4 Ways to Save Money Buying a Home in Today’s Market
For some people looking to buy a home these days it can seem like a very expensive endeavor. Home prices are still higher and mortgage rates have climbed into the 6% range for a 30-year fixed which is a lot higher than they have been in recent years. Furthermore, some economists are speculating that home prices will continue to rise year over year in 2023. Given these facts you may want to consider some ways that you can save some money during this transaction. Here are a few ideas.
Low Down Payment Loan
Nowadays many homebuyers are not able to put a full 20% down towards their home purchase. However, the good news is that you may be able to qualify for a loan that requires a lot less. An FHA loan allows you to get away with putting as little as 3.5% down, but you just need to have a good enough credit score (above 580). A loan such as this will have some other guidelines to follow or requirements such as mortgage insurance.
Down Payment Assistance Programs
If coming up with a down payment is a large hurdle for you, look into assistance programs in your area. Some of these programs do low or zero interest loans or provide money towards your upfront costs. Eligibility is based on credit and household income. These programs vary but some do require you to take a course as well as be in an approved location.
Down Payment Gift
Some buyers are fortunate to have family members who can help with a downpayment as a gift. This is permitted but there are guidelines. Lenders will want to confirm that this is in fact a gift and that it is not required to be paid back as that can affect your loan qualification. A gift letter stating this will be required as well as evidence of the transfer of funds. While there is no limit to what you can accept as a gift, if more than $15,000 then the family member will need to file a gift tax return to disclose it.
Auctions and Short Sales
With inventory still on the slim side, it is wise to keep an open mind about the property you are looking for. Buying a home at an auction is great as it can be a quick sale and still get to pick the price. A short sale can also be a way to save as banks are looking to liquidate for what they are owed which is often for less than market value. These types of properties are not as common to find these days but another option is to look for a home in need of updating. These homes should be priced lower and you can always make updates over time which saves you up front.