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5 Ways to Save on Costs When Buying a House

If you are a first-time home buyer or maybe it’s been a while since you last purchased your home, this article will help inform you on the home-buying process and related costs.

Even if you have a good idea of how it normally works, you may find a golden nugget that will help you save in an area you were not aware.

Let’s go over how the process works traditionally when you are buying a new home and where to find savings.

 1. Hire an experienced, trusted Real Estate Agent.

A good realtor will save you a lot of time, money and energy. While some first-time home buyers will try saving money by not using an agent, this will hurt more than help. An experienced realtor will be able to negotiate on your behalf and save you money in areas you didn’t know about.

They also have advertising budgets to get the word out to buyers. As the buyer, you normally don’t pay the realtor anyway- the seller does. Realtors get paid at the close of the sale on the house. Their compensation is 100% commission based and they don’t make anything until the house closes escrow.

The home seller typically pays the costs out of their home sale. In a situation where the buyer is helping cover the cost, it would generally be between 1% - 3% and the seller would cover 3% to 4% of the cost. Check with your agent on what is being worked out in the contract with the listing agent brokerage, as far as who is covering closing costs.

The realtor fee is a percentage of the sale price, commonly 6%. For example, if the home sells for $500,000, the realtors will get $30,000- split up between the broker and both the buyer’s agent and listing agent.

 

2. Have 20% saved for the down payment.

If you have less than a 20% down payment, you will be stuck paying Private Mortgage Insurance (PMI). This is insurance to cover the loan itself, so that if a borrower defaults on the loan, the lender is reimbursed for the funds lost. Here’s a list of reasons to avoid PMI. Your mortgage loan interest rate could potentially be lower also with a bigger down payment.

 

3. Get loan quotes from multiple lenders and do price comparisons.

Lenders will each have different interest rates, so it’s recommended that you get mortgage loan quotes from 3-4 different lenders. They also have different fees they charge, which you can see in their loan estimate; for example, loan application fee, loan origination fee, etc.

Find a couple lenders that you are comfortable with, and negotiate with them to see who is the best fit.

 

4. Increase your credit score.

Your loan will be cheaper, the higher your credit score is. The lender fees and interest rates are directly related to your credit score. Here are a few simple things you can do to get it higher before applying for a loan.

  • Pay down any credit card balances. It is recommended to keep your credit card balance at or below 15% of your spending limit. For example, if your spending limit is $10,000, your balance should be $1,500 and below.

  • Don’t apply for new loans or credit. When you open a new account, your credit score will take an initial drop for a couple months. Hold off on buying any new cars or getting any new credit cards if you plan on applying for a mortgage loan soon. 

 

5. Find a house that needs some work.

Most buyers are looking for a home where they won’t need to make any upgrades. It certainly is nice if you can afford a move-in ready home, but it comes at a higher price.

If you find a house that needs some love, but you can still function in it while putting off improvements, you can save upfront on the house sale cost. This will give you time to save up for the upgrades, once you are moved in. There are even mortgage loans that will help pay for renovations, such as Fannie Mae and others.

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How to Find Out What Your Home is Worth in 2018: Real Estate Broker Opinion on Your Home Value

Are you interested in finding out what your home is worth in today’s California real estate market? There are so many online tools to give you estimates, however they don’t necessarily reflect the exact value you would receive when selling. It’s best to talk to a real estate professional who can tell you exactly what is selling right now, and in the last 90 days in your area.

You should meet with a real estate broker and even a couple of realtors to find out a more realistic selling price, as they are currently working on active transactions in the market and could tell you what is happening.

The real estate professional will be able to pull recent “comps”, comparable sales, for homes located in the same area, same size, etc. that have sold in the last 90 days. They can also tell you if there was a bidding war with multiple offers.

Real Estate Photos

“If you are within 3 years of selling your home, you will want to keep tabs on the value and the real estate market in hopes that you can sell at an opportunistic time,” says Jose V. Sanchez, financial advisor and contributor to LifeInsuranceToolkit.com.

It all depends what your goals are. If you have the time and getting top dollar for your home is your goal, you can price it high and sit on it for a while to see if anyone will make an offer. You can always take it off the market if it doesn’t get an offer, and try again at a later time.

If you are needing to sell fast, of course you still want to get the highest price possible without the risk of it sitting on the market for too long. If a property sits on the market for 30 days or more, it often gets stigmatized by buyers- thinking “What might be wrong with this property?”

To find out what your home is worth in the current market, get a FREE Valuation of your home by filling out our form with your property information. You will receive an email with your estimate within 24-48 hours.

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5 Steps to Save Up For a House Down Payment

Step 1: Determine how much you will need to save.

Find out how much of a mortgage you can qualify for by talking to a mortgage lender. Your housing expense should not exceed 28% of your stable monthly income.

For example, if your income is $4,500/month, you can safely allocate $1,260 of that to your down payment savings. The $1,260 will include mortgage principal and interest, real estate taxes, homeowners insurance, and homeowners association (HOA) dues(if any), private mortgage insurance (PMI).

