Buying your first house can be the biggest achievement in your life but it comes with many headaches. First, finding the right property that meets your needs could take months. Moreover, trying to negotiate the right deal is not easy.
If you are not careful, the house that you buy could end up costing you money in the end. Here are some tips that will come in handy if you want to save money when buying a house…
Choose the Location Well
When looking for a loan to buy a house, you need to pay a certain amount of money for closing costs before you finalize the transaction. These closing costs make up between 2-5 percent of the total price of a home. The actual closing costs of a house depend on where it is located.
If you choose a house in a low-tax area, you might end up paying only 1% in closing costs. However, if you are buying a house in cities with higher taxes, the closing costs will be higher.
Review Your Credit
Lenders consider several factors when deciding whether to approve your mortgage application. Credit score is the most important factor that you need to consider when applying for a mortgage. If your credit score is low, your chances of being approved for a loan decrease. Even if you get a mortgage with a low credit score, you will end up paying high rates of interest.
Therefore, you need to find out what your credit score is before approaching banks for a loan. This way, you will be able to clean up errors before applying.
Be Ready to Negotiate
When you are purchasing a house, most things are up for negotiation. However, you might have to ask for a few concessions from the seller. Doing so could help you to save a lot of money, but you have to agree on a price first.
If you need help negotiating a good price, you should consider hiring a realtor. You can also negotiate on the closing costs if you want an even lower purchase price. Asking your lender to cover some of the closing costs might help you to save several hundred dollars.
If you want to save money upfront, you should opt for a mortgage with no closing costs. However, this option might mean higher payments over the life of the loan.
When you are buying a home for the first time, it is easy to focus on the end goal, but you need to look at the bigger picture. You should consider different financing options from different lenders before you make a choice. Doing so allows you to get the best rate possible for your mortgage.
You need to get a pre-approval if you want to know how much house you can afford and whether you qualify for good interest rates.
Choose the Right Mortgage
Most people who are buying homes for the first time tend to choose 30-year mortgages. However, you should know that choosing a different type of mortgage could save you money. Opting for a shorter loan term allows you to finish paying off the mortgage faster, and pay much less interest.
The problem with shorter terms is that you have to make higher payments. If you are not comfortable with this, you should opt for a thirty-year mortgage and make extra payments to pay it off faster.
Walking into a new home is exciting but an expensive mortgage can take away from your happiness. If you follow the above tips, you will save money when buying your first home.