Oct. 8, 2018.
Finally, an answer to the question every first-time homebuyer is asking. By the time you sign on the dotted line, how much will it actually cost you to get into a new place?
These days, new homebuyers might spend an average of $40,000 in one-time fees on their mortgage. But wait — there’s hope if you don’t have that kind of cash on hand.
Cutting that cost completely could all come down to the mortgage program you select. USDA, FHA, and VA home loans range from zero to 3.5-percent minimum down payment. So, you’ve got options if you want to save up to $40,000 on the upfront cost of homeownership.
You can keep homebuying affordable — and dare we say, easy — by questioning the true price of your mortgage and getting choosy with the mortgage program you pick. We’ll show you how.
Question everything: 6 savings shortcuts could make your mortgage cheaper
Asking the right questions — and taking strategic shortcuts — can keep the upfront costs of homeownership to a minimum:
1. Talk to your loan officer, like yesterday.
This is your homebuying journey, and you have a lot more control over your mortgage than you think. Ask your loan officer your burning questions directly — because that’s what they’re there for. To help you find an affordable home loan you can comfortably pay each month.
A loan officer who can’t meet you where you’re at, answer your questions, and provide plenty of options for money-saving shortcuts may not have enough experience to help you find the right mortgage program at a lower price.
2. Shop around.
Your mortgage, your way, remember? If you haven’t found a loan officer you’re happy with yet, it’s well within your rights (and even recommended) that you shop around. Look for a mortgage lender that offers more loan programs than competing lenders. With more loan options comes more flexibility in interest rate, loan terms, upfront loan fees, and, ultimately, your monthly payment.
Something as simple as shopping around to find a better deal on your mortgage could save you $300 a year, or $9,000 on a 30-year mortgage, by cutting just a quarter point in interest.
Get so much more from your mortgage. We love our first-time buyers, and we’re lending in 40 states.
3. Forgo your down payment.
Who says you have to have a 15-percent down payment? The new Thumbtack and RealEstate.com report showed an average $40,000 cost for the typical first-time buyer in October 2018, which could include a 15-percent down payment of $32,700. But a good loan officer will recognize that for most first-time buyers, this just isn’t feasible. In fact, more and more homebuyers are chucking the big down payment right out the window. That’s why 61 percent of first-timers paid a low down payment in 2017.
If you have the 15 percent, use it. A larger down payment can make your monthly mortgage cheaper. Reaching the 20-percent down payment threshold can also eliminate the added monthly cost of PMI (Private Mortgage Insurance). If you don’t have it, ask your loan officer about the many low- and no-down-payment programs available to you — many of which are extra-friendly to first-time buyers.
You can also look into Down Payment Assistance (DPA) programs, which can vary by state. Some Homebuyer Purchase Assistance (HPA) programs in Florida, for example, offer up to $40,000 for down payment and closing costs, bringing you back to even.
4. Ask the seller to pay your closing costs.
It’s been called the “happy homebuyer’s little secret.” Asking the seller to pay for some or all of your closing costs (that include fees for your appraisal, credit report, government reporting, survey, tax service, lender origination, attorney, and more) could save you around $3,700.
It never hurts to ask, and a seller may be more willing to chip in if they need the deal to move quickly.
5. Ask your lender to pay your closing costs.
Your lender may also be willing to give you wiggle room to help you cover the upfront cost of closing. Your options may depend on the loan program you choose, but opting to increase your mortgage interest rate slightly can allow your lender to cover the cost of closing.
Keep in mind that increasing your mortgage interest rate will also potentially increase your monthly mortgage payment. Your loan officer can talk with you about how long it will take to recoup this additional loan premium.
6. Hire movers only when you need them.
Like your mortgage, moving is another major variable you have control over when buying a house. Thumbtack estimates the cost of local moving companies at anywhere from $30 to $50 per hour, including truck rental. Moving a three-bedroom home with four movers over a span of 6 to 9 hours may run you $700 to $1000, depending on your area.
One way to save without compromising your sanity is by doing some of the heavy lifting:
- Purge as much as you can and try to make some profit in a pre-moving yard sale.
- Pack all the small items you can and leave the bulkier stuff — and the valuables — to the movers.
- Just as you did with your mortgage, take time to shop around.
- Move on a weekday versus a weekend, if possible. Most moving companies endorse this “insider tip” for homebuyers who want to save: Book on Monday through Thursday, and you’re likely to find lower rates.
Just stop renting: Waiting to buy could cost you over $200,000
Using low- to no-down-payment mortgage programs and a few other cost-cutting tricks makes it possible to buy a house without draining your savings. It can also bust the myth that buying a house is too expensive, holding at least 20 percent of millennials back from their dream of homeownership.
Add to that the fact that waiting to buy a house could cost you more in the long run, and there’s even more reason to get moving.
Rents are also rising these days right along with home prices. As of 2018, buying a three-bedroom house costs less than renting in most parts of the U.S. Depending on where you live, you could save over $600 monthly — or $229,536 on your total mortgage — when you buy at today’s lower rates.*
Calculate how much you could save by owning instead of renting and then reach out to a local loan officer for guidance. We’re here to help you find a house you love, save on the cost of buying it, and get you there fast.
*Estimated payments/costs rounded to the nearest dollar. Based on a $700,000 purchase price, $140,000 down payment, and a 30-year fixed $560,000 loan amount. Rates effective as of 5/30/18 and are based on a 720 minimum FICO credit score and a single-family residence occupancy type. Rates subject to change. Scenarios listed are for informational purposes only.
For educational purposes only. Please contact a qualified professional for specific guidance.
Sources deemed reliable but not guaranteed.