Buying a home is one of the biggest investments most people make in their lives. It’s also one of the most expensive. Although many expect real estate prices to flatten or fall in 2023, high interest rates will continue to make buying a home costly.
That doesn’t mean buyers shouldn’t keep shopping for real estate. Instead, with careful planning and savviness, people can find their dream homes without breaking the bank. Here are 21 ways to save money when buying a house before, during, and after you make your offer.
1. Improve your credit score
Having a good credit score is an important first step in getting a mortgage. While having a credit score of at least 620 should help you in being approved for a mortgage, having a credit score above 740 will get you a lower interest rate, which will save you money long term.
Several factors go into having a positive credit score. It includes your bill payment history, amount of debt, length of credit, new or recent credit, and the kinds of credit you have. So make sure to pay your bills on time, and don’t max out your credit cards.
2. Know your budget and stick to it
Before you start looking, know how much you can afford to spend on a home. Take into consideration how much you can pay every month on the mortgage, insurance, utilities, repairs, and other expenses that come with home ownership.
Once you know your budget, set your search parameters accordingly. While you may be able to negotiate a lower offer on a home, you don’t want to fall in love with a property that will leave you broke or unable to make payments.
3. Work with an experienced agent
A top-rated, experienced real estate agent is worth every penny of their commission fee. They can narrow down your search field to help find what you want and need within your budget. Plus, their expertise can help you find hidden gems in the market to get you more bang for your buck.
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An agent can save you even more money during the offer process. They’ll negotiate on your behalf and can advise you on whether you’re getting a good deal — or if you should walk away.
4. Ask to waive brokerage fees
You don’t have to go broke working with a real estate agent. Sometimes, you can save money by asking if they offer any discounts or are willing to waive some of the smaller fees associated with a home sale.
Some agencies offer discounts to customers who work with newer agents. While these agents may not have as much experience as others, you can trust that they will have ample support from their brokerage to provide you with top-notch service.
5. Save for a downpayment of 20% – or more
The more you can pay in cash when you buy a home the better. Having a larger down payment will reduce the total amount of your mortgage and how much you pay in interest long term.
While loans are available for as little as 3% to 10% down, you’ll save more money over time if you can put down 20% of the asking price with your offer. That means, if you’re looking at homes listed at $300,000, you should have at least $60,000 in savings.
6. Compare mortgage brokers
It has never been easier to compare multiple mortgage brokerages and shop for the best deal. When comparing brokers, find out which lender will give you the best deal and, most importantly, the lower fixed-interest rate.
While you’re at it, get preapproved for a mortgage before you go shopping. Preapproval — which is different from being prequalified — gives you a conditional approval on a loan, including the terms of repayment. It requires a full application process that gives you and the lender a clear look at how much you can afford to spend on a home. With preapproval, you can house-hunt with peace of mind and avoid financing hiccups after you make an offer.
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7. Get a shorter-term mortgage
Most home buyers get a 30-year fixed mortgage when they buy their home. By getting a 15-year mortgage, you can spend less money on interest. This could save you thousands of dollars, depending on the size of your loan and your interest rate.
Before getting a 15-year mortgage, make sure you can afford the terms. You’ll be spending more money each month than you would with a 30-year mortgage.
If you’re unsure of your ability to make larger payments every month, you can make extra or larger payments instead whenever possible. Make sure to talk to your lender when you do this to ensure those extra payments go toward the principle on your loan instead of the interest.
8. Shop during winter
While the real estate market can ebb and flow from year to year, winter is consistently a good time for buyers to shop. The market tends to slow down — particularly during the holiday season. When homes linger on the market, sellers are usually more willing to reduce their asking price and agree to contingencies, such as paying for home inspections, repairs, and all closing costs.
If you’re curious what a home looks like during other seasons, ask the seller if they have photos. Otherwise, you might be able to find some on Google Street View.
9. Be willing to downsize
Buying a smaller home is a good option to save money if you’re able to downsize. Homes with fewer rooms and lower square footage tend to cost less than others houses in a market. Going smaller is especially helpful for saving money if you have your sights set on buying in a pricier neighborhood. You’ll get your dream location for a fraction of the cost over time.
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Smaller homes also require fewer furnishings, which means you’ll spend less money buying furniture and accessories than you might in a large home. You can save even more money on utilities by having fewer rooms to heat, cool, and light.
10. Look at fixer-uppers
Buying a home in need of repairs and updates can also save you money. Many sellers don’t want to be bothered with renovations, especially when they’re trying to sell a home quickly. You can buy a home for a bargain if you agree to take on the updates.
Before you go forward with buying a fixer upper, know the full extent of the renovations you will need to make. Costly repairs, such as foundation work, electrical work, and roofing, can quickly add up and cut into your savings.
