9 Easy Ways to Save Money When Buying a Home
Buying a home? We're sharing some of our favorite ways to save money when making that purchase of a lifetime.
When buying a new home, it can feel like there’s an endless amount of information to keep in mind, from choosing the ideal neighborhood and finding a mortgage to figuring out which furniture will make the cut. We want to help you make homebuying a painless experience now—and help you reduce bills in the long run.
1. Start Saving Immediately
Even before you decide to buy a home, you’ll thank yourself for putting some money into a designated new-house fund. The common wisdom is to save about 20 percent of your future home’s value. This is a good down payment and will help you avoid private mortgage insurance, which can cost between .5 and 1 percent of the loan amount. Twenty percent might sound like a lot, but if you put away $50 to $100 every month, you’ll get there quicker than you expect. (Get some extra cash now with these clever tricks to cut costs at the grocery store.)
2. Shop Around for a Mortgage Rate
When it comes to choosing a mortgage, you have more choice than you might think. Mortgages can differ significantly from firm to firm, so we recommend looking into roughly five firms—more if you have time. Learn about the range of loan options (a shorter-term loan may have higher monthly payments, but you will likely pay less interest) and explore rates. Even saving only half a percentage point can net tens of thousands of dollars over the years.
3. Get Other Opinions
We mean it! When you find the “perfect” house, it’s easy to get caught up in the excitement and miss out on little issues that could become costly. Gather experienced family and friends to tour the property with you. They may help identify and solve potential problems ahead of time, instead of letting you discover them yourself after the honeymoon period. (Speaking of honeymoons, we want to help you save money when you hit the road, too.)
4. Prepare to Negotiate at the Beginning…
You can, and should, negotiate everything when buying a home. Haggle over the price and present a counteroffer, making sure your numbers are reasonable so you don’t risk offending the owner.
5. …And at the End
Closing costs are another important area for compromise. Your expenses from the credit check, loan origination fees, title insurance and appraisal fees typically add up to between 2 and 5 percent of a home’s purchase price, depending on where you live. Your lender may cover a chunk (or all) of the bill, so it’s definitely worth asking.
6. Don’t Rush into a Property
You might want to jump at a house for a variety of reasons: Maybe you’re expecting, or it has the most amazing kitchen you’ve ever seen and you don’t want someone else to snag it first. However, we recommend taking the time to research neighborhoods and give due consideration before signing along the dotted line.
7. Conduct Your Own Inspection
Paying attention during the home inspection is critical. Be sure to take notes, ask questions and watch what the inspector is doing, but don’t rely solely on that report. Go through the home yourself, and get to know the property more thoroughly. You might spot broken or unusable appliances, for example. If you do, ask the seller for a credit so you don’t end up fronting the cost for a new fridge during your first week in your new home.
8. Be Picky with Your Homeowners Insurance
As with mortgage rates, there are more options than you might suspect. However, the cheapest one isn’t necessarily going to be the right fit. Evaluate all of your choices to find the rate and policy that are best for you. One of our favorite tips? Consider bundling homeowners insurance with your other policies, as some insurers offer discounts for this practice.
9. Assess the Property
In case it isn’t yet clear, when it comes to reducing home expenditures, we recommend double-checking everything. A number of factors could be inflating your home’s value, and examining how the value was initially determined could help reduce your taxes, making your annual bill feel a lot more wallet-friendly. (Looking to save even more money? Check out our 12 ways to save when eating at restaurants.)
Paying attention to details and taking the time to do thorough research can help you avoid stress and save money throughout the homebuying process. With any luck, the only thing that’ll be on your mind when you get your new keys is when to host your first dinner party.