How You Could Save Big on Your Next Home Purchase

Whether it’s a brand-new experience or you’re buying a home for the first time, purchasing a property is an adventure. However, the process is expensive, so it pays to know how you can cut costs back with your next home purchase.

If you’ve been concerned about the costs of buying a house, then there are plenty of things you can do to save yourself money. You could invest in an affordable fixer-upper or take advantage of HUD homes.

In this article, we’re going to take a look at five of the best ways to save money and give a boost to your home-buying budget. Let’s get started!

Unfortunately, fixer-uppers have gotten a bad reputation as savings-draining “money pits.” Yet, that often isn’t the case. In fact, they could be the means to give you access to neighborhoods that would otherwise be unaffordable with your current budget!

Since they’re usually in a bit of disrepair, they tend to get overlooked. That’s often because there is an assumption that they’ll end up being expensive to renovate. However, even that could save you big bucks compared to a full-price new home. Why? Well, you get to prioritize what you renovate and what you don’t!

With this approach, you can restore your property as you see fit. You could stagger any of the repairs over a period of time or focus on what is essential to you. On top of that, much of the cosmetic renovation can be done yourself for a fraction of the price.

Buying a fixer-upper may also make you eligible for an FHA loan via the 203(k) program. This scheme provides mortgages for homebuyers looking to purchase and restore fixer-uppers. Yes, buying a fixer-upper is a process, but you gain a home that may increase in price and give you equity down the line.

Pros

• Fixer-uppers are often cheaper and can give access to expensive neighborhoods
• Less competition and risk of a bidding war
• Prioritize what you renovate and spend money on
• Better room to get good returns down the road

Cons

• Might be costly to repair
• Harder to have a set budget
• May take longer than desired to be livable

While shared ownership isn’t for everyone, it can be an affordable path to buying a home. For instance, co-ownership with friends or relatives could offset your financial burden.

By living under the same roof, you and your roommates spread the cost of mortgage payments, maintenance, and utilities. Of course, as with any group purchase, there are some potential pitfalls. For example, what if someone decides to leave or can’t fulfill their financial responsibilities? You’ll need to weigh the odds before you buy with others, no matter how close you are.

Alternatively, shared equity allows homebuyers to live in a home while using the resources of an investor, such as a relative or housing association. Eventually, you buy the investor out or sell the property and split the profits.

Pros

• Split your monthly expenses and share house maintenance
• Boosts your chance of qualifying for a mortgage
• Easier to make a downpayment Gains in home equity

Cons

• Difficult to walk away
• Credit score may be impacted if co-owner falls behind on payments

A HUD home is a property, often foreclosed, that’s come under the ownership of the US Department of Housing and Urban Development. Buying one has many benefits, not the least of which is that they are almost always more affordable than other homes.

Taking this route could give you access to HUD’s three percent deposit scheme. What’s more, HUD will pay up to five percent of closing costs. You may even be eligible for FHA-approved financing or other federally-backed schemes, such as those for repairs and veterans.

As a bonus, you’ll likely be able to move in quicker since a HUD property has already been appraised for an FHA mortgage.

Pros

• More affordable than many other properties
• Typically faster closing Some closing costs are covered
• Won’t have to compete with investors

Cons

• Can only negotiate through a HUD-approved real estate
• Properties are sold as-is and might be in disrepair

Your expenses aren’t just limited to the price of a home. Thankfully, there are a few ways to manage these costs, too.

With a good credit history backing you, you’ll have a better chance of being approved for a loan with favorable rates. Gauging your current standing is relatively straightforward, and is made all the more convenient thanks to online credit checkers.

If you want to improve or maintain your score, there are a few steps to consider. Sure, it might be tempting to keep applying for new credit cards, but that could actually be counterproductive. That’s because each application will result in a hard inquiry from lenders. If too many are made, your score ends up taking a hit.

Instead, make it a habit to avoid late payments, as they negatively impact credit. Likewise, look to bring debt down and keep your credit cards in check.

Home-buying expenses are more than the deposit, with the most significant being closing costs. That covers home inspections and document fees, which could be anywhere from two to five percent of a home’s value. Besides that, there are also property taxes, homeowners’ insurance, and more to factor in.

Of course, these expenses can vary.

With that in mind, consulting with a realtor may inform your decision-making and even save you money. If you do go down this road, be sure to give them a thorough overview of your situation to get the best advice and, above all, solutions tailored to your specific circumstances.

Besides practical guidance, realtors have the expertise to navigate otherwise stressful negotiations with sellers. That experience could help you get a favorable price and potentially cover any extras.

It isn’t always easy to find a property that won’t break the bank, but owning a home should be a realistic dream for everyone. And the good news? With these money-saving tips and finance hacks, you’ll be better placed to set yourself up for success in the property market.

Whether you invest in a fixer-upper or go down the path of shared ownership, you can start on the road to becoming a happy homeowner. After all, giving yourself the security of homeownership is worth it.