Four Ways To Save Thousands Of Dollars When Buying A Home

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Buying a home? Find out how to slash unnecessary costs and interest, plus discover a strategic mortgage payment strategy that can save you $247,220 in interest over the lifetime of a 30-year mortgage.

A little bit of research can go a long way when buying a home.

In some cases, making specific choices or negotiating certain aspects of your mortgage loan can save you tens of thousands of dollars or more.

If you’re thinking of buying a home in the near future, these tips can save you a small fortune over time.

In this article, we show you four ways to save money when buying a home:

Find the most competitive mortgage interest rates.
Avoid private mortgage insurance fees.
Negotiate a 7-day contingency.
Make strategic mortgage payments.

You can use the tips below to help guide you along the homebuying process.

Before you read on, make sure you go and check out our resources on paying off your mortgage faster so that you do save money and you expand your financial options.

1. Find Competitive Mortgage Interest Rates

The interest rate you pay on your mortgage loan affects your pocketbook in two ways:

Your monthly mortgage payments
The total price of your home

Before you agree to finance your home through your favorite banker, take a few minutes to compare rates from several lenders.

Comparing interest rates before you choose a lender can save you thousands of dollars.

For example, if you get a 30-year fixed-rate mortgage loan for $300,000:

An interest rate of 4.5% would result in mortgage payments of about $1520 per month, and your total home cost (if paid over the full 30 years) is about $547,220.

In this case, a 4.5% interest rate costs you $247,220 in interest over 30 years.
An interest rate just one percent lower – at 3.5% – results in mortgage payments of $1347 per month, and your total home cost (if paid over the full 30 years) is about $484,968.

In this case, a 3.5% interest rate costs you $184,968 in interest over 30 years.

Compare interest rates and get preapproved in minutes. Visit Credible now

In the example above, a one percent difference in interest saves you $173 per month and $62,252 over the lifetime of your mortgage.

Before you choose a lender, compare interest rates!

The quickest way to research mortgage lenders is by using a comparison site such as Credible. Credible allows you to quickly compare rates from vetted lenders, so you can find rates in minutes.

While you’re on the site, you can also prequalify for a mortgage loan and get an approval letter in minutes.

Credible is easy to use and does not affect your credit score.

Finding the lower interest rates on your mortgage loan saves a significant amount of money on your monthly payments and your total purchase price.

Before you choose a mortgage lender, shop around to find the most competitive interest rates, which can save you tens of thousands of dollars over time.

2. Avoid Private Mortgage Insurance Fees

You can save thousands of dollars per year by making a minimum 20% downpayment on your home, which allows you to skip the hefty cost of paying for your banker’s private mortgage insurance.

Private mortgage insurance (PMI) is a type of insurance that protects your banker in the event that you fail to make your mortgage payments.

PMI provides no benefits to you, the buyer.

The insurance is costly, usually between .5% – 2% of the total price of your home annually.

For example, if you buy a $285,000 home, you’ll pay about $3,420 per year ($285/month) for private mortgage insurance.

PMI is a complete waste of your money, but you can skip the expense altogether by making a downpayment of at least 20%.

Instead of paying for your banker’s costly private mortgage insurance, save up 20% of the purchase price before you finance a new home.

60% of homebuyers save their money to come up with a downpayment on their homes, and 38% use proceeds from the sale of a previous home as their downpayment.

If saving 20% seems daunting, or if the sale of your current home won’t raise enough money to meet your goals, consider picking up a side hustle or building an extra stream of income to help you save money quicker.

3. Negotiate A 7-Day Contingency

Negotiating a 7-day contingency helps ensure that you don’t get surprised with thousands of dollars in repairs as soon as you move into your new home.

When you’re negotiating the price of your home, ask about working in a minimum 7-day contingency agreement that allows you to back out of the deal for any reason – without recourse.

During this 7-day period, hire a private property inspector to check the home for critical issues.

If the inspection uncovers critical issues with the home, you can back out of the deal or try to renegotiate the price to cover repairs.

When you’re negotiating the loan itself, ask your banker for a loan with no prepayment penalties, and consider lenders that offer no-fee financing. These two considerations can also help you save thousands of dollars over time.

The 7-day contingency is a critical aspect of negotiating with the seller, and you should use the time to hire a private inspector to avoid surprise expenses.

Homebuying is easier with Credible. Get your mortgage pre-approved in minutes

4. Make Strategic Mortgage Payments

While we’re on the topic cutting home buying costs, we’d be remiss if we didn’t mention a simple mortgage payment strategy that can save you tens of thousands of dollars over the lifetime of your loan.

Biweekly mortgage payments can save you a small fortune on interest.

Here’s how it works: Instead of making one mortgage payment each month, split your usual payment in half and pay it every other week.

For example, if your monthly mortgage payment is $764, you would instead pay $382 every two weeks.

In the example above, if your full mortgage loan was $160,000 at 4% interest on a 30-year fixed rate, you would save $18,703 and pay off your home two and a half years earlier than expected.

Strategic mortgage payments only work if you’ve taken out a loan that does not penalize you for prepayments and if your lender is willing to set up biweekly payments.

Before you choose a lender, ask for a loan with no prepayment penalties that will allow you to pay biweekly.

Save Tens Of Thousands Of Dollars On Your New Home

Understanding how mortgages work can save you a small fortune when purchasing a home.

To keep the most money in your pocket, compare lenders to find lower interest rates, avoid paying for private mortgage insurance, negotiate a 7-day contingency agreement, and make strategic mortgage payments.

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