Purchasing a home can be a time-consuming and expensive venture. It also isn’t a short-term commitment that will disappear within a matter of months. Mortgages are costly loans that can take anywhere from 15 to 30 years to pay off. Whether you’re buying your first home or investing in real estate, chances are you’re searching for how to get the best deal possible. Well, look no further because you’ve come to the right place. Read on for real estate hacks that will save you money.
1. Shop Around For The Best Mortgage
It’s easy to get caught up in the emotions of buying a home, but it’s important to remain level-headed. The last thing you want to do is settle for a mortgage with high payments and even higher interest rates. Thoroughly compare loans and receive quotes from lenders to make a decision that fits your needs. Note that there are various types of mortgages available. Whether you’re a United States veteran or a first-time homebuyer, there’s a loan out there for you. If you’re financially able, it’s a good idea to look into the difference between a 15-year mortgage versus a 30-year one. Although a shorter loan means larger monthly payments, it can reduce the amount of interest paid in the long run.
Additionally, getting pre-approved for a mortgage gives you a competitive edge, allowing you to stand out from buyers without one. When you request a pre-approval, lenders will evaluate your creditworthiness and other factors to determine how much money they can lend you. Once that’s done, you can shop with confidence and gauge how much you can afford. Not only will this help you look like a serious buyer, but it will also prevent you from purchasing a property that will be difficult to pay for in the future.
If you’re already a homeowner and are 62 years old or older, consider looking into a reverse mortgage. In sum, a reverse mortgage is a loan that allows you to borrow money based on the equity of your property. Unlike a traditional mortgage, you’re not bound to monthly interest payments. You won’t be obligated to pay off the loan until you sell your property, vacate the home, or pass away.
2. Have Your Finances In Order
To purchase a home, you need to make sure your financial health is in tip-top shape. While you don’t need to have a perfect credit score, it is recommended that you have a score of 650 or higher. If your credit score is lower than that, it’s time to make some changes. Your credit score is vital and has a direct impact on the amount of interest you’ll pay on your loan. Take the time to improve your credit score by paying off debt early, increase the amount you pay, and keep credit card balances low. Once you finalize the purchase of your home, consider discussing tax deductions related to your property with a CPA, who likely uses a software like ProSeries, to keep expenses down.
Moreover, it’s important to not make any large financial decisions around the same time you’re buying a home. Opening (and even closing) lines of credit and hard inquiries can have a huge impact on your credit. Hold off on buying that new car or adding a travel Visa to your account. New lines of credit will increase your debt-to-income (DTI) ratio, which is one of the last things you want before receiving your loan. Ideally, you want to have a DTI of 43% or under. This is especially important because your mortgage can be denied even after receiving a pre-approval. Lenders will take a look at your credit right before closing to ensure you’re still financially stable.
3. Thoroughly Inspect Your Home To be
When you’re conducting your home search, you may find one that checks off all the right boxes, making it a must buy, right? Guess again. Sometimes homes are too good to be true, so it’s important to look around for things that seem out of place to protect your investment. For instance, mold problems in the bathrooms, terrible plumbing, and squeaky floorboards are all issues that can be hidden in plain sight.
Before purchasing the property, hire a professional home inspector to ensure you’re not walking into a potentially pricey purchase. Home inspectors will shed light on issues that could cost thousands of dollars to repair. If numerous repairs need to be made, deduct it from your offer or have the seller agree to fix or pay for them prior to closing. Although an inspector costs money upfront to hire, it’s better to use the money here than to spend a fortune after the deal has been made.
Moreover, this step is incredibly important if you’re planning on buying a fix and flip property, also known as a fixer-upper. Fixer-upper homes can be good buys for those who want to save money and make the home truly their own. These properties are typically sold below market average, but there can be hidden costs associated with them. For instance, there is paperwork you need to file to acquire the proper building permits.
4. Have a Down Payment Ready
Although a downpayment isn’t a must have, it’s highly recommended. Lenders want to see that you’re financially stable and can afford the monthly payments on your home. The best part is that the more money you put down, the lower those payments will be. Plus, a 20% or more down payment means avoiding private mortgage insurance (PMI) altogether. PMI is insurance for the lender in the event you can’t pay off your loan. However, mortgages, such as FHA loans, require you to have mortgage insurance regardless of the amount of your down payment.
Buying a home is an enormous commitment that requires plenty of additional research and planning. There are a lot of considerations to take into account in order to not make a costly mistake. With these hacks, we know you’ll be able to save money. Good luck with your home search!
About the Author:
Gladis Gomez holds a B.A. in Creative Writing with an emphasis in fiction and poetry. She proudly received her education at the University of California, Riverside. Shortly after graduating, she entered the world of marketing and fell in love with copywriting. She has been happily doing it ever since, currently writing for 365 Business Tips. In her free time, she enjoys cuddling with her dog, reading a good book, and traveling.