Buying a lovely home is the dream for many and making the decision for which home to buy and what things to considered while buying a home so that the costs attached are reduced becomes a difficult task. Without proper guidance one would end up breaking the bank since buying a house is a financial decision. All that one has to have is a careful planning, informed decisions, and strategic thinking for that would save your thousands of dollars while purchasing your dream home. In this blog we are going to be exploring practical ways of cost-cutting for the purchase of a house so that the purchase becomes affordable.
1. Understand your Budget and make it tight
i. Analyse your portfolio and financial situation.
It is before you start looking for a home to buy, you should look upon at your financial conditions and your financial backup resources. One should definitely review his savings, monthly income, and existing debts. If you are looking for the credit facility via loan or mortgage, then you should definitely determine how much you can afford for a down payment and monthly mortgage payments.
ii. Arrange a Pre-Approval Letter
It is advisable for a mortgagor to have a pre-approval letter if he wants to buy the property with mortgage money. This Pre-Approval letter gives you a clear understanding of your budget and strengthens your bargaining position with sellers. And then you can compare rates from different lenders to secure the lowest interest rates.
iii. Be careful with your budget and avoid overbuying.
One should always keep his budget in his mind and should never stretch it for the purchase of bigger and fancier home and one should resist any such urge coming out of brainwashed mind done by the agents or any other persons. For such an activity could disturb your financial stability. Being stick to your budget helps you to manage the future maintenance and unexpected repairs to your home since avoidance of overbuying helps you save a lot of money.
2. Do not hurry and look around for the Best Mortgage Rates
i. Compare Multiple Lenders available around you.
One should always have an urge to have the minimum cost of loan or credit. Even for taking the loan for the purchase of home, one should never do hurry and put efforts to find the best deal for taking the loan for the purchase. There are different lenders available who offer varying interest rates and terms. Taking help of the online platforms available for the comparison and doing a diligent consultation with local banks, credit unions and online lenders can help to get the best deal that will reduce your loan cost.
ii. Maintain and improve your credit score.
Having a higher credit score can significantly reduce your mortgage interest rate. Making prompt payment and paying off your pending debts, and removing dispute errors on your credit report, and avoid having a new unnecessary credit before applying for a mortgage can help to get the credit a low interest rate, thereby reducing the cost of loan.
3. Find ways to save on Down Payment and Closing Costs
i. Take the benefit of the first-time home buyer program facility.
There are many government schemes available and even many states offer assistance programs for the first time buyers, including grants, low-interest loans, or down payment assistance. One should be aware of such government assistance before purchasing a home to get a fair reduction in the purchase of a home.
ii. Negotiate Closing Costs.
One should always try for negotiations which would reduce the closing costs. Negotiating with your lender for discounts and comparing different service providers for the task of Title Insurance, Inspections, and legal services can help to find the service at affordable price.
iii. Try avoiding Private Mortgage Insurance.
Aiming for an appropriate percentage of down payment which would help in avoiding Private Mortgage Insurance (PMI) can help to reduce the monthly payment towards mortgage.
4. Choose the Right Location
i. Give priority to the Emerging Neighborhoods.
Homes which are build in up-and-coming areas are often more affordable then the neighborhoods which are established long ago. A proper research for the areas with planned developments or increasing property values.
ii. Looking beyond City Centers may help.
If any rural or suburban area meets your needs of commuting distance and access to amenities, then purchasing a home in such areas in an excellent idea, because such areas offer lower property prices and taxes and make your home purchase affordable.
iii. Do a diligent Investigation for the applicable Property Taxes.
Property taxes differ from location to location and can significantly impact your monthly costs. Purchasing a home in areas with lower tax rates can save you a lot of money in the long-term.
5. Take the help of a Knowledgeable Real Estate Agent
i. Choose an Experience Real Estate Agent.
Choosing an expert and skilled agent who is service oriented can help you get a home within your budget, negotiate better prices, and reduce the cost of complex paperwork.
ii. Trying reducing the Agent’s Commission by Proper Negotiation.
Look for a genuine agent who is service oriented and willing to lower his commission for his clientele. Working with a buyer’s agent who charges less fee can help to reduce the cost again.
iii. Take the help of online tool.
Online websites help you to do research for the properties, compare prices and even to connect with agents. This comparable research help you to find best prices and make the purchase affordable.
6. Timing your purchase strategically can help
i. Consider off-peak seasons and buy during such period.
It has been seen typically that the Real Estate Housing Market remain slow during winter months, and it is the time when their is less competition for the purchase of homes. It is the best time to purchase a home at potentially lower prices.
ii. Monitoring Interest Rate Trends can help to have the best deal.
being vigilant towards economic indicators and market trends to catch and lock in a favourable rate of mortgage.
iii. Buy Leveraging Market Conditions.
Negotiations can be taken to the optimum level, where the supply for the homes are more than their demands. In such situation, the purchase price can be negotiated to the lowest price.
7. Make it done a smart home inspection
i. Never skip a diligent home inspection.
Many people would think skipping the home inspection before the purchase to be good idea to reduce the cost of purchase but it is actually risky and can results into the future uncertain and surprise expenses later which are the result of negligence of skipping the home inspection.
ii. Make Inspection based Negotiations.
If it is found in the inspection that the house is subject to wear and tear which is not normal, then a request for the deduction in price to the seller can be made.
iii. Always choose a Qualified Inspector.
Expenditure on a qualified inspector is again an efficient way to reduce the future unnecessary repair cost.
8. Try Negotiate for everything and at every stage
i. Always offer for the price which is below the ask price.
Try every possible way to negotiate, especially for the home which has been in the market and couldn’t be sold of for a long.
ii. Request for the Concession from the seller.
One should always address to the seller, the major issues of costs appurtenant to the home in future and demand concession in the price.
9. Give preference to a smaller or older home
i. Consider downsizing strategy.
It is typically less costly to have a smaller home, and this can lower the ongoing expenses, which include Utilities and Property taxes.
ii. Look for a Fix-upper.
Buying a property in ignorance of the structural damages is the biggest mistake, it can cost you high for the structural repairs. One should always look for the house with normal wear and tear so that negotiation on the purchase price can be made to lower it.
iii. Do not fall for unnecessary features and avoid them.
Luxury is kind of a thing which is always expensive, looking for the home with luxurious amenities pools, large yards, or high-end finishes is definitely going to increase the cost of purchase of your home. One should always avoid these luxuries and look for an affordable and durable home.
10. Make a strategic Plan for Long-Term Savings
i. Try making a wise investment in Energy Efficient homes.
The homes which have pre-installed solar panels or similar energy saving systems can help you save your money on utility bills.
ii. Take the benefit of Rates Drop.
If you are thinking of buying a home at low cost, then you should always wait for the off-season or if you can, then for the depression period when Property rates drop so that you can buy a property at a low cost.
11. Leverage Tax Benefits
i. Deduct Mortgage Interest.
Deductions from the taxable income can be made by the homeowners thereby reducing their overall tax burden.
ii. Claim Property Tax Deductions.
One should take the benefit of Property Tax Deductions from annual tax return.
iii. Explore Other Tax Credits.
There are various other tax benefits including federal and state tax credits for energy-efficient upgrades or first-time homebuyers.
I am a Commerce Graduate and Real Estate Consultant.