If you’re buying a home for the first time, you’ll want to get the best possible deal. A lower price and better mortgage on your home will set you up with lower monthly payments for the foreseeable future—and if you ever decide to sell the home, you’ll be in a much better position to turn a profit.
Many novice homebuyers don’t understand what steps to take to ensure they’re getting an affordable home for a good price. But the most important steps are easy to follow.
Improve Your Credit Score
First, work to improve your credit score. Your credit score is a quantified measure of your financial trustworthiness, and it’s the metric most banks will use to determine whether they should give you a home loan—and what kind of home loan to give you.
There are a few ways you can increase your credit score:
- Make payments on time. The most important thing you can do is make payments on time, every time; pay attention to when your bills come due, and set up automatic payments if you can. Don’t miss payments or accumulate delinquent accounts.
- Reduce your debt. You can also improve your credit by reducing the amount of debt you owe. This may require cutting expenses in your life in other areas, increasing your total income, or both. However you approach it, the less debt you have, the better.
- Avoid opening new accounts. Opening a new account before making a major purchase or applying for a loan can look bad on your credit. For now, just keep the accounts you have.
It will take time to increase your credit score, especially if you’re in “fair” or “poor” territory—sometimes, months to years. But with a higher credit score, you’ll have a much better chance of getting a good deal on a loan.
Shop Around for a Loan
Next, take your time and shop around for a home loan; you can compare home loans online, so the process is incredibly convenient these days.
Be sure to think about the following factors:
- Interest rate. The most impactful variable for most people is the interest rate of the loan. This is the percentage of the principal you’ll pay to the bank every year. Over the course of 15 or 30 years, this can add up to be quite significant. Finding an interest rate that’s just a percentage point lower can help you pay hundreds of dollars per month (or more), and save you tens of thousands of dollars over the lifetime of the loan.
- Term. You’ll also need to decide what kind of loan term will work best for you. Many homeowners choose a 30-year mortgage because it offers lower monthly payments, but it takes longer to pay off. You may also want to consider a 15-year mortgage, with higher monthly payments that allow you to pay off your house quicker.
- Other conditions. Pay close attention to the other terms and conditions of your loan. For example, is your interest rate fixed or variable?
Look for Homes in Your Price Range
This may go without saying, but make sure you’re looking at homes that are only in your price range.
If you’re looking for the best possible deal, there will be some neighborhoods where properties are overpriced no matter how you evaluate them.
Work with a real estate agent to find neighborhoods with good properties at an affordable price, and open your mind to look in areas you may not initially consider. The more options you review, the closer you’ll get to finding your “dream” property.
Use a Variety of Channels
That same principle applies here as well; use a variety of different channels to discover properties. You can use mainstream real estate search platforms, as well as your social media platforms.
Also, don’t be afraid to look for properties at auctions—you’ll need to be more scrutinizing, but you can find some amazing deals this way.
It’s also important to negotiate the price and terms of the home sale. In some areas that are seller-sided and highly competitive, you may not have much room to negotiate.
But in an area with balanced supply and demand, you’ll be in a much better position to push for what you want.
Always Get an Inspection
Getting a good deal isn’t just about lowering the price you pay for a home—it’s also about finding a home that’s high enough quality to justify what you paid for it.
Accordingly, you should always get a home inspection to make sure the property is worth it.
If you follow these tips, you’ll be in a better position to get a good deal on your first home. Once you have this experience, buying your next home will be much easier.