10 Money-Saving Tips for First-Time Home Buyers

Buying your first house or horse property is one of the biggest milestones in your life. With the way rent has been going up in general, it’s no wonder that you’re considering buying your first home. But this process can truly seem daunting. Not only is it a lengthy process, it is also the biggest investment you’ve probably ever made. That is why many first-time home buyers try to see where they can save up some money. But don’t worry, it’s not as difficult as it may seem. Here are 10 money-saving tips for first-time home buyers that will surely help.

Money Saving Tips For First Time Home Buyers

First step in saving for first-time home buyers – make your budget

Even before you start looking at houses, you need to know what you’re working with. That is, you need to know whether you will be able to sustain your lifestyle and your future mortgage payments. Try to create a personal budget for buying your first home. Take every last expense into consideration. First-time home buyers often forget to do this first step, but it is incredibly important. Focus on the actual purchase costs and the yearly costs. Also consider the actual moving costs and see whether you’re at the right place financially for such a move.

There are, however, ways you can combine cutting expenses on the purchase with the move. You simply have to be a bit savvy. For instance, you can decide to buy a three-bedroom home instead of a four-bedroom home. You can then put the excess things you have in storage units that can move with you. You can decide where to put them later. If you choose a smaller home, this will cut your expenses by tens of thousands of dollars, while the storage price is insignificant in comparison.

Set up a special savings account

Yes, the home-buying process involves saving, unfortunately. However, it is not impossible. There are many ways you can save money, bit by bit. But, if you’re generally a spendthrift, and you’re not sure you can do it gradually, it is best to set up a savings account specifically for this purpose. Then vow not to touch that account. Now, many people have a problem with waiting. In fact, many first-time home buyers actually rush with the investment because they are impatient to start that chapter of their lives. But, you need to try to be more patient in this case, because the benefits will be significant. The more money you have saved, the lower the loan will be. This can save you thousands of dollars in interest rates.

Aim for 20% down payment

Even though many banks offer mortgages as low as 5%, you should definitely aim for 20%. This means that you will borrow less, which, in this case, means lower monthly mortgage payments. Also, the interest rate will be lower, which could save you even tens of thousands of dollars throughout the duration of the loan. If you put 20% down, you can avoid private mortgage insurance, which can be anywhere from 100 dollars a month and up. This can also save you thousands of dollars.

Explore your options

There’s plenty of fish in the sea, as the saying goes. And still, many first-time home buyers fall into the trap of talking to a single lender. However, that is not the best way of going about it. Explore your options, see what is offered and compare. Try to talk to at least three lenders, then compare lender fees, loan terms, and their rates. Once again, this simple act can potentially save you thousands of dollars.

Select the right mortgage

While a majority of first-time home buyers select the tradition 30-year mortgage deal, that costs much, much more in the long run. If possible, choose the 15-year mortgage program. For instance, if you choose to pay off your mortgage in 15 instead of 30 years, you will save incredible amounts of money. Aside from the benefits of paying the house off twice as fast, you could potentially save 100,000 dollars and more.

Add a little something every month

Basically, if you can’t afford to choose the 15-year mortgage deal, there are ways to save up money even with the 30-year one. For instance, when possible, you could pay off an extra 100 dollars per month. Every time you pay more, you decrease the length of the loan and save in interest.

Negotiate, negotiate, negotiate

We cannot stress enough the importance of negotiating in this process. For instance, closing costs can be anywhere from one to eight percent of the buying price. And that is in no way a small amount. Sometimes, first-time home buyers are afraid to negotiate with their lender. But don’t be, there’s no harm in asking. You can ask the lender to cover some (or even all) of these fees. Also, you can negotiate the actual price of the house with the seller. Remember, it doesn’t hurt to ask!

Learn about the market

In this day and age, it is truly not that difficult to do some research on pretty much anything. Learn the ins and the outs of the market, and this will help you in the negotiation process. Learn what the other homes are selling for in the area you’ve decided on. If you’re informed during the talk with your agent, you have a much better chance of getting a good price.

Pay for inspections

Yes, you may have fallen in love with that house and it looks perfect on the outside. But it sometimes vital to leave emotions out of the decision-making process, which is what first-time home buyers are inclined to do. Home inspectors will be able to search the property and uncover any possible problems. Once again, this can save you money in the long run. Also, if they reveal any problems, you can deduct expense estimates from the offer. Or, you can get the seller to pay for repairs before you buy. Sometimes, you have to invest to earn money.

Sign a contingency clause

A contingency clause is meant to protect the buyer in case of any unforeseeable events. For instance, if you get fired or if the loan falls through, or if the appraisal costs are higher than your approved funding, the contingency clause helps you keep your “earnest money.” That is, this clause will ensure that any money you used to secure the house will be repaid. Without it, there’s a chance that you could lose that money, while still having to buy the house.