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How to Save Money When Buying a House: 15 Tips to Get the Best Deal

Tags: house money loan

Do you want to know how to save Money when buying a house?

Homeownership is the number one path to wealth for many people, and your primary home can become your biggest asset down the line. However, with home prices exploding in most areas, it’s getting harder and harder to afford a home. So if homeownership seems out of reach, don’t despair. There are ways to soften the blow and save money when buying a house. Follow these tips to get the best deals on property and achieve your dream of homeownership.

How to Save Money When Buying a House

1. Shop in Up-and-Coming Neighborhoods

Buying a home in the right neighborhood is important. A safe neighborhood in a good school district with any amenities that you might need is ideal.

A great place to start looking is in an up-and-coming neighborhood. Look for places with new shops opening or new constructions. These areas may not be the best right now, but you can tell they are on the upswing. This means you might still be able to find great deals!

2. Buy a Fixer-Upper

If you really want to get the best deal on a home, look for a fixer-upper. These are the homes with plumbing issues, wall damage, and other items that need a lot of work. However, if you are handy, you can use this as an opportunity to turn a run-down home into your dream home.

Before you buy a fixer-upper, it’s important to know exactly what you are getting into. Make sure you have the home inspected and know everything that needs fixing. Also, it might be harder to get a VA Loan or an FHA loan for a fixer-upper. Your only option may be a conventional loan or a cash payment. But, with the lower cost of a fixer-upper, these options might not be out of reach.

3. Look for Easy Fixes

If you don’t want to do all the work that a fixer-upper entails, look for an ugly house with easy cosmetic fixes. I did this when I purchased my home in Georgia. The bedroom had an ugly brown 1970s shag carpet, and the walls were painted with a dirt-brown color. The walls in the living areas were all different colors, and none of them matched.

To describe this home as ugly was an understatement. It was hideous, and that made it a turn-off for potential buyers. But, if you are looking to save money when buying a house, these fixes are your best friend. It doesn’t cost that much to paint and recarpet, and you can choose a design that best suits your tastes. These fixes are a gift in disguise; they give you the motivation to decorate your house your way!

4. Have an Immaculate Credit Score

Unless you are going to buy a house in cash, you need a good credit score. To save even more money, you need the best credit score you can get. This is because lenders only offer the best rates to those borrowers who have proven that they are financially responsible. Even a difference of .5% can save you a ton of money over the life of your loan.

If you are planning on buying a house in the near future, start fixing your credit now. Stop taking out new lines of credit, and pay off as much debt as you can (without limiting your ability to make a down payment). Make sure you are paying for everything on time.

This is also a great time to check your credit report and ensure there aren’t any errors. Perhaps something got misreported and is impacting your score. You will want to make sure anything like this is cleared up before shopping for a mortgage.

5. Save up a 20% Down Payment

The best way to save money over the life of your loan is to save enough money for a 20% down payment. There are two main reasons for this. First, it allows you to access a conventional loan, which tends to have better rates than an FHA loan.

But second, and more importantly, if you have 20%, you don’t have to pay PMI (Primary Mortgage Insurance). This insurance is meant to protect lenders from making high-risk investments. The thought process is that if you have at least 20% down, you have a higher stake in the property and are less likely to walk away from your mortgage obligation.

6. Negotiate on Closing Costs

Closing costs are one of the biggest up-front expenses you will have to pay when buying a house. These costs include loan origination fees, appraisal fees, title fees, and tons of other fees associated with taking out a mortgage and buying a home. Typically, the buyer will pay these fees; however, you can negotiate and get the seller to pay in a buyer’s market.

This may not be feasible in a seller’s market, as sellers are getting lots of offers and will choose the best option for them. Make sure you understand the market before attempting to negotiate on closing costs.

7. Buy During the Winter

It’s true that there’s a season for buying homes. Springtime is the best time to put a home up for sale. The weather is nice, and everyone is shopping for new housing. But the opposite is true for buying. People tend not to want to move in the winter, so they stop house-hunting. This means that the colder months are ideal for buyers looking for a deal.

If someone needs to put their home on the market in the winter (or it didn’t sell in the spring), they are probably more likely to make a deal. This is because the listing prices are typically lower in the winter as well.

8. Geoarbitrage

It is hard to move when your job depends on being in a certain location or when your family has roots in a certain city. I get it, and I get not everyone can move to save money on housing.

