3 Ways to Save Money when Buying a House

Buying a house is one of the largest and most important investments you will ever make, so it’s important to understand how to save money and avoid common mistakes, which can be costly. While you might assume that home-buying is a straightforward process, there are actually multiple steps (and some expenses) – that you should definitely be aware of first, especially if you’re working with a budget!

How to Save Money When You Buy a House

Although you probably already realize that a home is among the most expensive things you will ever buy, you might not realize that there are additional costs and expenses that come with this major investment. So, if you want to save money when buying a house and make the process less painful for your pocketbook, here are three smart, strategic steps you can take:

1. Buy in the Path of Growth

When you buy real estate close to (but not directly in) an up-and-coming area or hot neighborhood, you can often save between 20-30 percent on the purchase price, while still enjoying many of the perks that come with living near one of the area’s hottest communities. In addition, this smart move will help you see faster appreciation rates. And if you want to save even more, look for a house close to a popular area that also needs renovation work. By purchasing a fixer-upper and buying in the path of growth, you will save money and make even more in the long run.

2. Negotiate the Closing Costs

When buying a house, the price of closing costs might surprise you… And not in a good way! According to Zillow, the average buyer typically pays between 2-5 percent of the purchase price in closing costs, which means paying between $4-10k on a $200k house – ouch! When you buy a house, closing costs generally include things like attorney, lender and title fees, appraisals, escrow, interest, the price of inspections, radon testing and more. But most buyers don’t know that many of these costs are negotiable, which means you could save a few thousand dollars before you even get the keys to your new house!

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3. Eliminate Private Mortgage Insurance (PMI)

Last but not least, it’s important to note that if you borrow more than 80 percent of the cost on a home, you will be required to pay private mortgage insurance (PMI). This usually amounts to around .5 to 1 percent of the total loan amount each year, so if you can avoid having to pay it, you really should! If you are getting a mortgage, you will need to come up with a down payment of 20 percent in order to avoid paying PMI. This move will save you thousands of dollars in the long run, so if you can’t afford it on the homes in the price range you’ve been considering, it may be worth it to look at a few lower-priced properties. 

Remember, just because you can do something doesn’t mean you should! It’s feels great to own a really nice home, but it feels even better to own a home you can actually afford. Only spend what makes sense and you will enjoy the peace of mind that comes along with making smart financial decisions.

Would you like to learn more smart strategies for buying a house? Let us know in the comments section below!

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