Are you in the market for a new home?
Youre not alone 35% of homebuyersare buying for the first time.
How We Saved $18,000 Buying a House
My husband and I recently joined thefirst-time homeowners club.
No Interest Til Almost 2027?
Balance Transfer = Credit Card Cheat Code
But we didnt get the first house we made an offer on.
For us, the sixth time was the charm.
Thats because we faced some tough competition.
Every time we made an offer, other people made offers including all-cash ones and we kept getting outbid.
We didnt want to mistakenly overpay, so we remained patient and kept looking.
The first time we made an offer, it was an emotional experience.
But after a while, we became more comfortable with the process.
Finally, after four months of searching, our sixth offer was accepted!
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Perhaps youve had a similar experience.
Many cities currently have asellers market with more homebuyers than homes to buy.
This leads to multiple offers and bidding wars among buyers.
Despite the intense competition, we found five ways to save a total of $18,000.
Heres are a few tips that any first-time homebuyers can use:
1.
How much are closing costs?
In April 2016, themedian price of a homewas $232,500 (not including newly constructed homes).
At this price, your closing costs would be somewhere between $4,650 and $11,625.
Keep in mind newly constructed homes tend to cost even more.
In fact, themedian sales price of a new home was $321,100in April 2016.
Therefore, expect your closing costs to be higher with a new home than an older one.
The good news is you’re free to save some money on these pesky fees.
Heres what we did.
We had three accounts withone bank: a checking, savings and business account.
So our bank was the first place we went to get a mortgage quote.
At the time, we didnt know about relationship credits and were lucky our bank offered them to us.
Our bank essentially rewarded us for keeping our assets there.
The more assets we kept with the bank, the higher the relationship credit would be.
For example,here are some of Citibanks relationship credit options and requirements.
Shop around a little effort can mean big savings.
You should always get a mortgage quote from at least two lenders.
There are two reasons to get multiple quotes.
First, it allows you to comparison shop.
What are you shopping around for, exactly?
Most people want to get the lowest possible interest rate and closing costs.
The second reason is so lenders can compete for your business.
Essentially, it’s possible for you to start a mini bidding war.
How would you actually do this in practice?
Lets say you really want to work with a specific lender.
But when you compare its mortgage terms with another lenders, theyre not competitive.
you might go to the lender you like and say, I really want to work with you.
Can you do better?
Thats exactly what we did.
We were transparent with both lenders we reached out to.
Do some online research.
Sites likeNerdwalletlet you quickly compare rates across multiple lenders.
Contact at least two lenders and get a mortgage quote from each, including your own bank.
Then negotiate to get the best terms.
Your lender will hire an independent professional appraiser to assess your new homes value before you finalize the purchase.
This protects you both.
Then the appraiser writes a report and provides it to you and the bank.
Lets do the math.
However, the appraisal says the home is actually only worth $90,000.
How often does this happen?
In these cases, the winning bid is often above the sellers asking price.
In our case, the appraisal came in $10,000 lower than our offer.
So we decided to negotiate with the sellers and ask them to lower the price to match the appraisal.
Luckily, this strategy worked for us the sellers agreed to lower the purchase price by $10,000.
Try not to pay above the appraised value.
It never hurts to try!
On average, homeowners insurance costs$952 a year.
Many insurance companies offer a discount if you buy multiple policies homeowners, auto, life from them.
When we bought our home, we lived in New York City and didnt have a car.
But we were planning to buy a car eight months later, once we moved into our new house.
Our insurer told us we could still get a discount even if we didnt immediately need theauto insurance.
Narrow the list down to two or three companies and contact each for a quote.
Ask specifically about discounts for buying multiple policies.
So we rented it out.
We temporarilyrented outour new house.
This resulted in a total of $5,440 insavings on our rent.
But this may not always be an option.
Your new home may be part of a co-op or homeowners association that doesnt allow renters.
Perhaps it needs major renovations and is unfit for tenants.
Luckily, our home didnt require tenant approval from anyone (except us!)
and was move-in ready.
Think creatively about how to make the most of your situation.
Lana has an MBA from Harvard Business School and a B.S.
in Finance and Accounting from NYUs Stern School of Business.
