The goal to buy a home is one that many Americans dream about each year, but it can take some preparation and goal-setting to get you there. There are a lot of expenses and budgeting to buy a home you can afford along with all the other expenses in your life, so anywhere you can save money on its purchase will help you out in the long-run. Here are some recommendations to help you save on your next home purchase.
Look For Affordable Financing
One of the largest costs in buying a home is the cost of the loan, or its interest rate. The higher the interest rate that you qualify for, the more interest you will pay on the mortgage payment, which makes your mortgage payment more. When you can shop around for the best interest rate and terms to get you into a home, you can make the process more doable. Talk to your mortgage broker about the best interest rates and various loan programs available, and if you don't have a lender yet, ask your real estate broker for a recommendation.
First off in the loan process, look to see what the fixed mortgage rate is set at. Mortgage rates are at an all-time low and can provide you a way to get a fixed rate that is quite low for the entire length of your 30-year mortgage.
However, if you cannot qualify for the lowest rate available, you can look for an adjustable-rate mortgage, which will also help you save money on the financing. For example, an adjustable-rate mortgage will start out at 3 percent for the first twelve months, then increase by a quarter percent each year.
Keep in mind your low rate at the beginning of the adjustable rate will be reduced, but it will incrementally increase over time. So be sure you know when the rate will begin to increase so you can look at refinancing for a fixed-rate mortgage. Later on down the road your credit score may be better and you will have a better chance at a low rate.
Buy A Fixer-Upper
Another way to help you save on your home buying costs is to buy a home that is a fixer-upper and needs some work. A home in this condition will sell less than other homes around it that are the same size and style, but because you are buying it at a discount you can do the repairs over time. Then, because you are doing the work, you are building up the home's equity value.
Talk to your residential real estate broker about your needs in a home based on your budget. They can help you find a home that is priced at the lower end to fit within your smaller budget.