The most expensive investment you make in your life is purchasing a home. Though buying a new home is a symbol of long-awaited financial security and professional triumph, getting caught up in the excitement of signed mortgage loan documents and “sold” stickers slapped on for-sale signs can work to the detriment of first-time homebuyers.
That said, you’ll need to verify that you can afford the mortgage, fees, and utility expenses that accompany homeownership.
Unfortunately, homeowners often focus solely on the list price and forget about the other costs involved with owning a home.
When you purchase a home, you will need to pay a large down payment, application fees, title fees, surveyor fees, and even property taxes.
As a homeowner, if you fail to budget for these expenses properly, you may corner yourself into a financially compromising situation and risk losing your home if you don’t make changes.
Partner with a mobile notary
One of the best ways to save money when purchasing a house is to recruit a mobile notary when signing pertinent mortgage documents.
A mobile notary saves you time and money by coming to you and ensuring your real-estate documents are valid and authenticated.
Five surefire strategies to save money on your mortgage
Create a budget that you will follow
The first step in saving money on your mortgage is creating a budget that you and your family will follow.
As you are making your budget, determine your “necessary expenses” and calculate how much they cost you each month.
Then, the rest of the expenses you have are non-essential, meaning you can cut corners in these categories without forgoing your basic needs.
As you reduce the amount you spend on non-essential expenses, you can save money and put it to more critical uses, such as paying off other debts.
Lower your debt-to-income ratio
Whether you’re shopping for a new home or are looking to refinance your existing mortgage, the most critical factor in determining your interest rate and monthly payments is your debt-to-income ratio.
The debt-to-income ratio is simply all of your monthly debt payments divided by your gross monthly income.
If you have a significant amount of debt, your ratio is high.
High debt-to-income ratios are red flags for mortgage companies, and if you have a high ratio, it leads to higher costs and premiums.
Luckily though, you can tend to a high debt-to-income ratio with a strict and thoughtfully-crafted budget.
Once you have created a budget, the money that you have allocated from non-essential spending should be used to pay off debts.
As you pay off your debts, your ratio decreases, your credit score increases, and lenders are more willing to work with you and offer better pricing.
Rent out an extra bedroom
If you have an extra bedroom in your home or apartment, you should consider renting it out. R
enting out spare rooms or even entire homes has become common thanks to Airbnb companies that let you specify when and for how long people can rent.
Renting out a room is an easy way to make extra cash.
This side income increases your monthly take-home pay, granting you the opportunity to chip away at your debts.
You can also utilize this budgetary wiggle room to subsidize your mortgage payments.
Automation can save you money
Even though you’re inundated with emails and reminders that your bills are due on a specific day, it’s easy to forget.
When you fail to make a payment, companies are quick to charge you for the mistake, and the fees can quickly add up to a lot of money.
Setting your bills up for autopayment through your bank is an easy way to prevent ever paying a late fee again.
Automated payments ensure that you pay your bills on time without fail.
With this strategy, you can put your hard-earned money to better use instead of wasting money on late fees.
If you have a government-backed FHA loan, it may be beneficial to look into a streamlined refinance.
For those unfamiliar, a streamlined refinance allows you to take advantage of a lower interest rate and subsequently lower monthly payments without extending your loan length.
If you have a conventional home loan, you too can refinance to obtain a lower rate and payment. Refinancing also allows you to change the length of your loan.
For those debtors that ritually budget and save money, you can put more cash down, shortening your loan term and keeping you from paying more in interest.
Don’t let the stressors of homeownership detract from this financial milestone. With a thoughtful approach, you can avoid the gut-wrenching diagnosis of life-long debt.