Buying your first home is a big deal. It’s exciting and nerve-racking at the same time. From finding the right property, which can take months, to getting the best deal possible on your mortgage application, to saving enough for the down payment and closing costs, the home buying process does come with its fair share of headaches. Even though the market continues to be red hot, it still is possible to save money when buying your first home.
The Ultimate Guide to Save Money When Buying Your First Home
With careful planning, research, and determination, the dream of being a homeowner can soon become a reality. And with that said, here are a few tips to help you navigate the entire process and avoid common, yet costly mistakes when buying your first home.
1) Review Your Credit
Your credit score is one of the major things lenders look at when accessing your mortgage application. This is very important when buying your first home. It will determine your interest rate and possibly other loan terms.
Borrowers with an excellent score are considered less likely to default on their mortgage and as such, they are rewarded with lower interest rates. Check your credit report from one of the major credit reference agencies, which include:
- Equifax, and
Be sure to correct any errors and look for opportunities to improve your credit before you go shopping for mortgages.
2) Choose Your Location Carefully
The location of the property you choose is important when buying your first home. It will impact everything both in the short and long term.
What makes a good location is subjective; however, some key factors include:
- access to social amenities, and
- the people living around.
It’s important to consider a location that has historically held its value. Keep in mind that the closing costs will also depend on where your home is located.
If you’re looking for a place that’s more of a summer home, choose wisely. There are areas like the Beaches, Toronto (check the list here), that have done very well and have gone up in value considerably, but in a down market, these properties will be a little harder to sell. If you’re staying long term, it shouldn’t matter much. If you’re buying a place for just a couple of years, you might want to avoid the high-cost vacation areas.
3) Shop Around
The market is filled with several first-time buyer mortgage options to choose from. Go shopping for a mortgage by comparing rates and loan terms from multiple lenders to ensure you are getting the best deal possible. This is helpful when buying your first home and can help to get pre-approved before you start shopping for a house. Mortgage pre-approval gives you an idea of the amount of mortgage you can qualify for. The pre-qualification letter gives you an upper hand when making an offer to a house.
4) Be Ready To Negotiate
Virtually everything is negotiable during the home buying process.
For starters, home sellers are always looking to maximize the selling price, so don’t let their initial offer scare you away. The recommended way to start negotiations is to begin your counteroffer at 5% below the asking price. And, keep in mind that market conditions will play a major role in determining how much room you have to negotiate.
Either way, stick to your budget when buying your first home. Other areas where negotiation is possible are with repairs, closing costs, as well as mortgage rates.
5) Choose the Right Kind of Mortgage
There are different types of mortgage loans and each comes with different terms. Most mortgages have a 15 or 30-year term. And the majority of first-time buyers tend to go for the latter. Although it’s less risky, it will absolutely cost you more in the long run. But, you can reduce that by paying a huge down payment.
On the other hand, the 15-year old mortgage allows you to pay off your loan much faster and saves you a lot in interest. The only downside is the higher monthly payments. Whichever way you choose to go, ensure it is within your means and that it allows you to be mortgage-free in the shortest time possible.
It can be hard when buying your first home, but, these tips can help make the process a lot easier! Keep that in mind when house shopping.
Will you be buying your first home soon? What tips are you putting to use?
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.