How to Save Money When Buying a Home
When the time arrives to get a mortgage, getting a good deal is important. This includes obtaining the lowest mortgage rate possible. The following tips can help you save money when buying a house.
Shop for Lenders
While your credit score determines your loan standards, every bank has its own underwriters who analyze the credit report as a whole. Additionally, they charge different rates when it comes to loan application, origination and processing. Obtain several different estimates, and check the fees each lender charges. This also gives you a chance to speak with different officers to evaluate a potential mortgage relationship.
Use a Real Estate Agent
An experienced real estate agent can help protect you and save you money by negotiating various contract items, including the price of the home. Any seller who uses an agent expects buyers to employ their own. Since you don’t pay an agent when shopping for homes, this is not the time to go without. Buyer representatives usually get a share from the seller’s agent commission. The listing agreement specifies how much the listing brokerage will share, but it’s usually 50 percent.
Pay a Higher Down Payment
To avoid paying private mortgage insurance (PMI), you will generally need to pay at least 20 percent down on the loan. FHA loans require PMI, no matter how much money you put up. Regardless, a higher down payment lowers the monthly payment. You end up paying less for the house because of the lower interest amount.
Increase Credit Score
The quickest way to raise your credit score is to pay down any balances on the credit report. That’s because the credit utilization ratio makes up almost one-third of the FICO score. Additionally, don’t look for other credit before applying for a mortgage. Hard inquiries and new accounts make up 10 percent of the credit score.
Look Beyond Upgrades and Custom Features
When shopping for homes, house hunters often focus on custom features and upgrades. However, homes that have stainless steel appliances, fancy backsplashes, and hardwood floors cost more. That’s because desirable features dictate the price, and those things are what people look for. If you want to save money on a house, look for one that needs small improvements. You can always add the features you want at a later date.
Get the Correct Type of Loan
Don’t forget to utilize the status that fits the situation. For example, veterans don’t have to put down any money nor pay PMI when they get a VA loan. You can also reevaluate your search criteria and see if you can qualify for a USDA loan. This involves living outside major metropolitan areas, and there are income limits.
However, most families with moderate incomes qualify. While USDA loans require insurance, it’s much lower when compared to other mortgages. Additionally, you won’t have to pay a down payment.
Buy in the Winter Time
Spring and summer see the most activity in the real estate market because people enjoy going outside to look for houses when the weather is nice. Since prices are higher, then, shop for a home during the cold season instead. You will have less competition and more negotiating room to lower the purchase price.
Following these directives still allows you to find a property that you like, you’ll just pay less. When shopping, make sure to inspect the home fully. Bringing a third party along to help point out problems is always a good idea too.
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