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How to Be Financially Savvy When Buying a Home

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Getting ready to buy your first home? 

Whether you’re just starting to consider purchasing, or you’re already looking for properties, you know that there are a whole lot of moving parts to consider—especially when it comes to finances. 

So how can you be sure you’re making the best financial decisions throughout your home buying process? Here are a few tips. 

Don’t get too hung up on your down payment. 

The standard rule of thumb, when it comes to down payments, is that you should save 20 percent to put down on a home. 

The truth, however, is that first-time homebuyers rarely have to put that much down! The 20 percent rule is actually a bit of outdated home buying advice—and that’s good news for your savings account. 

In fact, most first-time homebuyers put an average of just 5 percent down. While this requires that you take out a larger loan, it can also actually save you money in the long run.

If you’re looking at homes in the $310,000 price range, for example, by the time you save 20 percent of that, the homes you’re looking at could have climbed to the $350,000 range. 

Often, it makes more sense to put less down and purchase now—assuming you can find a loan with favorable terms. 

Shop around for a mortgage. 

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One of the biggest mistakes first-time homebuyers make is getting just one offer from one lender. 

In fact, you may find that you get significantly different offers from different lenders, even though your credit history and income remain exactly the same. 

The reason for this is that loan packages are almost never set in stone. There are various elements of each package that a lender can tweak. 

This is also one reason it’s a good idea to get at least one offer from a local lender whom you can meet in person and who knows your market. For one thing, a local lender may be able to help you get to closing faster if you’re buying in a competitive market

And they may very well also be able to get you a better interest rate—and after all, you’ll never know until you ask! 

 

Find a great real estate agent. 

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One of the best pieces of advice when it comes to buying a home, especially if it’s your first, is to find a great real estate agent

How do you find one? The best method is to get referrals. Ask local friends and family if they have any recommendations, and don’t be afraid to interview a few different agents before settling on the one you want to work with. 

A great agent will be able to:

  • Spot potential problems with any homes you’re viewing
  • Help you navigate the lending process
  • Negotiate strongly on your behalf
  • Give you solid, objective advice on properties you’re interested in
  • Tell you about the areas and neighborhoods you’re interested in

A great agent can also save you money by knowing when to ask your sellers for credits, for example, or knowing how much certain home renovations are really worth. 

Staying financially savvy when buying a home requires a lot of attention to detail. But by doing your homework and working with an agent who knows your market, you’ll find the house of your dreams—which also means, the house you can afford!—in no time.

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