I would definitely not consider myself a real estate expert (I do want to learn and invest more) but we have bought two homes so I have become more familiar with the process. Right now, especially in our area, homes are in huge demand because of low interest rates + pandemic fears. If you are looking to buy a home, I wanted to share a few money saving tips we have used in the past when purchasing. Maybe there are a couple that can help you out!
Real Estate Rewards Programs
We used a real estate rewards program through our bank, and it looks like other banks and some real estate companies have similar options as well. Essentially how it works is you are recommended one or two real estate agents when purchasing a home. When you go with one of these recommended real estate agents, after closing you get a nice check in the mail (we got $1500!) How it works is, there is a lot of competition for real estate agents. Real estate agents give up part of their commission through this program in order to be referred and get your business, and you + the bank get to cash in on that.
*Please listen to the advice of professionals, I am just sharing our experiences below*
On our first home purchase, we were sooo disappointed with our home inspection. He literally only flipped light switches and faucets. We literally could have done all this ourselves very easily! He did not go under the house or into the crawl spaces, which were our main concerns and something we couldn't do on our own. This costed a couple hundred bucks! On our second home we opted to not do a traditional home inspection (since we were remodeling everything anyway) and chose to do a roof and foundation inspection. If you do go with a traditional home inspection, I recommend talking with the inspector before hand to ensure they will be able to inspect all areas you are concerned about, as well as shopping around for cheaper prices.
For our second home, we had in our contract that the seller would purchase us a 1 year home warranty. This covers items that are not visible through an inspection and some appliances. Within a couple months the water heater died, and we called up the home warranty company. Turns out there is fine print about "codes" so we would have to pay out of pocket $800 for a new water heater WITH the warranty. We ended up buying a bigger, more efficient water heater for the same price and just installed it ourselves. For most services through the home warranty we had to pay out of pocket for something. Moral of this story, in the future I would ask for more credits at closing instead of a home warranty.
I think when most people consider a mortgage, they often look at 30 year loans. According to a lot of sources, most homebuyers do a 30 year mortgage. Especially for new home buyers, these can be more accessible. Your monthly payments are lower and you generally do not have to bring the traditional 20% down payment. For our first home, we did a 30 year loan but we told ourselves we would pay extra every month to save on interest. How many times did we actually pay extra money on our mortgage? ONCE. For our second home we did the math and discovered we would save $130,000 in interest by paying more monthly with a 15 year loan vs paying over an extra 15 years during a 30 year loan. Thats a G Wagon! We pay about $500 more every month, but in the long run save so much money in interest. Not only that, but 15 year loans have lower interest rates, and you also don't have to pay a PMI (an additional mortgage insurance cost you have to pay if you don't put down 20%) Considering how long you plan to live in the home and what you can pay every month, you may want to review different loan types.
Closing Costs + Credits
There is so much negotiating that goes into each escrow. If there is an issue that needs to be fixed with the house or the inspection turns up something unexpected, you can ask for the seller to either fix these issues or offer closing credits. Essentially they are giving up part of their cut of the house sale back to you to help with closing costs. When we sold our house, there were a few small fixes that showed up (like cracks in the pool) and the buyer requested a credit, which we were able to negotiate with them about. This way we are "crediting" some money from the sale back to them so they have to bring less closing costs. Closing costs cover a lot of things from the escrow company to title transfer and home insurance. Its generally a percentage of the home sale price. These credits help you pay less of this. Depending on the market and how long the house has sat, you can also request the seller pay all closing cost ( which are generally paid mostly by the buyer). Right now the market is a sellers market and homes are selling very quickly so closings costs and credits may be harder to come by.
If you are looking to purchase a home I hope a few of these tips were helpful for you! If you have your own tips for saving money buying a home, let me know down below.
Tips for saving money *selling a home* coming soon!
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