Saving Money When You Buy a Home
Posted on | October 5, 2009 | No Comments
There are compelling arguments for both renting and owning a home. We’ll save that debate for another time. But what people on both sides of the equation can agree on is this: Saving money is always a good idea.
Prospective renters, like aspiring homeowners, can help themselves by doing some homework before they start looking for a place. Get a sense of the market value for your areas of choice, given the amenities you desire. Then, once you settle on a place, don’t hesitate to negotiate – provided you’ve got some clear examples from the market at large or of deficiencies or areas that could be improved.
Renters can also keep costs down once they move in by maximizing energy efficiency. Insulate doors and windows. Push for energy efficient windows. Embrace low-energy light bulbs and other green tools. Remember to save your receipts and deduct any improvements from your monthly rent. A handful of small alterations can lead to big savings on monthly energy bills.
These are just a handful of tips for prospective renters. Homeowners, however, are looking for a bit more to chew on. Shelling out a security deposit along with your first month’s rent is one thing – putting down a $40,000 down payment on a home is something entirely different.
But just like there are a few simple steps renters can take to save money on their living spaces, there are also a few key avenues prospective homeowners should consider.
Homework, due diligence and careful deliberation is equally – if not more – important for prospective homeowners. Renters who embrace some simple cost-saving measures can recoup a month’s rent or so every year, maybe a bit more or less depending on a host of factors.
But homeowners stand to save big-time dollars. Here are a few potential methods:
-Find Someone You Trust
In a general sense, this is true for both renters and homeowners – why would you rent an apartment from a shady character or work with a lender who you don’t like or trust? But a surprising number of people feel locked into a particular lender or agent. This is one area where loyalty shouldn’t blind your common sense – if your lender is not bending over backwards to help you save money or walk you through the process, you need to walk back out through the door.
A good lender can save you money on your mortgage. Commission work is a tough business, but satisfied customers and word-of-mouth advertising can mean more to a savvy lender in the long run.
-Make Your Good Credit Work For You
If you’ve worked hard to earn a stellar credit report, make sure it pays off when it’s time to buy a home. One way to kill your good standing is to blow off small errors or inaccuracies on your credit report – or, even worse, to fail to hunt for them all together. The reality is, about 1 in 4 credit reports have major errors, according to a 2004 study.
There are ways to correct errors on your credit report. Make sure you pore over yours to ensure it is error-free. Those little mistakes can translate to less-than-favorable loan terms when it comes time to purchase.
-Give up the High Life for a While
Spend the first five or 10 years of your home-owning life eating Ramen noodles. Go out to the movies once a year. Become a regular at the neighborhood secondhand store. Do whatever it takes to scrimp and save those first few years – it can make a huge difference. In fact, here’s two ways a lean budget can save you a bundle of money:
1) The Loan Term
Get the shortest loan term you can possible afford. The difference between a 30-year mortgage and a 20-year mortgage is more than a decade – it’s probably tens of thousands of dollars. If you can sock away a bunch of money early, you can probably afford to finance that $100,000 with a 20-year mortgage instead of a 30-year mortgage. At 7 percent interest, you’re talking about serious cash savings – more than $50,000.
2) Boosting the Monthly Payment
Here’s the other way a tight budget can help you in the long-run. Adding just an extra $100 or $200 toward your mortgage principal each month can shorten your mortgage term by a few years. Not months – years. Not to mention the thousands of needless dollars spent on interest.
These are just a few basic ways that prospective homeowners can save money on what will be the biggest purchase of their lives. There’s a variety of mortgage types and lending programs out there, from FHA loans to 80-10-10s to assumable mortgages. Take the time to get a baseline understanding and do not be afraid to ask questions. If you can’t get a straight answer from someone at any point during the home-buying process, considering hitting the “Pause” button.
The guest article was written by Brandon Laughridge of MortgageLoanPlace.com. MLP specializes in educating consumers about FHA Loan Requirments and FHA Mortgages in general.
Comments
Leave a Reply