Buying a house in LA is not an easy task and especially not pocket friendly. You must be earning around $127,000 annually to even be eligible to buy a single family home. Moreover, even after paying 20% of the down payment of the house, you are expected to pay $3,000 for monthly mortgage.
So, how do you begin saving money for the house? Or how to save money when buying the house? We put together a few professionals and got down to answering these questions and much more so that you are completely prepared for buying your new house.
Decide the amount of money you want
Before even saving up for a home, you need to set a budget and look for houses that can fit well within that budget. Then, based on that budget you will have to make a long term plan in order to decide within how many years would you want to buy the house. Remember the longer you take, the more expensive the house will get. So, try to save up money as much as you can as fast as possible.
How to save up for a house?
Saving up money is an essential to buy a house. Purchasing a house is nothing like anything you have bought before. You have to make up a plan and find ways to save a lot of money to make ends meet. We would advise you to set a monthly savings goal and achieve it. Remember to note down the price of the type of house you want so that you know exactly how much you need to save.
Following is a list of things for you to do in order to save up for a house:
• Setting up a Savings Account/ High Yield Savings Account
We all have that moment where it clicks us that we should do something about our living situation; own a house and live in it instead of renting a place.
The day you get your this moment, go to you bank and open up a savings account. However, this savings account would hardly give you any profit considering the little interest you would get. So, a better option for you would be to open up a high yield savings account. This is because these accounts give you a lot more interest than your average bank savings account. In fact, you can get a Certificate Deposit for a high yield savings account to compare and contrast how much you interest would you get from it and telly it with the interest the bank is offering. Then, whichever option attracts you the most, go for it.
• How much to put in that savings account?
First, plan out your monthly budget and figure out the total amount of money you need to spend on a monthly basis. Then, the rest of the money that gets saved up from your cheque should be immediately transferred to your savings account. Do this at the start of the month immediately after getting your pay cheque.
• Decrease your Expenses
Once you have made a list of your monthly expenses, think of what you can cut from that list so that more money can be saved. The whole point of this is to help you achieve your goal much faster. Deposit all that saved up money in your savings account so that you do not go ahead and use it on something else.
• Money instead of Gifts
We are sure you receive plenty of gifts in the holiday season or on your birthdays. So, how about you to talk to your friends and family and ask them to give you money to deposit in your savings account as a gift rather than actually buying you one. This would be a great way to add a couple more dollars in your account.
Tips and Tricks to Saving Money when Buying a House
Listed below are 5 ways to help you save money when buying a house:
1) Using a Real Estate Agent
Some people choose not to get a Real Estate Agent because they think ” Why should I have to pay someone to buy me a house when I can easily do it on my own?”
However, this couldn’t be further from the truth because you will actually save up a lot of those hard earned bucks using a Realtor. In fact, the truth is that you won’t be the one paying his commission; it is the seller who will.
Buying a house with the help of a Realtor is going to make the process so much easier for you too. They often know the value of a house as soon as they walk in and will let you know immediately if it is overpriced or under-priced.
Additionally, moving requires a lot of work. You need to be in contact with good movers, home inspectors, contractors etc. It can be really hard for you to keep up with the expenses of paying all these people and you might actually end up overpaying them. This is why Real Estate Agents are so important! They know a lot of professionals and can hook you up with them along with providing you good money saving deals.
All in all, a good Realtor will make proper amendments in the contract and crack deals that will end up saving you a lot of money. It us always a good idea to either ask your friends for referrals of good Realtors or look for them online on websites like Zillow and Yelp.
2) Credit Score
If you want to get lower interest rates on loans and decrease the Lender fee, make sure your credit score is high as both of these payments directly depend on your credit rating.
Here iss how you can increase your credit score quickly before buying a house:
- Firstly, you will need your credit report’s copy.
- Next, you will need to highlight all negative accounts.
- Then, dispute your credit inquiries.
- Make sure to pay off your credit card balances.
- The next step is to get in touch with collection agencies and ask them if they could remove the accounts that you pay off.
- Do not pay those agencies which refuse to remove accounts from your credit creport
- It is also very important that you get in touch with creditors and ask them if they could remove all late payments.
- Now you must dispute all credit inquiries.
- Lastly, becoming an authorized user on a friend’s/family member’s credit card will also greatly help you in increase your credit score.
By following the steps given above, you can increase your credit score by as much as 100 points in just thirty days!
Additionally, try not to open up new accounts by buying a car or anything else when you know you have to apply for mortgage. This is because as soon as you open up an account, your credit score will fall and you really need to keep the score high to make sure you don’t have to spend more than you absolutely need to.
We also recommend that you keep Credit Card balance below fifteen percent of the credit limit to keep your score high at all times. Do keep in mind that your payment history will have a thirty five percent impact on your current credit rating.
3) Home Inspections:
Many a times, you might walk through a house for the first time and find that it perfectly fits your description of a perfect house. However, once you start living there, you might actually start finding hundreds of tiny faults like toilet moulds, plumbing issues and squeaky floors. This is why it is absolutely necessary to get a good Home Inspector and have him check the place out before you place your bid on it.
The Home Inspector can make a detailed review of all the flaws in the house and you can then decide to either buy a new place or negotiate a lower price for the current house.
We recommend getting a house with small faults in it because they are going to be cheaper. This is because houses in perfect condition are in high demand which makes them more expensive. On the other hand, you can get a not so perfect house for a much cheaper price and pay a meagre amount to get small renovations done. This will allow you to give your house a personalized touch while saving lots of bucks.
4) Mortgage Loans:
You should always check out the different types of Mortgage Loans and see if you are eligible for them. For example, if you are a veteran, you can apply for a VA loan. This way you wont have to make a down payment as well as pay mortgage insurance.
Also, if you buy a house outside of metropolitan areas, you are eligible for USDA loans. Basically, these loans were created to help people with financial troubles buy houses in rural areas. This loan too will remove the need for a down payment along with reducing mortgage insurance to 0.35 percent of the loan amount.
Additionally, you should also consider paying higher monthly premiums by opting for a 15 year mortgage plan instead of a 30 year one. This will lower your interest rate and help you save thousands of dollars!
5) Avoiding Private Mortgage Insurance (PMI)
You need to pay at least 20% of the down payment in order to avoid PMI. PMI is basically an insurance of the mortgage loan that you are taking so that if you fail to pay the loan, the lender will not experience any inconvenience. He will be paid via the PMI.
Although if you opt for a FHA loan, you will have to pay the mortgage insurance. It does not matter whether you pay 20 or more percent of the down payment since PMI is an essential for FHA.
We would advise you to thoroughly check and plan out whichever of the two plans you decide to go with.
Some other ways to save money:
- Buy a house in winter- Now, this may come as quite a surprise but if you buy a house in the winter season , instead of summer or spring, you can save as much as $20,000 due to lower demands.
- Search and inquire about different home insurance companies. You will be shocked to know how much some companies overcharge their customers!
- Don’t forget to add contingency clauses to your contract. These insure that in the event of you losing your job or the loan failing to come through, you will be able to withdraw your offer and get your money back.
Buying a house is without a doubt expensive but it definitely will help you save money in the long run. Also, if you decide to sell the house, you will not experience any loss. The next buyer will pay the same amount or even more. Overall, we suggest you to properly look at your options and then choose the house you are willing to invest in.