Going from renting to buying is a huge step in the right direction. Your money will be working for you instead of disappearing with the wind. It’s a big deal, so it stands to reason that some preparation is needed. Here are some practical tips for how you can begin to save for your new home and how you can save money on your purchase.
- Get educated. You are reading this article so you are on your way to saving and finding the right home. There are some really great first time home buyer classes out there as well. They are short and simple (and don’t require homework), but they give you the ins and outs of home buying. They will prepare you for how to save for a home, how to budget for a home, and how to get the loan that you want and need.
- Find the right agent. This is paramount to a great experience as well as being helpful in saving money on your purchase. A good agent will be able to help you to determine different ways you can save on your home. They will know what kinds of loans are out there and which one might be right for you. A good agent will also be a great negotiator who will work hard to get you the best deal possible on your home! He/she will also be knowledgeable about the things in a home that are likely to cost a lot of money when they need replacing, for example, the furnace, the roof, the foundation, the trees.
- Save for a down payment. Do some scouring of your budget and determine things that you can cut back on. Discover how you can begin to save more and more each month. You might consider putting your retirement contributions on hold for six months to a year to get a nice chunk of change that will help you get the home of your dreams. You will want to try and save approximately 20% of the price of the home to 1) help you secure a loan, 2) to keep your mortgage payments as low as possible.
- Improve your credit score. Work to improve your credit score by paying off some credit cards and loans. Make sure you don’t make late payments. Also, don’t apply for any other loans while you are trying to save for and purchase a home.
- Investigate different types of mortgages. Not all mortgages are the same, so shop around. Michigan has a number of different mortgage options for first time home buyers that are worth checking out!
- Find the right bank. Not all banks and loans are equal. Before you start looking for a home, talk to your banker about the ins and outs of their loan programs. Do your research. Ask around and get referrals on other banks and bankers. The one you choose could be the key to a smooth, fast transaction or a long, bumpy one. Also, it can make a difference on how much you eventually pay for your home!
- Look for credits. Don’t be totally discouraged if a new home is in need of some big repairs, especially if it is the right price! In different states and regions, you can get credits on different home improvements. If you are a first-time home buyer, you could get a credit towards a more efficient furnace, a new roof, or additional funds to put in solar. All homeowners should check out potential regional credits as well as federal tax credits to see if they qualify.
- Go DIY. If you can, look for a home with the right price tag in the right neighborhood. This could mean that you have to look at homes that are less than perfect. Being willing to do some projects on your own will increase your chances of finding a home in the neighborhood that is perfect for you. Consider that a home in need of repairs in your ideal neighborhood is likely to be a much wiser purchase than a turnkey, beautiful home in a not-so-great neighborhood.
- Think about other costs. When you are looking for a home, consider other costs associated with the purchase. It is common to just focus on the home and its price, but remember that there are a lot of other expenses after buying a home. Consider that there will be bills for water, gas, electricity, landscaping, etc… add those costs onto the mortgage and make sure that they are doable. You want to be able to enjoy your home and not live with constant financial stress.
Buying a home can be one of the best ways to invest in yourself and your financial future. Taking steps now to save for a home where you can joyfully plant some roots and lay your head means you are on the right track. Pay down bills, save as much as possible, and start looking for that perfect realtor who can advise you, educate you, and partner with you to find the perfect home.