Buying a home is undoubtedly expensive—oftentimes it’s the biggest investment people make in their lives.
Here are a few ways to save money when buying a home that can add up and can help your wallet in the long run.
Use a real estate agent
Scratch that. Use an experienced real estate agent. A good realtor can save you both time and money and will help guide you through the home buying process as smoothly as possible. In addition to them being a resource, an agent will negotiate and save you money on various aspects that an untrained eye might not know to look for.
By the way, feel free to reach out to a member of the Sopris Realty team—we’re experienced and ready to help nail down the best price possible.
Private mortgage insurance (PMI) is a type of mortgage insurance that you might be required to pay for if you have a conventional loan and do not have a down payment that’s 20% of the total loan. It’s an extra layer of protection for the lender—an insurance policy on the loan itself—and is arranged by them and provided by a private insurance company.
It’s worth noting that FHA loans will require a PMI regardless of how much money you have as a down payment, typically for the entire life of the loan. Some people choose to refinance and switch from an FHA to a conventional loan once their loan-to-value ratio is below 78%.
PMI is a monthly expense that adds up over time. If you can, having 20% down is a great way to avoid those extra fees and save money when buying your home. Saving that much money comes with its own set of pros and cons (such as waiting longer to get the house of your dreams), but is worth considering if you are looking for frugality in the long run.
Consider buying in the off-season
In the real estate market, there are peak seasons and off-seasons—though in places like Colorado, the market is pretty steadily hot with high demand and low supply. However, sometimes buying in the off or shoulder season can pay off, based on a lower demand that leaves room for more negotiation.
Your real estate agent can help you to navigate the best time to buy a house based on the local market and your needs.
Shop around for your mortgage
Not all loans are created equal. When looking for a mortgage loan, be sure to shop around and check out several different lenders. Interest rates will vary, as will lending fees, such as processing, loan origination, and loan application fees—all of these are listed in the loan estimate.
When looking for a lender, check out private companies, banks, and credit unions and be sure to check out reviews online.
Research specialized programs and loans
There are different programs available to home buyers that can save money and make the housing process more affordable and accessible.
For example, FHA loans—a US Federal Housing Administration-insured mortgage loan—is a type of federal assistance that can help buyers qualify for a home loan with only 3.5% down. There are several state initiatives as well, for rural communities, first-time homebuyers, and more.
Another example is specialized programs, such as Fannie Mae’s incentivized foreclosure program that can help buyers save up to 3% on closing costs. Habitat for Humanity is another option that partners with buyers in need to build a home through sweat equity.
Increase your credit score
Increasing your credit score is a step that should happen before the home-buying process begins. A high credit score can make a huge difference in the affordability of your loan, as interest rates and lender fees are tied to the health of your credit score. The higher your score, the more money you save with your mortgage.
Some ways to boost your credit score include paying down your credit card balances, making regular payments, creating a lengthy payment history, and having several lines of credit (but not too many new ones—new accounts can drop your score initially for a few months).
Look for professional perks
There are also ways to sometimes save money on loans, prices, and closing costs, depending on your career. For example, teachers, firefighters, veterans, farmers, emergency technicians, and law enforcement all qualify for various homebuying programs. To find out what you qualify for, be sure to ask your lender or a loan advisor.
Additionally, Sopris Realty offers a Civil Service Discount for both buyers and sellers, which includes 25% of commission toward closing costs. This includes firefighters, emergency service members, law enforcement, military, healthcare professionals, government employees, and educators. Learn more here.