Buying a home isn’t a decision to blink at. Matter of fact, the average cost of a home in the United States is $188,900! When you’re considering big cities, full of excitement and entertainment like New York City, Los Angeles, or Miami, the prices skyrocket. Want to save money when buying a home? It’s definitely not easy!
However, rest assured, finding your dream home while not breaking the bank is very much possible. For example, let’s say you want to buy a house in Miami—with certain flat fee MLS services like beycome, you’ll get 3% of the listing price back. So, going back to the above example, for a house that’s $188,900, 3% of that would be $5,667—which could be used for mortgage payments, brand new furniture, or other expenses. That sounds pretty good to me!
5 Tips to Save Money When Buying a Home
Beyond the initial cost savings, there are still a few more tips you can use to save money when buying a home.
1. Get Loan Quotes From Multiple Lenders
When looking to buy a home, it’s always a good idea to get a quote from multiple lenders rather than just one.
Because factors such as interest rate will vary from lender to lender.
- You’ll find that some have more forgiving rates than others,
- some have different promotions that’ll alleviate hefty application fees, origination fees, and more.
- Additionally, this gives you the perfect opportunity to chat with several different lenders and see which one you’re most comfortable with. After all, you’ll be dealing with them for awhile!
Bonus Tip: If you want to save money while buying a house, it’s typically a good idea to wait until your credit score improves before starting the process. This is because you’ll get the benefit of a cheaper loan with a better score.
2. Find a Home That Needs Some Work
Before we dive deeper into this point, let me pose one warning: do your research! This is crucial! Don’t buy a home that has a completely nonfunctional plumbing system, or structural issues. This may likely cost more than buying a brand new home.
Rather, look at houses that are more aesthetically flawed—such as walls that need to be painted, or older fixtures and lighting. These are the diamonds in the rough you should be attempting to scope out. They’ll likely cost less than a freshly minted home with all the bells and whistles.
Everyone’s looking for the house with brand new appliances, lights, and that 12-jet jacuzzi out back. While these are nice, you can definitely add them to your home on your own timeline, rather than pay for it all up front.
Also, your house will have a more personalized touch if you build it up!
Want to save when buying a home? Buy an ugly one that’s easy to fix up. They’re typically the best bargains.
3. Buy A Home In Winter
Okay, so this one seems a little weird, but hear me out!
Typically, real estate professionals will assure us, the buyers, that spring and summer are the prime seasons for house hunting and moving. This makes enough sense. People are more likely to go out and shop when the weather’s nice, as well as move in at that time when they don’t have to be transporting furniture through unforgiving weather.
Similarly, sellers prefer for their house to not be covered in snow when trying to make a sale. For this reason, it’s a sheer supply and demand game. When you have fewer buyers in the market, supply exceeds demand thus resulting in prices being lowered during these months.
NerdWallet claims that you can save as much as $20,000! And honestly, I can attest to this. I have purchased every single one of my homes either in the winter time or heading into winter, and the sellers are much easier to negotiate with at that time. They know the market is slower in the winter and they’d rather just get their house sold!
If you want to save money when buying a house, you might want to search a little harder during those winter months!
4. Have 20% Saved For The Down Payment
Saving for a home before purchasing one is always a great idea. Typically, if you have 20% for a down-payment upfront, you can avoid hefty mortgage insurance. (Private Mortgage Insurance (PMI) is insurance on the mortgage itself, and if the lender defaults on this loan, the lender is reimbursed for the funds lost.)
I know, 20% seems like a lot to save, but let’s go back to the example mentioned in the introduction above. The average cost of a house in the United States is $188,900, and 20% of that is $37,780. This number is fairly reasonable if you commit to saving aggressively for a couple of years, or less. You could also just shop for lower-priced homes in which you can make a 20% down-payment easier.
If you want a good rule of thumb on how much house you can afford, multiply the down-payment by five to arrive at the highest price you can pay while avoiding PMI.
Related: How Much House Can I Afford?
5. Research State and Local Assistance Programs to Buy a Home
In addition to federal programs, plenty of states also offer assistance programs for first-time home buyers, with several perks such as down payment assistance, closing cost assistance, tax credits and discounted interest rates.
Here are a few options that can help you save money when buying a home:
- FHA Loan. The Federal Housing Administration insures the mortgage, and typically comes with competitive interest rates, smaller down payments, and lower closing costs than conventional loans. If you have a credit score of 580 or higher, you could be eligible for a mortgage with a down payment as low as 3.5 percent of the purchase price. If you have a credit score lower than 580, you may still qualify but the down payment would be at least 10 percent of the purchase amount (which honestly, is the minimum I would recommend anyway!).
- USDA Loan. This is fairly unknown, but the U.S. Department of Agriculture (USDA) has a home-buyer assistance program. While this program focuses on homes in certain rural areas, you don’t need to buy or run a farm to be eligible. Applicants with a credit score of 640 or higher usually get streamlined processing.
- VA Loan. If you’re a veteran, you qualify for this. The U.S. Department of Veterans Affairs (VA) helps active-duty military members, veterans and surviving spouses buy homes. VA loans come with competitive interest rates and require no down payment; you’re also not required to pay for PMI, and a minimum credit score isn’t required for eligibility.
- Good Neighbor Next Door. This program is sponsored by The U.S. Department of Housing and Urban Development (HUD). They provide housing aid for law enforcement officers, firefighters, emergency medical technicians, and pre-kindergarten through 12th-grade teachers. In this program, you can receive a discount of upwards of 50 percent on a home’s listing price in regions known as “revitalization areas”.
If you’re looking to save money when buying a home, keep these tips in mind. Also, there are many more programs that you can look into when buying a home if you want to save money. Don’t waste your time or your funds, always make sure to do your research before deciding on a home. Happy house hunting!
Are you looking to save money when buying a home? What will you do to save money?
AUTHOR LaTia Longuemire
My name is LaTia Longuemire. I enjoy writing, singing, and cooking in my spare time. My passion is helping others. At this stage in my lifetime, I'm primarily focused on my children. They are everything that keeps my world spinning.