11. Get multiple quotes for home insurance
Just like shopping for a home and a mortgage, do your research when it comes to purchasing homeowners insurance. Most mortgage lenders require home insurance, and you want to have it to protect one of your biggest investments. But that doesn’t mean you have to go with the first offer you get.
While you’re looking at homes, find out if they need high-risk insurance. Some homes require additional insurance based on where they are located. You could end up paying extra money on your insurance premiums every year, which will add up over time.
12. Require a home inspection
Include a home inspection with your offer to avoid unexpected, and costly, surprises after you take ownership. A good home inspection will turn up structural issues with the foundation and roof, as well as reviewing the condition of the HVAC and electrical systems, pest and mold concerns, and more.
Remember, an inspection is different from an appraisal. While an appraisal provides a professional assessment of a home’s value, and is typically required as part of the mortgage process, an inspection takes a deeper look at the condition.
To save even more money, ask the seller to cover the cost of the inspection, which typically ranges between $250 and $300.
13. Negotiate closing costs
While buyers and sellers typically split closing costs, you can negotiate the terms as part of your offer. It’s a good practice to ask the seller to pay the commission fee for both real estate agents involved in the transaction.
Most agents earn a 2.5% to 3% commission on a home’s sale. That means you would give your agent $7,500 to $9,000 on a $300,000 home, in addition to the other legal fees. Instead of paying that out of your pocket, the seller can pay it from the proceeds of the sale.
14. Take advantage of tax benefits
Homeowners can take advantage of tax benefits to save money through the years. This can include taking a large deduction when you buy your house, and reporting the interest you pay on your mortgage.
Some communities also offer tax incentives or rebates for buyers in emerging parts of town. Check with a tax preparer and real estate agent to find out if there are any opportunities that you qualify for locally.
15. Refinance your mortgage
If you’ve faithfully paid your loan and kept your property in good condition, you may want to refinance your mortgage. Whether you have a 15-year or 30-year mortgage, you may be eligible to refinance your loan throughout the term. Refinancing — which is a similar process to securing a loan in the first place — can help you secure an even lower rate on your mortgage.
16. Reassess the property taxes
Paying property taxes is a costly part of homeownership. As property values increase over time, the amount of money you will owe every year will increase accordingly. Although property taxes are used to pay for services like improving roads and schools, you don’t want to overpay for them.
If you think your home has been priced above the market value, you can request a new assessment that could lower how much you have to pay. Visit your local government’s website for more information on the forms you'll need to fill out and steps you’ll need to take.
17. Reduce energy costs
Monthly utility costs can add up over time, especially if you own a large home with many rooms. You can take steps to reduce the amount of money you spend on utilities every month.
The simplest thing you can do is make sure lights are turned off when they aren’t in use and your home’s thermostat is kept at a comfortable, but not excessively hot or cold, level, depending on the season. Swap out traditional light bulbs for LEDs, and make sure you regularly change air filters.
You can also make bigger investments in reducing your electric costs by installing energy-efficient systems and fixtures. You should also make sure your home is properly secured and sealed. Check the windows and insulation so you don’t let in hot and cold air that will make your HVAC system work harder.
18. Be strategic about renovations
Homes require maintenance and updates, but you don’t have to make them all at the same time. Before spending a lot of money renovating your primary bedroom suite, start with repairs that will protect your home from damage, such as replacing the roof after hail damage or fixing termite damage.
After making structural repairs, prioritize other renovations based on how much value they will add to your home and how they will benefit you in the long term. Spending money on a kitchen update typically adds value to your home, giving you a strong return on your investment. Likewise, you and your family will likely get more use out of an updated kitchen versus a game room.
19. Work with budget-friendly, reputable vendors
Before hiring anyone to help with renovations, do your research and get multiple bids. Prices can vary drastically from vendor to vendor.
Just make sure you get positive, reputable references for anyone you hire. Saving money with a budget-friendly vendor up front could cost you more money in the long run if they do subpar work or use shoddy materials.
20. Repurpose old furnishings
It’s normal to want to furnish your home and make it cozy. Instead of rushing out to buy all new furniture, you can save money by refinishing furniture you already have or finding used, bargain pieces. A little paint and fabric can give an old piece of furniture new life and save you lots of money.
Remember, you can always replace pieces down the road. So avoid making too many big purchases right away that you might end up regretting.
21. Rent out extra space
You can save money on your monthly mortgage payment by renting out a room or a floor of your house. This could include taking on a long-term tenant or listing your home on a vacation rental site for short-term renters.
In addition to bringing in income to help cover the cost of taxes, updates, and more, renting out part of your home can also have tax benefits. You may be able to write off a portion of your home’s costs as a business expense.