Nothing can match the thrill of stepping over the threshold of a house as the new homeowner. Once you’ve settled in, however, you recall how much money you’ve spent in the process.
Because the prices have climbed, home ownership has fallen. More people choose to rent, so rents have skyrocketed from the higher demand. It seems like the cheaper and less stressful option, but renters lose hundreds a year from renting.
When you buy a house, you have more control over what you pay each month. You’re also putting your payments into equity rather than losing the value of your rent payment once you’ve handed it over. You could save significantly in the long run.
Don’t let the price and fees of a home purchase scare you from this long-term investment. Use some of these strategies to save.
- Save for a 20-Percent-Down Payment
Now that we’ve climbed our way out of the recession, lenders are more willing to offer loans for major investments like a house. You can get a home with a down payment as low as 3.5 percent.
This means for a home priced at $200,000, you’d need about $7,000 up front. But a smaller down payment means higher interest rates. You’ll pay thousands more over the life of the mortgage than if you save for a higher down payment.
To get the best deal on your mortgage, aim for a 20 percent down payment or more. For a $200,000 home, you’ll need a minimum of $40,000 up front. That may take time to save, but it’s well worth it considering how much less you’ll pay over the next 30 years.
- Use a Flat-Rate Realty Company
As a general industry standard, Realtors charge a six percent fee: three percent to be absorbed by you and three percent by the seller. The percentage is comparatively small, but it means you’ll lose $6,000 on a $200,000 home. If you buy a $400,000 home, you’re losing $12,000.
You can save significantly with a flat-rate realty company. According to the sales team of Green Residential in Houston, the average agent commission for a home is $24,000 ($12,000 from you, $12,000 from the seller).
When you use a flat rate company, you’ll save $4,000 or more. It’s a solid way to maximize value.
- Make Regular Extra Payments
The most expensive facet of purchasing a new home is the interest on your 30-year mortgage. Regular extra payments will pay down the loan faster while reducing your interest payments. When you have an extra $500 per month, take advantage of the savings by putting it toward your mortgage.
You can also shrink the mortgage period from 30 years to 15. The bank will decide your eligibility based your credit score, payment history, income, and other factors, so not everyone will qualify.
But if you do and can afford to make the payments, you stand to save tens of thousands over the long run.
- Time it Right
Statistically speaking, the worst time to sell a home is in the fall or winter, which makes that the best time to buy. Home sales always dip then because demand drops, and sellers often agree to less than they were demanding earlier in the year.
It may not be convenient to purchase during the colder season, given holiday expenses, a new school year, and other factors that can get in the way of funding and managing the move. But if you can make the sacrifice, home prices could be thousands less.
- Use the Home Inspection to Your Advantage
Never purchase a home without an inspection. It costs a little extra, but it’s ultimately to your benefit. Existing homes often have hidden issues that the homeowner may not be aware of or he doesn’t want you to know about.
Without an inspection, you may discover unexpected repairs shortly after moving in. The inspection results can be used to negotiate a lower price on the house. Not only will you dodge unexpected costs, but you’ll purchase the home for thousands less, perhaps, than the asking price.
You don’t have to overpay for one of the largest investments of your life. With the right moves and some financial preparation, you’ll save thousands on your new home.
