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