Monday, December 28, 2015, AM | Leave Comment
Buying a new home can feel quite exciting. Buying a new home for the first time can feel both exciting and quite scary. You know you are looking at a significant financial investment, possibly the single largest investment you will ever make into anything you own.
You are also looking at a significant commitment, because with home ownership comes the responsibility to maintain its value over time.
In this post, learn simple ways to save money when you buy a new home.
Improve Your Credit Score
You are entitled to a free credit report each year. So the first thing to do is pull your credit report and clean up anything that could be dragging your score down.
This will help you get a mortgage with a lower interest rate. The greatest savings come with scores of 740 or higher. At 720 or higher you can still qualify for a good interest rate.
Just a one percent difference can raise or lower your monthly payment but as much as $100.
Put Down More Than 20 Percent
If you put down 20 percent or less on your mortgage, there is a better than average chance your lender will require you to buy private mortgage insurance (PMI) to guard against default.
Since most private mortgage insurance will run you up to one percent of your total mortgage, on a $200,000 mortgage, that will mean you can save up to $2,000 per year just for PMI.
Build Your Rainy Day Fund First
There are lots of costs that come along with buying a home.
From utility hookups to property taxes, agent fees to inspections, you need to be prepared before you begin the process.
You should build your rainy day fund to include money to cover all your insurance policy deductibles, the first six months’ worth of basic expenses and your first year’s property taxes, at minimum.
Each time you put in a claim with your insurance, your premium can increase an estimated 10-20 percent.
So if you can fix small issues out of your emergency fund, you stand to both save more money over the long term and have money in place for big unexpected emergencies.
Get Several Quotes for Homeowners Insurance
Unlike private mortgage insurance, homeowners insurance won’t be a cost you can totally avoid.
But you can ensure you get the best deal by getting several quotes.
Insure your home for the actual value of the home and contents (excluding irreplaceable items which will likely be insured separately anyway) rather than opting for a default value from the insurer.
With your rainy day fund in place and a policy written to insure actual costs, you can opt for a higher deductible to save money on the policy itself.
A jump in deductible of just $500 can net you an annual savings of 25 percent or more.
Scrutinize the Inspection
Here, you may want to bring along an objective friend to point out flaws your love-sick eyes may fail to see.
You want to see the flaws, not just because it gives you negotiating power, but because it can save you from a costly mistake.
Ignoring even one major repair can end up costing you hundreds or thousands after the fact.
Look for New Homes
The newer the home is, the less problems you will likely have. It can also help with resell value when it comes to sell.
Look for homes with the most wanted features, like open floor plans, seen in these Lehi homes for sale.
Buying a newer home will also mean it can be more energy-efficient, saving you on your monthly utility bills.
By working strategically step by step to evaluate each necessary cost that buying a new home entails, you can maximize the value of your available funds and minimize the future costs of insurance expenses and interest rates.Facebook.com/doable.finance