May 2, 2022

13 Tips to Save Money Buying Your New Home

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monThese are the 13 tips you can do to save money buying your new home and  ordering from more savings to least. You can share these tips on TikTok as you will find numerous young people who are looking forward to buying their first home and who require good advice from you. If lack of engagement is discouraging you, buy tiktok likes and go viral.

Tip 1. If you can and don’t mind it, buy in an up-and-coming area

Because the price will be lower and you may see faster appreciation rates. For this example, we are going to assume the house that you want to buy for $300,000 in an established area is 15% cheaper in an upcoming area, so $255,000.

– Total savings: $45,000

 

Tip 2. Save money on real estate taxes

You might find you can save money on taxes by buying a property on a different area. You could also ask for a tax review, if you think your home is worth less than the assessor says. The savings below are calculated by comparing the average yearly taxes in NY ($4,096) vs the ones from Queens ($2,672). You can see where the data comes from here.

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– Monthly savings: $119

– Yearly savings: $1,424

– Total savings (30 year): $42,730

 

Tip 3. Negotiate your mortgage interest rate

Talk to at least 3 different lenders and negotiate it down. Pro tip: Always compare APR rates (those include all costs involved in the loan and give you a better picture of how much is going to cost.) The savings below are calculated assuming you get a  $250,000 on a 30-year mortgage and you end up going with the lender that offered you 3.5% interest rate vs another lender that offered you 4% interest rate.) 

– Savings per month: $70

– Savings per year: $840

– Total savings on a 30-year mortgage: $25,200

Tip 4. Increase your credit score to save money

Before you get your mortgage improve your credit score by reviewing it and fixing errors on it. Also make sure you don’t apply for new loans or credit cards in the months prior buying a home. The savings below are calculated assuming your lender offers you a 3.5% interest on your mortgage vs a 4% you would have gotten before improving your credit score.

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– Savings per month: $70

– Savings per year: $840

– Total savings on a 30-year mortgage: $25,200

Tip 5. Avoid paying private mortgage insurance (PMI)

You have to pay PMI when you put down less than 20% on your home and you should only pay until you’ve paid down at least 20% equity of your home. The savings are calculated assuming you pay PMI of 1% of the loan amount of your mortgage ($250,000) per year and you pay it until the 10th year:

– Savings per month: $208

– Savings per year: $2,500

– Total Savings: $25,000

Tip 6. Refinance your mortgage when mortgage rates go down.

For this calculation we are going to use this example. If you lowered your interested rate from 4% to 3.5% and you had 28 years left of your $250,000 mortgage you will be able to save the following:

– Savings per month: $70

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– Savings per year: $840

– Total savings on a 28-year mortgage left: $23,520

Tip 7. Buy a house from an owner that is not being represented by a realtor

And use that lack of realtor fees as a bargaining chip to lower the purchase price. Let’s say you buy a $300,000 property without a realtor. Then you could ask the owner to lower the price 6% (realtor fees) because he will save that money by selling it directly to you.

– Total savings: $18,000

Tip 8. Get a first time home buyer grant

These grants typically cover part of your down payment, closing costs, or sometimes your purchase price but you have to be eligible to get them. Check your state for grants that can cover your home buying costs. For this example, we will use the 1stHomeIllinois program that gives you up to $7,500 for down payment and closing costs. 

– Total savings: $7,500

Tip 9. Use an independent home inspector

Don’t use the home inspector that your real estate agent recommends because they may not tell you all the problems about the property. To give you more context, home inspectors usually get business from real estate agents, and they don’t want to “kill the deal” because if they do, they won’t get more business from that agent. This is why they “soften” their language which can be bad for you in the long term. For this exercise, let’s say your inspector told you the roof needed small repairs, nothing to worry about, but after you buy your home, you find out that it completely needs to be replaced, which will cost you around $7,000 according to this article).

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– Total savings: $7,000

 

Tip 10. Negotiate your homeowners insurance:

Find cheaper insurance by talking to several providers. These savings are calculated assuming you end up getting a homeowners insurance of $1,000 vs $1,200 per year.

– Savings per year: $200

– Total Savings on 30-year mortgage: $6,000

Tip 11. Use a buyers agent that will refund you part of their commission

This is a legal practice in 40 states and getting more popular every day. This is payable to you days after closing. These savings are calculated assuming you buy a $300,000 home and your buyer agent receives a 3% commission and he refunds you half of that.

– Total savings at closing: $4,500

Tip 12. Negotiate your home price

Leverage the information you know about the market and the results of your legal due diligence and home inspection to lower the price of your property. For this exercise, let’s say your legal due diligence says they need to register a new addition to the home that was done without the approval of the authorities and that is going to cost $5,000. You talk to the seller and he is willing to cover those costs.

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– Total savings: $5,000

Tip 13. Negotiate your loan fees

Ask to waive unnecessary processing  fees or to waive the appraisal fee. For this example, let’s say your mortgage waives the processing fees ($400) and the appraisal fees ($600).

– Total savings: $1,000

Summary

So let’s summarize you can save a lot of money buying your new home:

If you buy a property for $300,000, your down payment is less than 20% down payment (let’s say is 5%) and you hold your property for 30 years without using any of these tips to lower your costs, you’ll end up paying  $489,828

But, if you follow these tips to buy a property that matches your needs and you negotiate every single component that is built into your payments, you will end up saving hundreds of thousands of dollars! Is this worth it? Absolutely! That money is better in YOUR POCKET!

Do you have any other tips to save money buying your new home?

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Tags

13 tips to save money buying your new home, Summary, Tip 10. Negotiate your homeowners insurance:, Tip 11. Use a buyers agent that will refund you part of their commission, Tip 12. Negotiate your home price, Tip 13. Negotiate your loan fees, Tip 2. Save money on real estate taxes, Tip 3. Negotiate your mortgage interest rate, Tip 4. Increase your credit score to save money, Tip 5. Avoid paying private mortgage insurance (PMI), Tip 6. Refinance your mortgage when mortgage rates go down., Tip 7. Buy a house from an owner that is not being represented by a realtor, Tip 8. Get a first time home buyer grant, Tip 9. Use an independent home inspector


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