Aaron Schouest

NMLS # 220685

678-595-3021

aaron@smcbrokers.com

Aaron Schouest President

How To Save As Much Money as Possible When Buying a House

How To Save As Much Money as Possible When Buying a House

With high prices and rising inflation, if you are hoping to buy a home for the first time this year, you are probably looking for any way to save money in the process. Here are some possible options for pinching those pennies to make home buying more affordable:

1. Improve Your Credit Score

The best mortgage interest rates are reserved for those with FICO credit scores of 740 or above. If your score is well below that you may want to wait and pay down your credit balances, make all your payments on time, and check for any errors on your credit report to bring up your score before buying.

2. Find an Experienced Agent

Having someone who knows the market as well as the other agents in the area can help negotiate great deals on your behalf. Look for referrals from friends, family, locals or on online real estate sites.

3. Save a Larger Down Payment (if possible)

The larger your down payment, the less risk your lender takes on by loaning you money. That typically translates into lower interest rates. A contribution of 20% is ideal but even if you can’t swing that, the higher your amount, the better. You might take a few extra months to save up a larger chunk of change or you might ask your family for down payment.  But keep in mind, when home values rise, waiting to save a larger down payment could work against you because by waiting you may end up paying much more for your house than if you had not waited.

4. Pay Discount Points

A discount point “buys down” the interest rate on the mortgage and one point is equal to 1% of the loan amount. While this means more money upfront, it can lower your overall mortgage costs dramatically. For example, if you lowered your interest rate on a 30-year fixed rate mortgage for $300,000 from 6.5% to 6.25% with a discount point, you’d save $40 in monthly payments and over $14,000 in interest over the course of the loan.

5. Avoid Private Mortgage Insurance

Private mortgage insurance or PMI is a fee you pay to protect your lender if you put down less than a 20% down payment. It can amount to hundreds of dollars a year in charges. You can avoid it by contributing a full down payment in cash, or by using a piggyback loan. This is where you make a 10% down payment, take out a first mortgage for 80% of the purchase price and then take a second mortgage out for the remaining 10%. The second mortgage acts like the rest of the 20% down payment on the first loan, freeing you from the PMI requirement.

6. Shop Around for Home Insurance

Part of your mortgage payment will be a divided portion of your annual home insurance premium. You can shop around among insurance companies to find the lowest rate to lower your overall home costs.

7. Buy a Fixer Upper

While it requires more patience and work, buying a home that is less than move-in ready could mean big savings in the price.

8. Ask for Seller Concessions

If there are repairs to be done, you can ask for the sellers to reduce their price to compensate for the work to be done. You might also be able to negotiate to have them pay a portion of your closing costs.

While buying a house for the first time is certain to be one of the largest purchases you’ve made, there are ways to help minimize the costs and keep the process affordable.

If you or someone you know is thinking of purchasing a new home please let us know. We'd love to give you or them a competitive mortgage quote!