However, if your job is remote or has employment options around the country, consider geoarbitrage. Geoarbitrage is moving to a lower cost of living area to save money. For example, I moved from Los Angeles to Savannah, Georgia, to a tiny town in Pennsylvania to save on housing costs, and I don’t regret it for a second. The lower cost of living has saved me a ton of money overall.

Another bonus of geoarbitrage is that you can pay less in property tax. The counties with big cities tend to have the highest taxes (Cook county, where Chicago is located, has some of the highest property taxes in the country!). So if you can move to a neighboring county, you might be able to lower your property tax bill.

9. Don’t Buy More House Than You Need

Do you really need a spare room, two offices, and two bedrooms? Will a third bathroom really make your life that much easier? Unfortunately, most people buy too much house, which can cost them thousands of dollars over the course of their mortgage.

The extra space seems nice until you have to buy the furniture to fill it and spend time cleaning it. Look for homes that have enough space for you, and don’t go overboard with formal dining areas and extra rooms that you will probably never use.

10. Avoid Fancy Gimmicks

Do you really need a jacuzzi, a double shower, or two ovens? These add ons sure are nice, but they can also increase the sale price of a home by far more than they are worth. Buyers get caught up in the “coolness” of some of these features and add-ons and don’t realize that they will probably never use the features, or if it’s something they really want, that they could probably install it themselves in a cheaper home for a fraction of the price.

11. Buy in Cash

I know that buying a house in cash is not realistic for most people. However, there are still some areas of the United States where you can get homes for under $100k. That’s still a lot of money, but bringing a cash offer to the table will not only give you a leg up while bidding, but it will also save you tons of money on interest and closing fees.

Spending all your savings on a house isn’t a great idea for everyone. However, if you have a solid job and the cash available, it will save you tens of thousands of dollars over the course of homeownership.

12. Shop for Loans

To get the best interest rate, don’t go with the first lender you find. Instead, shop around for mortgage lenders and see who will give you the best rate. Typically, having multiple credit inquiries hurts your credit. However, if they are all done within a thirty-day time frame, most credit reporting companies will understand that borrowers are likely shopping for a loan, which won’t negatively impact your credit.

While shopping for a loan, be sure to consider your options. There are FHA loans, VA loans, conventional loans, and various programs designed to help first-time home buyers. Each option has pros and cons, so be sure to research what is right for you (and what you might qualify for) before deciding.

13. Opt for a Fixed Rate Mortgage

Speaking of loans, if you plan on being in the home long-term, be sure to go with a fixed-rate mortgage. Adjustable rates can look attractive; however, you never know how the market will change. Interest rates can skyrocket just as your rate is up for adjustment, and you may be stuck paying thousands of dollars more than you expected for your loan.

The shock of shifting adjustable-rate mortgages helped usher in the financial crisis of 2008, so unless you know you will be moving before the rate adjusts, it’s not something to gamble with.

14. Don’t Skip an Inspection

In a seller’s market, buyers do anything they can to make their offer stand out. One thing many buyers do is offer to forgo the inspections.

Please don’t do this, especially if you’re a first-time buyer without a solid emergency fund. You never know what might be wrong with a house. There could be termites, plumbing issues, structural problems, and many other huge problems that could destroy an unsuspecting buyer financially. An inspector can identify many of these issues before you purchase a home, and this will give you a full picture of exactly what you are getting.

15. House Hack

Okay, this one isn’t technically how to save money when buying a house, but it can significantly help you save money once you’ve found your home.

House hacking involves using your house to make money and saving money on your home by default. Bringing in a little extra with your house can enable you to live with a reduced mortgage or even possibly mortgage-free, pay off your mortgage early, or eventually, could even become a source of somewhat passive income.

There are several ways to house hack your primary residence. The most obvious way is to rent out a portion of your home to a roommate. You could also rent your garage, parking spaces, or other portions of the property to interested parties. You could also do short-term rental options like Airbnb.

If house hacking is an option you really want to consider, it may be worthwhile to look at properties like duplexes and triplexes, or those with basements and ADU’s, so that you can have some separation from your tenants.

Happy House Hunting!

Buying a home is an exciting time, and it’s easy to get caught up in the hype of a dream home. However, follow these steps on how to save money when buying a house, and you can get a house that’s perfect for you at a fraction of the cost.

Happy hunting!



This post first appeared on Money Saved Is Money Earned, please read the originial post: here

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How to Save Money When Buying a House: 15 Tips to Get the Best Deal

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