How To Save When Buying Your Dream Texan Home
Many people don’t associate taking out a mortgage with cutting costs. A home is one of the largest purchases you’ll ever make, meaning you have the most opportunity to save. Making even a few small changes to your finances could save you thousands over the life of your mortgage. Check out these cost-saving tips for buying a home in Texas.
Focus On Getting an Excellent Credit Score
A credit score isn’t just necessary to qualify for a mortgage but also to earn a competitive interest rate. The better your credit score, the better rate you’ll qualify for. You can do several things to improve your credit score, including paying down debt, making on-time payments, and avoiding closing any older accounts. Many financial experts also recommend avoiding taking out new debt before buying a home. Financing a car purchase or opening a new credit card affects your debt-to-income (DTI), which could also impact your approval chances.
Qualifying for a lower interest rate can significantly affect your monthly payments. A simple 1% decrease in interest rates on a $300,000 mortgage could save you as much as $175 per month on your mortgage payment.
Pay a Higher Down Payment
A higher down payment can also help you save a lot when buying a house. The more money you put toward your home purchase, the less you have to finance. Additionally, putting more money toward your loan makes you a less risky borrower, meaning many lenders will give you a better interest rate.
As a general rule, try to aim for at least a 20% interest rate. Financing less of your purchase price also means you pay less for the home over the life of the loan. You’ll also start with more home equity, making it less likely that your property will be underwater if you need to sell in the near future. Finally, a larger down payment can help you avoid mortgage insurance. Most lenders are willing to drop mortgage insurance if you finance less than 80% of the purchase.
Know When To Refinance
Even if you’re just considering your first loan right now, it’s never too early to begin thinking about refinancing. Refinancing may make sense if interest rates drop significantly lower than what you currently pay. You should also consider refinancing if your existing loan has mortgage insurance, which often adds a couple hundred dollars to your monthly payment.
If possible, you could also make extra payments toward your mortgage in preparation for refinancing. Making even one extra mortgage payment per year can shorten a 30-year loan by four or five years.
Choose Your Lender and Loan Type Carefully
Even who you choose as a lender can affect how much you pay for your loan. Some lenders offer better rates, and shopping around could qualify you for a better one. Additionally, few lenders may be willing to help you make the necessary changes to qualify for better rates, like offering credit counseling services. The loan you choose also makes a difference in how much you pay. A 15-year loan means higher payments but less interest. At the end of the 15 years, you’ll also own your home free of debt.
Interested home buyers looking for mortgages in Texas have many excellent options. From FHA, conventional, investment, or jumbo, there are mortgage options available to fit most buying needs. Getting pre-approval before shopping for available homes also has many cost-saving benefits.
Negotiate the Purchase and Details of the Home
Negotiating the purchase of your home is also an option. Your negotiation power may be affected by many factors, including the competitiveness of your market and your financing options. For example, sellers tend to favor cash buyers because they don’t have to meet strict lender requirements. Sellers may also be more willing to accept a lower purchase price on a home if they don’t have to make ample repairs.
If you’re handy, you may choose to negotiate a lower purchase price and make any necessary repairs yourself. However, keep in mind that FHA and conventional loans usually require the home to be in liveable condition to finance. If the seller isn’t willing to come down on the price, there may be other ways to save. Consider asking them to cover some portion of the closing costs. Many new home buyers don’t realize they can negotiate their home price, and negotiations are one of the best reasons to work with an experienced realtor.
Clipping coupons and negotiating your cable bill are great ways to save money. But boosting your credit score and putting more down on your mortgage has the potential to save you thousands of dollars over the life of your loan. The lender and loan type you choose also significantly impact your total cost.
