Buying a home is probably the largest investment you’ll ever make in your lifetime. The idea of being in debt for many years can be daunting particularly if you’ve used up all your savings. The good news is that there are ways you can buy a home and still save money in the process by following these valuable tips.
1. Do Your Research
Your real estate agent or even your lender may tell you buying a home is a simple process, and they’ll take care of all the important details. However, educating yourself is the best way to know what you’re getting into and save money at the same time.
Many first-time homebuyers are amazed and shocked at the many additional costs they’re charged beyond the actual price of the home. You can get valuable and free information on the true costs involved in home buying through government agencies like the Federal Citizen Information Center.
2. Safeguard Your Deposit
When you sign a binder, you’re typically required to put down a deposit. In many jurisdictions, this is considered the same as a legal and binding contract. Although a binder is not the same as an actual contract, it may be the best way to protect your deposit. If you’re interested in the home, sign the binder as a sign of good faith. If you decide you don’t want the property due to something found in the inspection, the binder may allow a cancellation and a refund of your deposit.
3. Finding the Right Real Estate Agent
Many people shy away from using real estate agents because they want the money in their own pockets rather than the real estate agent’s. However, real estate agents can actually help you save money. They know things the average homebuyer do not and are familiar with legal jargon used in home buying and selling. Talk to friends and family members who have used real estate agents and find one that’s trustworthy and reliable.
4. Get Pre-Qualified
Few things can be more disappointing than finding the home of your dreams only to discover you don’t qualify for the loan. Getting pre-qualified can save a lot of heartache and disappointment down the road when you do find the right home. Being pre-qualified can also prove helpful when negotiating a price with the seller because you know how much you can spend on the home.
It's important to remember that pre-qualified is not the same as pre-approved. Pre-qualified gives you an idea of how much you should be able to borrow based on general info given to the lender. Pre-approved is how much you actually can borrow after the lender has reviewed all your financial information and your credit scores.
5. Consider an Assumable Mortgage
An assumable mortgage allows you to take over the payments on the current mortgage rather than taking out a new mortgage. VA or FHA mortgage loans can often be assumable. You can save thousands of dollars on mortgage costs and fees by assuming a mortgage already in place even if the interest rate appears to be higher at first. Do the math and see which one gives you the best deal overall.
6. Ask the Seller to Share Costs
As stated above, mortgages often come with a lot of costs and fees. Consider asking the seller if he or she is willing to split the costs. If the seller is in a hurry to sell, he or she may be willing to pay half the costs just to get the sale done as quickly as possible.
7. Shop Around for Mortgage Loans
Don’t go with the first lender willing to approve your mortgage loan. Shop around for mortgage brokers, banks and lenders. You may find that mortgage brokers will give you a better deal than your local bank because they only make money at closing. Sometimes, the seller may be interesting making some money by extending credit to you.
Consider paying family members interest if they can help you finance your new home. You may also find it helpful to ask attorneys and real estate agents in your area if they know of any properties for sale. Homes going into foreclose can often be bought at lower prices.
Purchasing a home will cost you enough as it is. Why not be creative as possible in this process. The money you can save by following many of these tips can stay in your pockets and maybe finance your next family vacation!
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