Mortgage rates have risen rapidly this year. The increase in rates combined with high home prices has many potential home-buyers wondering if they should wait to begin searching for the home of their dreams. We’ve compiled 9 ways to help save money in the home-buying process.
(Looking for more ideas? Here are 6 more tips and trends to help you navigate the home buying process successfully and get you into the house of your dreams this year!)
Wait to Buy
Sure, waiting to buy a home might turn out well. For those who have the option to wait, mortgage rates will likely come down as inflation cools, which could start happening next year. But many people don’t have the luxury of waiting, and we’re here to tell you that there are many ways to save money in this hot market without changing your timeline.
Fix Your Costs Through a Fixed-Rate Mortgage
Rent inflation can ruin your budget without a lot of warning. When you buy your home, you’re able to essentially fix your housing costs from month to month AND build equity.
When you have a fixed-rate mortgage, you don’t have to worry about your monthly payment changing dramatically from year to year. Remember, you may be able to refinance your mortgage at a lower rate in a year or two, which would lower your monthly payment as well.
Reduce Your Payments with a 15-Year Mortgage
While the typical mortgage is for 30 years, a shorter loan with a better rate may be appealing. Additionally, you save an enormous amount in interest over the life of the loan AND build equity faster!
Of course, this plan isn’t all sunshine and rainbows. If the higher payment is more than you can swing, it won’t be worth the stress and rigidity in your budget for the next 15 years.
Consider an Adjustable Rate Mortgage (Maybe)
An adjustable-rate mortgage *may* be worth considering. An ARM offers a lower initial rate compared with a traditional fixed-rate mortgage.
The rate is fixed for a set amount of time, and then it adjusts up or down depending on interest rates at that time. As you might have guessed, this can be risky.
The key to this strategy is being absolutely sure you will be able to afford the maximum rate down the road. Or, if you anticipate moving before the initial rate period expires, an ARM can offer you lower rates in the meantime until you sell again.
But if the ARM rate isn’t much lower than a fixed-rate mortgage, the savings are probably not worth the uncertainty.
Lower Your Costs with First-Time Homebuyer or Veteran Programs
There are two IFA home mortgage programs, one for first-time buyers and one for experienced home buyers. There is also a Military Homeownership Assistance Program for eligible service members and veterans.
Shop Around. (For both your mortgage and your house!)
Rates can vary dramatically from lender to lender. So the best way to get a good deal on mortgage rates is to let lenders compete for your business. Get a qualified or pre-qualified rate from a lender. Then, shop that rate around to other lenders and see if any of them will offer you a better one.
Save at least 20% for the Down Payment
The more you increase your down payment, the more you can lower your overall monthly mortgage payment. Additionally, a big down payment can help you avoid the need for private mortgage insurance (PMI).
Buy During the Fall and Winter Months
We all know spring and summer are hot real estate months. With so many buyers and sellers during this time, it’s also typically the most expensive time to buy a home. Keep in mind that while the pickings may be smaller in fall and winter, the prices may be smaller, too!
Use an Experienced Realtor, of course!
If the housing market feels intimidating to you, make sure to find a dependable and experienced real estate agent who knows the area well and can save you time and money. You don’t have to do it alone, and we’re here to help you navigate the process and find ways you can save money. Contact us today, and let’s get started!