5 Ways to First Time Home Buyers to Save Money
Buying your first home can be one of the most stressful experiences in your entire life. First of all, it’s likely the largest amount of money you’ve ever spent all at the same time. If you’re taking out a mortgage you’re also committing yourself to paying off a loan for the next fifteen to thirty years. You’ve probably never thought about being involved in anything for that long unless you have children. Then there’s the hundreds of pages of paperwork to muddle through, and all of the pitfalls to traverse before you find the right mix of buyer, house, location, neighborhood and timing. It’s enough to give you an anxiety attack. But don’t think you have to overspend in order to have it all. Here are five ways that first time home buyers can save money.
Probably the best thing you can do to trim your final bill is to remain as patient as humanly possible. It’s all too easy for a first time home buyer to get caught up in the moment and rush ahead. This will happen any time you find a house that looks like your ‘dream home’. You’ll quickly want to gloss over all of the faults because you’re busy picturing yourself living there, reclining on the front porch and watering the lawn on a beautiful spring day. This is a trap, and you’ll have to fight your emotions to remain impartial. Rushing past even a small detail could cost you thousands of dollars, so make sure you’ve exhausted all questions before signing the contract.
This is a buyer’s market right now, as there are far too many homes on the market and too many desperate sellers to make you truly sweat. But you still shouldn’t buy a house unless you can see yourself staying there for the foreseeable future. Unless your business is flipping homes, you’re going to want to live in that house for several years before looking to sell. There are loads of costs inherent in the exchange of ownership that have nothing at all to do with the value of the home. Closing costs alone will be several thousands of dollars. Buy a house that you’ll outgrow in only a year or two and you’ll pay dearly for the mistake.
Before you get very deep at all into the process, make sure your credit score is where it needs to be. Just because you can afford the purchase doesn’t mean you’ll get a good interest rate, especially if you have a poor credit history. Check over your credit report at least six months before you plan on trying to purchase a property. That will give you a chance to correct any errors you might uncover and pay down high interest debt that is ruining your credit rating. Skip this step and you’ll likely pay too much for a mortgage, which will plague you for years and years to come.
So how do you make sure you can save as much as possible on the mortgage? Well, think carefully about the options, and understand the difference between interest rate and points. Points are the interest on the mortgage that you’d pay right up front during the closing. This obviously requires a higher down payment, but will result in a lower interest rate. So how long do you plan on staying in the house? If you’re going to live there for a decade or more, pay the points and save money long term. If it’s a project house and you’ll only stay for a few years, skip the points and go with the interest.
All mortgage issues aside, don’t skip over a proper home inspection. Perhaps when you browse selections in the real estate section of the paper you’ll find a property that has everything you want but seems too good to be true. The inspection will tell you if that is truly the case. You’ll have to pay money for a professional housing inspection, but you’ll save a bundle in repair costs you can build into the closing, instead of discovering them six months down the line when you’re stuck footing the bill.
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