Save Money When Buying a Home

Buying Saves Rent. Buying a home allows you to build equity. Instead of giving money to your landlord, you can pay yourself. You can also lock in your monthly payment for 15 to 20 years and not have to worry about rising rent costs. But, before you buy, make sure the savings are real for you. Make sure you figure costs.

• You should be able to afford 3 times your annual income, no more.
• Monthly payments, including taxes, mortgage interest, insurance, and maintenance will run from .75% to 1.15% of the purchase price of a home. Take time to figure out if you are really saving or if renting is more affordable.

What to Buy

• Buy bigger not smaller if you are willing to rent out part of your home. It may be best to buy now and not wait to lose out on buyer-favoring markets even if you can not quite afford it. By renting a room or buying a duplex, you can offset your mortgage costs, and when you are more income strong, stop renting and enjoy.
• However, smaller costs less. If you buy something 20% less than you can afford, you will save even further on things like utilities, insurance, and furniture.
• Remember that buying in a high-priced neighborhood will affect other costs. You will socialize at higher prices, be persuaded to buy similar cars, and have to maintain your house in a similar fashion as your neighbors. Look at moderately-priced neighborhoods.
• Think about appreciation. Higher priced neighborhoods have hit their limits, whereas lower priced neighborhoods, with home improvements and younger people moving in, you may find property values and taxes going up steeply.
• Buy homes placed on the market in December, not in the summer; you will be able to get a better deal.
• Foreclosures may be a great way to get into a house for less. Just be careful that the foreclosure listing price is considerably less than surrounding home values and that the costs for fixing damage to the house don’t outweigh the savings.

How to Buy

• Pre-qualify for a home loan. This will save you time and will make it easier for you to negotiate as an assured buyer.
• Remember you set the price as a buyer, not the seller.

• Negotiate a price down by looking at what other houses would sell for now, not what they sold for.
• Use the time the house has been on the market as a bargaining chip.
• Look at maintenance issues and subtract your cost to fix the house from the selling price.
• Nit-pick. If you find a dirty air filter on the AC or a loose step, that can indicate problems with the house which, in turn, can affect its value.

• Never tell your real estate agent how high you will go. S/he will push to toward that price and beyond. Better to keep the figure to yourself.
• Contact the listing agent of a house you want to buy directly and ask him or her to take a 3% commission. Even though the usual commission is 6%, that agent will have to half the commission with any agent who works for you.
• Get a bank loan. Mortgage brokers may get you a larger loan, but you will pay their fees, end up with a more expensive house than you might be able to afford, and may have a loan that has less than desirable interest terms.
• Write a time limit clause in your buyer’s contract. You don’t want to wait for a seller and lose a good interest rate that you locked in for a period of time.
• Put more cash down. You should consider putting up to 20% down. This will lower your interest rate and, thus, your monthly payments.
• If you can afford it, get a shorter term mortgage. This will save in interest rate costs that add up and make the original purchase price much larger. You can also get a 30-year mortgage at a lower interest rate but pay the loan every two weeks instead of each month, in effect, making this loan a 15-year loan.

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