Buying a home is unquestionably among the most significant financial decisions you will ever make over the course of your lifetime. As you gain this all-important asset that can — and will — serve your family in years to come, you may also find your liquidity depleted and even find yourself in debt for the next few decades.
Indeed, unless you have the capacity to pay off a home in full when you buy it, these scenarios can be a foregone conclusion. However, did you know that there are some not-too-well-known ways to keep the financial burden of buying a home on the low side? Let us count the ways.
Get pre-approved, not just pre-qualified.
The process of buying a home does not start with getting a real estate agent and searching for the perfect home. Instead, it starts with determining that you can, in fact, afford to buy one and, by extension, knowing your price range. For this reason, it’s a good idea to determine your purchasing power and calculating affordability in advance.
In the same vein, you’ll need to get your credit report, as well, as this can make or break your eligibility for a mortgage. Subsequently, you may already be able to pre-qualify for a loan, giving you a solid idea of what you can realistically expect to borrow. And you definitely shouldn’t stop there. In fact, you’ll want to take it a step further by actually getting a pre-approval letter, which is essentially a conditional commitment for a specific loan amount. This puts you a step closer to getting a mortgage and can speed up the process of closing a home down the line.
No downpayment, no problem.
Now, getting a loan is one thing; scrounging up the down payment, on the other hand, will be an entirely different story. Generally speaking, a 20 percent down payment is required to get the ball rolling, which, for most people, is quite a hefty sum of money. However, some home buyer programs may allow a lot less, though more often than not, this also translates to higher fees and paying out of pocket for mortgage insurance.
Doubtless, getting to shell out less than 20 percent as a downpayment is a very welcome option for homebuyers who simply don’t have that kind of money. It’s definitely worth exploring and taking advantage of low- to no-down-payment options that you might be eligible for, such as rural housing loans, VA loans, or FHA loans.
Spring for a home inspection.
One thing you will probably hear a lot of as you go about the process of buying a home is how you must get a home inspection. True, this is not a mandatory step and yes, you’ll have to pay for it out of pocket. However, the fact of the matter is that a home inspection is absolutely crucial, if only to alleviate your risks and ultimately protect your financial interest.
As the term purports, a home inspection is a way to really scrutinize your soon-to-be-home for possible problems. This can single-handedly protect you from surprise expenses in costly and essential repairs that may rear their ugly heads after you’ve already bought the house. This way, they can be addressed by the seller before closing, and maybe even get you a much better deal on the property in the process.
Budget for what comes after.
Finally, know that your expenditures likely won’t end after putting up the down payment. In fact, it’s more than wise to budget for closing costs, which can set you back approximately 2 to 5 percent of your loan amount. In many cases, you can actually negotiate to have the seller cover a portion of these costs, which is also why you must not pass up on the opportunity to negotiate.
And of course, don’t forget your move-in expenses. After all, you’ll likely want to make improvements on the home to make it truly yours, so prepare for this possible expense, too.
Indeed, buying a home will test your finances in more ways than one, but there’s more than one way to make it work in your favor. So, get started by doing your due diligence because you’re bound to find a financial hack or two if you look close enough.
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