Meet Our Anonymous Guest Writer
We were contacted by someone who has valuable information on home buying to share with some of our clients. Enjoy!
Few things are more exciting than purchasing a new home. Finding and closing on the home that will facilitate the next phase in your life is a significant step, and it’s as complex as it is thrilling. There are a lot of moving parts, and it’s important to understand the process so that you can make good decisions along the way.
Fortunately, there are some finance hacks that you can use to put yourself in the best financial position before, during, and after the homebuying process. Here are a few examples:
Know your down payment options.
Your first order of business will be to research down payments for homes in the area you’re considering. For years, most homes required a 20 percent down payment, but now CNBC says it’s considerably lower in many places. What’s more, many loans don’t require a hefty down payment.
If you don’t think you can meet the required down payment for homes in your area, don’t count yourself out; there are options. For instance, if you’re a veteran, you could get a mortgage through the Veterans Administration (VA) without making a down payment. The Department of Agriculture (USDA) also offers mortgages like these.
If your credit score is 500 or higher and you’re a first-time buyer, you might qualify for a Federal Housing Administration (FHA) loan. With an FHA loan, you may be able to purchase a home with as little as 3.5 percent down. While government-secured loans like these can feel complicated, you can work with a lender like PennyMac to ease you through the process.
Look at HUD homes.
Another option for saving money is purchasing a home through the Department of Housing and Urban Development (HUD). HomeAdvisor explains you can find HUD homes in good condition in basically any location in the country by speaking with a real estate agent or authorized broker.
Along with saving on the sale price of a home, you can get free services from real estate brokers (e.g., offer and deposit submission), and you might qualify for repair loans and a 3 percent down payment. Plus HUD often pays 5 percent of the closing costs, which can total thousands of dollars.
Mend your credit.
The better your credit score, the better loan you can typically get when buying a home. If your credit isn’t very good, you can improve it by paying off any missed payments, staying up-to-date on payments going forth, and chipping away at any outstanding debt. Also, don’t open any more accounts while you’re trying to build your credit because it can negatively affect your score.
Go with less than you can afford.
As tempting as it is to purchase a home that’s right at your budget’s limit, it’s probably not wise. Homeownership usually costs more than you expect, so go with a home with a mortgage you can comfortably afford, and be sure to leave room for unexpected expenses like maintenance, repairs, and/or job loss.
Additional costs to consider when buying a home might include:
- Property taxes
- Closing costs
- Security and other tech upgrades
- Inspection and appraisal fees
- Mortgage insurance
- Homeowners insurance
Save on homeowners insurance.
This type of insurance can be quite expensive, but fortunately there are ways to reduce the amount you have to pay each month. For example, installing a quality home security system will reduce the likelihood that your insurance provider will need to pay out due to property crime or other incidents, which means they will typically lower your premium.
As exciting as purchasing a new home can be, it’s important to understand the process so that you can come out in a good financial position. Explore options that will ensure you aren’t stretched too much, and consider less traditional funding options. Hacks like these can help you land the perfect home while maintaining your financial security for the future.