It’s time to ditch that rented space and start your journey as a first-time homebuyer. The initial thought of becoming a homeowner might send some overwhelming waves of emotions as you consider the tedious process that comes with it. From determining a budget based on your financial standing to closing on your dream home, there’s no doubt buying a home requires a fair share of time and money in exchange for an undeniable feeling of triumph. But, it’s important to not let the stress of the process deter you from reaching one of life’s biggest milestones. Here are a few money-saving tips to avoid that dent in your wallet during the homebuying process.
Purchasing a home doesn’t just happen overnight—be patient in your homebuying journey and get a head start by catching a glimpse into the market. This could be as simple as browsing websites, newspapers and magazines for houses on the market during your morning coffee routine. Take this time to make note of your favorite homes and how long they stay on the market. Find patterns in length of stay on the market, as well as price changes. This will help you get familiarized with housing trends in the area and set reasonable expectations for the rest of your house buying journey.
Determine Your Budget
Finding a dream home is exciting, but determining a budget isn’t as much. How do you set a realistic price point for your first home? A rule of thumb that lenders generally recommend is to look for homes that cost no more than three to five times your annual household income—if you plan to make a 20% down payment. Another money-saving tip to consider while building your budget is to have your 20% down payment ready to bring to the table in order to avoid unnecessary expenses such as mortgage insurance.
Get the Right Type of Mortgage Loan
Following a close second to determining your budget is exploring mortgage loan options to find the best fit your financial needs. Mortgage rates can vary significantly across financial institutions and exploring rates across a few places increases your chance of earning some bigger savings for the long run.
And, depending on your circumstances, you can find a mortgage loan that’s better than your typical conventional loan. For example, Veterans can qualify for a VA loan and bypass mortgage insurance and down payments, or if your browsing rural and suburban homes, USDA could spare you a down payments and offer you mortgage insurance at just .35%.Consider your options before you jump the gun, it could just save you thousands on your first home.
Prepare to Negotiate
As a first-time homebuyer, don’t let the opportunity to shave off some of that hefty price tag go to waste. By researching and understanding where houses stand on the market, you could haggle the price of your dream home and present a reasonable counteroffer that could land you a closing deal within your budget. And when it comes to closing costs—which includes everything from credit check and loan origination fees to appraisal fees and title insurance—your lender may cover a portion, or even all, of the big bill.
Conduct Your Own Inspection
A common precaution overlooked by many first-time homebuyers is being attentive throughout the home inspection process. Come prepared with a notebook and pencil, ready to take notes, and ask questions about anything you’re unsure of. Being a potential owner of the property, you should take the initiative to go through the house yourself for a more thorough inspection. And if you come across something like a broken or unusable appliance, ask the seller for a credit so you don’t end up fronting the cost for a new dishwasher your first week in your new abode.
Above All, Start Saving Early
Behind every big-ticket purchase comes a great deal of preparation—especially for that of a house. While saving money is a priority during the homebuying process, the bulk of financial preparation takes place before the process even starts. But before you let that five-digit down payment scare you from reaching your goal, focus on small steps instead. For example, opening a separate savings account or a money market account can be a manageable first step to getting the wheels turning on your homebuying journey. This way, you avoid the temptations to touch your funds—especially when you’re craving that spontaneous vacation! Being prepared for one of life’s biggest investments will set the tone for how the rest of the process goes. Start saving now, and the rest will be smooth sailing.