Buying your first home is an exciting milestone, but it can also be expensive. It’s important to save as much money as possible for a down payment and closing costs.
Luckily, there are several easy practices you can use to help you save money when you buy your first home.
1. Pay Off Your Debt
Many financial experts recommend saving for an emergency fund before buying a home. This can help you avoid taking out high-interest credit card debt or loans to cover unexpected expenses.
However, some people struggle to balance paying off debt and putting money into savings. Here are some tips to help you decide which is best for your situation.
2. Save a Down Payment
If you’re planning to buy a home in the near future, you’ll need to create a budget and rigorously stick to it. Determine your savings timeline and work with a mortgage lender to understand what size down payment you need.
Reduce or eliminate bad habits to save hundreds of dollars a year, such as impulse shopping in person or online, and redirect them toward your down payment fund.
3. Set a Budget
The key to avoiding overspending is having a budget in place. This will help you understand your recurring expenses and determine how much you can afford to spend on housing.
Homeownership comes with many unforeseen costs. By understanding these costs, you can save money both when buying your home and after closing. Here are some helpful tips to get started: 1. Start a housing emergency fund.
4. Automate Your Savings
It’s common sense that saving money is a smart move, but it can be difficult to implement. To make it easier, you should automate your savings. For example, you can arrange it so that on payday a small portion of your paycheck is automatically transferred into a savings vehicle.
Many banks offer user-friendly tools, products and programs that enable you to do this.
5. Get a Credit Card with a Low Interest Rate
Buying your first home can be expensive, especially when you consider the down payment, property taxes and homeowners insurance. Fortunately, there are ways to cut costs and save money on your new house.
For starters, you can start by automating your savings. You can do this by transferring a percentage of your paycheck into your savings account on the day you get paid.
6. Get a Mortgage with a Low Interest Rate
Depending on how much you’re borrowing, a low interest rate can save you thousands of dollars. Make sure to lock in your mortgage rate as soon as you’re pre approved.
Boosting your down payment can also reduce your mortgage rate since it makes you less risky to lenders. First-time home buyers may also qualify for state and local programs.
Shop around with different mortgage lenders to find the best offer. Even a quarter of a percent interest difference can add up.
7. Get a Home Insurance Quote
Purchasing a home can introduce several new financial expenses. Be sure to consider mortgage payment, property taxes, insurance and maintenance costs when budgeting for your dream house.
Getting a home insurance quote is a smart move. Shop around with multiple insurers to ensure that you’re getting the best coverage at the lowest rate. You can usually switch carriers at any time without a penalty.
8. Get a Home Inspection
Buying a home is one of the biggest investments you’ll make. It’s essential to get a home inspection to avoid costly surprises.
Most real estate agents have relationships with certified inspectors and can recommend one. But if you’re a savvy negotiator, you can save even more money by asking the seller to complete some repairs before closing. These can include things like structural damage or a faulty water heater.
9. Get a Home Warranty
During the home sales season, some sellers will include a year-long home warranty as part of their sale price. However, home buyers should carefully research the home warranty companies to ensure they use reputable contractors and will actually cover legitimate repairs.
Ask the seller if they have one and what company it is with details of premiums, coverage and exclusions. This may help you decide whether it’s worth the expense. It is important to understand homeowners insurance vs. home warranty so you know exactly what is covered under each policy.
10. Get a Home Inspection Report
Home inspectors look for things like a leaky roof, insect infestation and previous storm damage. These issues can be costly to repair, so it’s best to know about them before buying a new home.
If possible, ask your inspector if you can attend the inspection. This way, you can see the problems firsthand and ask questions. This can be a valuable learning experience.