To shave even a few thousand dollars from the cost of buying a home, you might consider living further away from the city center or buying a fixer upper. But there are other tips for buying a house and ways to find a more affordable home that you might not have thought of. In addition to saving on the home purchase itself, you can also save on the ongoing costs of maintaining that home.
Here are some ways to get more for your money when buying a home:
Shop around for a mortgage
It’s easy to take out the first mortgage you’re offered from your bank, or through a broker someone recommends to you. But you stand to save thousands on interest payments over the term of your mortgage by talking to a few different lenders before choosing a loan.
Even a difference of half a percent could save you a lot! Let’s say you planned to take out a $250,000, 30-year, fixed-rate mortgage. With a 4 percent interest rate, you’d pay $179,674 in interest over 30 years. If you shopped around and got a 3.75 percent rate, you’d pay $12,870 less in interest. If you were approved for a 3.5 percent interest rate, you’d save over $25,000!
Keep in mind that shopping for a mortgage involves credit inquiries, which can temporarily affect your credit score. If you submit all inquiries within a short period of time, they’ll count as one credit inquiry instead of multiple ones, which will lower the impact on your credit score.
Banks and credit unions are great places to begin your search. There are also many tools out there that allow you to compare rates.
Consider a smaller space
You buy a home hoping it’ll suit your needs for years to come, but ask yourself some tough questions about the space you need to have versus the space that would be nice to have. Do you really need a guest room when you only host overnight guests once a year? Do you need a home office when you don’t ever work from home?
Underused extra bedrooms quickly turn into expensive storage rooms. The more bedrooms and square footage a house has, the more it can cost compared to smaller homes in the same neighborhood with similar amenities.
Not only do those extra rooms equal a larger monthly mortgage payment, but you have to heat and cool that space, too. And if you hire professional cleaning services, they generally charge more the larger your house is.
Before you visit homes for sale and fall in love with one, think about the rooms you’d need. And don’t shortchange space either by assuming that, say, your kids would be willing to share a room. Be realistic about that, too!
Avoid a huge yard
It’s easy to imagine yourself lounging in a hammock on the weekends in the middle of your lush, vast, well-landscaped lawn. But that grass isn’t going to mow itself.
If you hire a professional to mow your lawn, it will cost about $200 a month, depending on the size of your yard, how often you want the grass mowed, and what additional services you request (like landscaping or applying chemicals to kill weeds).
You can mow the lawn yourself, but it involves the upfront cost of a mower and other equipment. You’ll also lose valuable hammock-lounging time—don’t discount how much your time is worth!
The larger and more complicated your lawn and landscaping are, the more your yard will eat into your budget. This is an expense that surprises many first-time homebuyers.
Factor in your commute
One ongoing cost many don’t consider when buying a home is your commute to work from that location. It’s easy to tell yourself, “What’s another five miles?”
The answer is nearly $2,000 a year, according to estimates on the cost of driving per mile. That figure includes things like gas, maintenance, insurance, depreciation, license, registration, and taxes. But what it doesn’t include is the cost of your time and well-being (which is more negatively impacted the longer your daily commute is).
Choosing a house in a neighborhood far from your office will cost you more than you realize in money, stress, and time for family, friends, and hobbies. There’s also a correlation between commute time and happiness, so consider your commute carefully!