Personal Finance Hacks for Buying a Home
Written by George Miller
Buying a house of your own is an exciting prospect and a goal that many Americans share, with most agreeing a house is part of the American dream. Making such a large investment can be daunting, however, especially if it’s your very first property purchase. Given the large sums of money at stake, caution is advisable. Planning in advance and doing your research can save you money. Get started with these financial hacks:
Explore your options for mortgages
Get multiple quotes before signing any mortgage paperwork. In addition to knowing what kind of down payment is required and how high the interest rate will be, you also want to know if, how, and when the interest rates will be adjusted and whether it’s possible to lock your loan. The Balance recommends asking potential loan providers questions about costs and learning more about discount points. Each point is equal to one percent of the loan and reduces your interest. If you have a $100,000 loan, you pay $3,000 (which is tax-deductible) for three points.
Don’t assume a 20% down payment
In order to get a loan, you will have to provide an initial down payment. While an amount worth 20% of the total loan was once considered ideal, this has come into question as 5% and 10% down payments became more common after the 2007-2008 financial crisis thanks to the subsequent decrease in interest rates. Forbes provides insights into how to decide what type of down payment is for you, such as assessing interest rates and determining how much you want to dip into your savings. You can also research the average down payment and percentage of homes sold under the list price in your area of interest. In Granbury, for example, the average down payment over the last month was 20%, while 22.6% of the inventory was sold under list price.
Know your credit card utilization rate
To qualify for a favorable home loan with low interest, you want to demonstrate good credit. You can check your credit score by obtaining a free credit report from one or all three credit reporting agencies. Keeping your credit card bills and other debts in check is an essential first step in maintaining good credit. You also want to check your credit card utilization rate. This is calculated by dividing your monthly statement balance by your overall credit limit. You can improve your rate by decreasing spending, paying down your card with a personal loan, and clearing debt on time.
Get a preapproval letter
A pre-approval or pre-qualification for a mortgage is a document provided by potential lenders that details just how much they are willing to give you. With this information in hand, you will have a concrete idea of what price range is reasonable for you. It also means you can act quickly when you find a place you like. Displaying the letter will help secure a seller’s faith in you because it shows that you are a serious buyer. This can make a big difference when you’re competing with others for a piece of real estate.
Make the most of your home inspection
Before closing on a property, you as the buyer need to schedule a home inspection (which costs an average of $287.00 in Granbury). A certified third-party professional then comes to the house and surveys it from top to bottom, checking for possible problems such as a leaky roof or termites. You can present the seller with the home inspection report and ask them to cover certain repairs that are needed, for instance by crediting the estimated expense required toward the price of the house. Structure Tech details repairs you should (like electrical issues) and shouldn’t (such as cosmetic fixes) ask the seller to cover.
With home inspection repairs, as with home-buying in general, you have to be ready to negotiate. The more information you have at hand, the more likely you will be able to strike a deal. Never take the listing price for granted, for example, but find out if other homes in the area sold for under their list price. Knowing this in advance is a valuable bargaining chip. Use this and the other financial hacks described above to make sure you are getting a fair deal.
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