With increasing property values and interest rates, homebuyers need to get innovative to stay on budget and save on their real estate purchases. Unfortunately, you're likely to pay at least the full asking price in most locations, if not more. But there are still approaches you can use to help reduce the costs associated with purchasing a home. Check out these money-saving tips for first-time homebuyers from our public claims adjuster in Orlando, FL.
The first step in purchasing a home isn't scheduling many showings. Instead, it's speaking to a mortgage lender so you know precisely how much you can spend — both in terms of being approved and remaining within your personal budget. When you talk with a lender, you'll understand what kind of interest rate you qualify for and how much the down payment will influence your monthly expenses.
You'll also learn other related expenses, such as private mortgage insurance, real estate property taxes for the places you're researching, and closing costs. All of this research confirms that you completely understand the costs associated with purchasing a home, both upfront and month-to-month. That way, you won't be shocked by unexpected expenses once you buy.
Comparing mortgage rates is one of the most reasonable ways to save monthly and overall money. Even a fraction of an interest point can significantly affect how much you pay each month (and throughout your mortgage). Here's an illustration with a $350,000 mortgage. A 5.75% interest rate would equal a monthly payment of $2,043 in principal and interest. Raise that to 6.25%, and that payment grows by over $100 to $2,155. So over the life of your loan, you'd spend $40,000 more with a higher interest rate. Compare numerous lenders to locate the most competitive loan terms, including the rate.
Your credit score heavily influences your interest rate. Spending time enhancing your credit score before you purchase a house can make a massive difference. First, check your credit report and be sure there are no fraudulent charges or incorrect negative entries. Then, you can dispute them to have them removed from the report. It's also vital for your credit score to pay bills on time and decrease any high-interest debt, like credit card balances. Being consistent with these recommendations over time can improve your score and help you qualify for a lower mortgage rate.
The mortgage with the lowest rate isn't always the cheapest. Before you pick a specific home loan or lender, ask about the fees involved. Some lenders, for example, may charge an origination fee to cover administrative costs associated with the loan. Different mortgages also have extra built-in mortgage insurance fees. Conventional loans mandate private mortgage insurance (PMI) if the down payment is under 20%. FHA loans demand a similar mortgage insurance premium (MIP), no matter your down payment size.
Putting more money towards your down payment can save you in various ways. First, it lowers the mortgage balance, which lowers the interest you pay over time. It also lowers the monthly payment because you don't have as much to pay back. And if you can put down 20% of the purchase price, you can eliminate mortgage insurance fees to save even more.
These are tips for saving money as a first-time home buyer. Contact us today if you ned a public claims adjuster in Orlando, FL. We are here to help!