Got your heart set on becoming a homeowner? Getting on the property ladder is becoming increasingly more difficult as prices continue to soar. Here are a few tricks that could help to make affording your first home easier.
Use high-interest savings account for your down payment
For many people, saving up the down payment for a home is the biggest obstacle. The average down payment is about 15% and the average home costs about $275k – that means on average you could be looking to save up $40,000!
You can speed this saving process up by putting your money in a high-interest savings account. Sites like BankRate can help you to find the highest interest rates. Certificates of deposit generally have higher interest rates than regular savings, whilst government bonds have some of the highest interest rates reaching 3% in some cases.
Of course, there are other ways to save up faster too such as buying property with a partner and both taking measures to save up. You can also try other investment methods if you dare such as peer to peer lending (this is fairly secure and can offer returns of up to 15%, which is better than any bank!).
Clean up your credit score
Mortgage lenders are more likely to offer low deposits and low-interest rates if you have a good credit score. If you have a bad credit score, you may find that many lenders reject you without offering any deal.
To find out your credit score, use services such as Clear Score. If you have a low credit score, you may want to then consider credit-builder schemes (your bank may be able to offer one of these). Paying off other debts, making bill payments on time and keeping your personal details the same on all accounts can all improve your score.
Shop around for mortgages
A lot of first-time buyers accept the first mortgage deal that they’re offered. However, it pays to shop around – there are so many deals out there that you bound to save money elsewhere.
Whilst you can use comparison sites to shop for mortgages, some people may be able to get the professional help of a mortgage broker. You can find brokers at sites such as Altrua Financial. Mortgage brokers can not only guide you through the mortgage application process and educate you on various terms, but they may also have access to exclusive deals that you won’t find yourself on the market.
Budget for all the hidden costs
The mortgage down payment isn’t the only expense you’ll have to pay upfront when buying a house. There can also be hidden extras such as conveyancer fees, mortgage valuation fees, surveyor fees, and removals costs. If you’ve never rented a home before and you’re moving straight out of your parents, you may also have furniture to buy and various other equipment to purchase such as kitchenware and a TV. All of this can soon add up, possibly adding thousands to your total spending.
Draw up a financial plan and decide how much you’re likely to be spending overall. This will prevent you getting stuck at the last hurdle – you don’t want to have saved up all that money and found your perfect home only to have to pull out because you can’t afford to pay a conveyancer to sign over the paperwork.
Be prepared to negotiate
You can make small savings by negotiating various costs when buying a home. The seller of the property is likely to be able to knock some money off the value, although it may not be a lot – don’t expect anything more than a 2% deduction. An agent may be able to advise you whether to negotiate or not based on how much competition there is.
You can also bring down the cost of other extras by negotiating. Surveyors and conveyancers often don’t have set prices and will be willing to make small deductions. If you’re using a removals company, they may too be able to bring down the price if you inquire about it. These may only be small savings in the grand scheme of things, but it’s still money you wouldn’t have otherwise saved.