With mortgage rates at about 4.25% this will translate into a mortgage loan amount of about $250,000. The mortgage rate will be based on your credit score, loan program term, debt-to-income ratio and more.

To get the best-priced mortgage deals, you generally want to make a 20% down payment. It’s not a requirement, but that is the ideal. For a 20% down payment on a $250,000 home, you are looking at a $50,000 down payment.

 

Step 2: Decide on when exactly you want to buy a home.

When do you want to buy a home? If you decide you want to buy a home in 3 years from now, you will need to be prepared to save approximately $16,667 per year. That comes out to $1,389 per month. That’s a big chunk for anyone to put aside. You will need to consider cutting out the larger expenses from your budget or finding a way to make more income. You can do the calculation for 5 years or more to save and it may be more realistic for you.

 

Step 3: Take a look at your current budget and make room for savings.

The best way to look at your budget is to create an Excel spreadsheet and type in your income amount at top, list each expense in that column and subtract from your monthly income. This will give you a bottom figure- hopefully showing some money leftover, or breaking at 0.

If you don’t have any money leftover, you will need to take a look at the items that aren’t a necessity- such as eating out all the time, leisurely activities, etc. Take a look at the services you are using for your phone, internet, insurance, etc. and see if you can find a more affordable service elsewhere to cut costs.

Addressing the larger expense items is what will really help you save. If you have a huge car payment, maybe take a look at finding a lower car payment, or even making a one-time payment on a used car. That way, you are freeing up some of your income to set aside in savings.

 

Step 4: Find the best way to save, while also growing your savings at the same time.

Talk to an experienced financial advisor who can advise you on low-risk, long-term savings accounts that grows over time. It would be a real shame to let this amount of money sit in a regular bank savings account without any growth.

If you aren’t already in touch with a good financial advisor, ask your family members and friends for recommendations. You can also look into different companies online, such as Vanguard, T. Rowe Price, etc. and they can advise you on the right type of investment accounts.

 

Step 5: Set up an automated savings plan.

The best way to save money is to set up an automated system. Allocate a percentage or amount that will automatically come out of your paycheck each period and transfer into your savings account or money market account (the same way it would with a 401K contribution).

This way, you don’t see the money and therefore it’s invisible to you. There won’t be the temptation to spend it, because it won’t be in your regular bank account, ready to spend.

Saving for a home is a long process, but well worth the discipline. You will be grateful in the long run to have that bigger down payment because your monthly mortgage payment won’t be so outrageous that you feel you are drowning. Think of this as a dry run for getting you in the routine of saving, because once you are a homeowner, there will be unexpected expenses and repairs related to the house itself.

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Twin Rivers Property Search: How to Search For Properties

Looking for your new home? We understand how daunting the search for a new home can be and we are here to make the process easy for you. Here is a guide on how to search for properties.

This will show you all current, on-the-market listings in MLS, giving you the same access to properties as real estate agents have.

 

Find properties. Enter the city or zip code, Property Type, Status, Minimum or Maximum Price, Beds, Baths, etc.

  • If you want to get really targeted, click on “More Search Options” and there will be options like “Fireplace”, “Horse Property”, “No HOA Fee”, “No Pool”, etc.

In this example, we are searching “Sacramento” for “House Only”.

Click on “Search”. You will get a long list of properties.

Property Search

Get more targeted. We recommend that you sort by Price(Low to High), Status or City. Before browsing different listings, make sure to “Save This Search” so that you can come back to look again later.

You must register before you can save searches and get updates on new listings, open houses, etc. 

Fill out your information and click “Sign Up”. Once you have filled out the form, you will receive a confirmation email, asking you to confirm your email address. Confirm it and log in. 

Now you will be able to save all of your searches and come back to them later on without having to type back in all of your targeting criteria.

Sort price

This is what your Saved Search List page will look like:

saved search list

Start looking into each listing.

  • Location Information

  • Interior Features

  • Exterior Features

  • Schools

  • Additional Information

  • Map from Mapquest showing the streets

  • Walk Score (see what you are able to walk to vs. car dependent)

Find a property you love. Click “Save to Favorites” in the top right corner. You will get a pop-up asking you to register if you haven't already. 

save to favorites

Sign up for property updates and alerts. Go to the Property Search tab and there will be a drop down. Click on “Email Alerts” and sign up. This will allow you to stay updated on new listings in your target move-in areas, and also get updates on your Favorites- for example, when the status changes to “Pending Sale”, “Price Drop”, or there’s an open house scheduled, and more.

Take a tour of the home. Click on “Schedule Showing” or to get more information about the home, click on “Request Info”.

Get an estimate on your mortgage payment. Scroll down to the very bottom of a property listing page to find the Mortgage Calculator. This will show you an estimate based on Term, Interest Rate, Taxes, Insurance and Down Payment.

mortgage calculator