-year mortgage or so some serious research and compare mortgage rates before you commit to anything, saving money is likely at the front of your mind.
Make A Larger Down Payment To Avoid Having To Pay For Private Mortgage Insurance (PMI)
Private mortgage insurance allows those with a smaller downpayment to buy their home – in this case, you will be required to make private mortgage insurance payments if your deposit is lower than 20% This gives the lender the reassurance that they will be covered in the event that you default on the loan.
If you have taken out an FHA loan, you will have to pay mortgage insurance regardless of how much of a down payment you make. This is certainly something to consider since many low-income homeowners will opt for an FHA home loan without realizing that they may end up paying more in insurance than they would have done saving a larger deposit.
Furthermore, you should keep in mind that taking out this type of insurance will have an impact on your credit rating. It is also wise to look at how much mortgage insurance is to ensure that by paying it, you won’t be spending more than you would when putting down a bigger sum, to begin with.
Apply For An FHA Loan
In contrast, some people find that an FHA loan can make a huge difference, despite having to pay the aforementioned insurance. Your situation will largely depend on the best option for you and it is highly advisable to talk through your options with a mortgage advisor before you make any sort of commitment.
If you want to save a lot of money on your down payment, an FHA loan can be one of the best ways to achieve this since you may have the option to pay as little as 3.5%, which is a considerable saving.
Go For A Fixed-Rate Mortgage
If you are looking to save money over the long-term, a fixed-rate mortgage can be extremely advantageous. Whilst many adjustable-rate mortgages may begin with an attractive rate, this could go up significantly over the course of the loan – and if you are taking out a 15-year mortgage or something longer, the price of interest could go up several times.
In contrast, a fixed-rate mortgage will give you one rate of interest for the entire term which gives you peace of mind that you will always know what you are going to pay. Plus, even if inflation means that interest rates on mortgages go up across the board – you will be safe.
Improve Your Credit Before Buying
One of the most common mistakes that people make when applying for a mortgage is going into the process with a damaged credit score. Did you know that people with lower credit are typically offered higher rates of interest? Whilst it can be frustrating to have to wait a while longer to buy your dream home, doing so will ensure that you are hit with huge interest fees just because your credit score is not up to standard.
Buy A Fixer-Upper
It may seem like a lot of hard work to do up a house before moving in but oftentimes, this can save you an incredible amount of money. For starters, these run-down houses often sell for much less than homes that are already high-spec so you are making an initial saving. Plus, if you are willing to do most of the renovations yourself, you will save on the cost of labor – which can be extensive.
However, it is important to remember that for certain jobs, it is advisable to get a professional in. For example, the laws on doing your own electrical work can vary greatly depending on the state, but even if it is permitted, it can be dangerous. Aside from this, homeowners can save masses of money by painting, woodworking, tiling, and flooring their own homes.
Use A Good Real Estate Agent
Before choosing your real estate agent it is important to understand the difference between them and a realtor – the latter is someone who is bound by a specific code of ethics and is seen as a more experienced professional.
If you were to employ the services of a licensed realtor, this would likely cost more money. That said, paying a little extra for a person who will be able to find you a better deal, more quickly, will potentially save you money in the long term.
Going into the world of real-estate without being prepared is one of the worst things that any potential homeowner can do. Of course, ensuring that you have a good downpayment is one of the best ways to be prepared. But this can be difficult, especially if you have other financial commitments.
Clearing your other debts can be seriously beneficial when looking to buy a house as this will cut your outgoing significantly.
Furthermore, it is a wise idea to fund your mortgage before you have to start paying it. If you are living in rented accommodation or are still at home with parents, putting away the difference between the rent and future mortgage or the full amount aside each month will prepare you for life as a homeowner.
You should also shop around for the best mortgage deal and using a mortgage comparison calculator is a great way to find an affordable and lucrative deal for your situation.
It can be intimidating getting onto the property ladder and even if you are already a homeowner looking to purchase another property, things can be difficult. But this needn’t be an unmanageable time, financially. Thankfully, there are a lot of ways that you can make the most of your money and save a lot in the long-run.