Buying a home doesn’t come cheap — the average home in the United States is now valued at a record high of $284,600. Although managing your finances and purchasing a home for as little money as possible can seem daunting, it can be done. By being proactive about your finances, you’ll be able to purchase a home in line with your financial goals.
Shop around for the best mortgage
The mortgage rates and fees you’re offered may vary depending on the lender. Requesting loan estimates for the same type of mortgages from different lenders will therefore help you get the best deal. Be sure to compare mortgage features, interest rates, APR, settlement costs, and potential origination fees. A specialized mortgage company will find the best mortgage loan program to suit your needs at the best price. You may also have the chance to purchase discount points, which are immediate fees that lower the interest rate. This may be a worthwhile investment if you have the money to spare and plan on living in your home for years to come.
Strengthen your credit score
Your credit score plays a role in determining whether you qualify for a mortgage, as well as the interest rate you’re offered. A stronger credit score will result in a better rate. Take time to work on improving your credit score before you buy a house. Start off by acquiring copies of your credit report from Equifax, TransUnion, and Experian (this doesn’t cost you anything). Check the reports over, and if you spot any errors, contact the credit bureaus to remove them from your report. Also keep your credit card balances low and pay your bills on time.
Save up for your down payment
Saving up for a down payment of at least 20% means you won’t have to additionally purchase private mortgage insurance (PMI), which ensures the mortgage company is financially protected in the event of you being unable to keep up with your payments and ending up in foreclosure. PMI typically costs 1% of your loan, and you pay that amount annually — which results in an expensive monthly mortgage payment.
Buying a home doesn’t have to be overly expensive or stressful. By shopping around for a mortgage, boosting your credit score, and saving for a down payment, you’ll be able to purchase your home without breaking the bank.