Because buying a home is a huge financial investment, most people are looking for any way that they can save themselves some money along the way. Luckily, with a little research and proper planning, you can find ways to save hundreds and even thousands of dollars over the lifetime of your home ownership if you do things right.
To help you with this, here are three ways you can save money when buying a new home.
Avoid Having To Pay PMI
In an ideal world, you’d be able to pay for your home with cash. But because this is a very rare reality for people, paying at least 20 percent down is the next best thing.
If you’re able to put down at least 20 percent as a down payment on your home, Steve Gillman, a contributor to The Penny Hoarder, shares that you’ll be able to avoid having to pay PMI, or private mortgage insurance.
When you put down less than 20 percent on your mortgage, you’ll have to pay PMI as a way to secure the investment of your lender. This extra mortgage insurance will cause your monthly payment to be higher than it otherwise would be. So if you can afford to put more money down in order to avoid paying PMI, you could save yourself a lot of money over the life of your home loan.
Shop Around For The Best Mortgage Rates
Another way you can save money when buying a new home is to shop around for the best possible mortgage rates.
When doing this, Ginger Dean, a contributor to Forbes.com, recommends that you first look at 15-year loans rather than 30-year loans. While this will mean that your monthly payments will be higher, shorter loan terms usually mean better rates for you. So if you can afford to swing your loan in this direction, you could save yourself a lot of money and have a shorter loan as well.
Know What You Can Safely and Comfortably Afford
For many people, they’ll often be approved for a larger loan than they think they can actually afford. But with this extra money available to them, many are then enticed to buy more home than they should, which can put them in a tight spot financially.
Rather than doing this, Trent Hamm, a contributor to The Simple Dollar, recommends that you know what you can safely and comfortably afford before you get your home loan amount so that you can save yourself some money by not taking the full loan amount that’s offered to you.
If you’re planning to buy a new home soon, consider using the tips mentioned above to help you save yourself some money in the process.