For nearly all of us, buying a home represents one of the biggest financial transactions of our lifetime. There's really nothing that compares to buying a home, since not only do we have to put up thousands of dollars of our own money but we also (usually) have to borrow much more than that.
There's really no getting around the fact that buying a home is expensive. It takes a lot of financial discipline to save up a down payment and make the monthly payments.
Along the way, there are bound to be problems that eat into your savings. Everything from a new roof to a broken water heater is going to cost you. (Of course, renting can also have costly surprises such as escalating rent and being forced to move.) While there's not a whole lot you can do about some of the costs of buying a home, there are ways to reduce your out-of-pocket costs.
Do You Really Need a 20 Percent Down Payment?: You may have heard that the standard down payment is 20 percent. But it's possible to get a mortgage with little or nothing down. The best known of the low-down-payment options is backed by the Federal Housing Administration. The 3.5 percent down payment on an FHA loan requires you to pay a mortgage insurance premium every month along with your house payment. Obviously, your monthly payment will be higher with an FHA loan since you're borrowing more money but it might still make sense for you.
Shop Around for Your Mortgage: One of the easiest ways to cut costs when buying a home is by finding a low-interest loan. Get quotes from big banks, online banks and credit unions so that you can compare their fees and interest rates.
Some banks like to "massage" their annual percentage rates so that their rates seem lower than they are. Make sure that you compare the Good Faith Estimate given to you by each bank. One thing to note is that you are allowed to get as many quotes as you want within a three-week period. Normally, each quote would be a separate credit check, but when you're shopping for a mortgage, multiple quotes are considered only one inquiry on your credit reports.
Negotiate With the Seller: If you're looking to get a portion or even all of your closing costs covered, then negotiating with the seller is your best bet. Depending on the state of the real estate market in your area, you could ask for more or less. If the real estate market is struggling or the property in question has been on the market for an extended period of time you may be able to get the seller to cover all of your closing costs.
HOMES FOR SALE IN AMERICA'S TOP TURNAROUND MARKETS:
Top Turnaround Markets
Homebuying: Money-Saving Strategies at Time of Purchase
Despite progress over the past several years, nearly half of Las Vegas homeowners are said to still be underwater on their mortgages in this Sin City, often cited as ground zero for the housing boom and bust.
As of the third quarter of 2013, the median list price at $169,900 was up 11.0 percent from $153,000 in the second quarter, and up 30.8 percent from $129,900 one year ago. In Las Vegas, the pendulum has been swinging in a positive direction long enough to qualify it for the list of top turnaround towns, ranking seventh in price increases and 12th in inventory decline. Further, the pace of decline in age of inventory -– down 23.5 percent compared to year-ago levels -– places it within the top 25 percent of markets in the country –- a clear sign of favorable momentum.
The pictured three-bedroom, two-story home on Mahogany Meadows Ave has 1,800 square feet and was built in 2005. There is a loft area, and an enclosed back patio. It is located in a guard-gated community with basketball courts, a pool and clubhouse.
Tight inventory is Boulder’s secret to landing on this quarter’s top turnaround towns list. It trimmed its inventory of homes for sale by 18.1 percent compared to the third quarter of last year and ranked seventh in the nation for declining age of inventory, as inventory is down 18.1 percent. The median list price, at $359,000, is down 12.5 percent.
Boulder’s already-thin housing supply was stretched further when heavy rains fell on the eastern slope of the Rockies in September, causing massive flooding in Boulder and El Paso counties. However, Boulder’s relative health is worth remembering, and its likely quick return to its equalized buyer-seller home buying marketplace is anticipated for later this year.
With a median list price at $344,900 in the third quarter of 2013, Boston is one of the wealthier markets in the nation. It was less seriously hampered by the housing crash of recent years, however, like many markets that suffered greatly at the hands of foreclosures, Boston has cut its inventory deeply in recent years, earning fourth place in terms of inventory reduction during the third quarter of 2013.
Affordability was a serious issue in many Boston-area communities before the housing crash and now tight inventories have helped push median sales prices up 9.5 percent year-over-year in the third quarter.
Even though they are two of the wealthiest resort areas in the country, West Palm Beach and Boca Raton have had their share of challenges during the housing crash, not to mention Florida’s struggles with foreclosures. However, the West Palm-Boca market has taken the critical first step toward recovery.
While year-on-year inventory fell 20.7 percent in the third quarter of 2013, inventory counts fell 13.3 percent from the previous quarter, a sign that sellers are responding to higher prices and soon inventories will register positive gains. More houses lagging on the market in the slower fall and winter seasons could bring prices quickly under control and see this market find its own equilibrium in pace with the rest of the country.
This three-bedroom home in the Foxwood Estates Community was totally renovated, including knocking down walls. There is also a newer roof on this 1985-built home, which sits on a corner lot.
A newcomer to the Top 10 list, Dallas is one of those markets that did not rise much during the housing boom and did not fall very far either. Its median list price is $210,000, and its path to recovery has not been very steep at all, and as a result Dallas has rebounded more easily than some markets.
Inventories rose in the third quarter of 2013 by 3.1 percent compared to the previous quarter. The seasonal inventory rise as the buying season ends could indeed have a dampening effect on prices.
Known primarily as the home of the University of Michigan, this smaller market just missed the Top 10 ranking last quarter. Ann Arbor scored in the top 20th percentile among 146 markets in three of the most critical areas: size of inventory, price gains and age of inventory. Together, these metrics almost entirely define a market’s turnaround potential. While an improving economy is part of the reason, a shrinking inventory of homes has put upward pressure on price.
This 1,312-square-foot home is listed for $190,000. In addition to the three bedrooms, it also has a three-season sun porch and a non-maintenance deck. There are even "charming glass door knobs," according to the listing.
Still down 13.8 percent this quarter compared to year-ago levels, Fort Lauderdale’s inventory shortfall has lit a fire this year under once-lagging prices. As inventories remained flat in recent months, prices in Fort Lauderdale have risen in the third quarter of 2013. The region is entering a more buyer-leaning marketplace, with reports of sellers in Fort Lauderdale offering incentives to purchase, such as seller contributions to buyers’ closing costs and allowances for upgrades and renovations.
This four-bedroom, tri-level townhome in the greater-Fort Lauderdale area, is located in Sunrise, Fla., and has a recently reduced list price of $180,000. It has a one-car garage and a balcony that overlooks a courtyard. Built in 1995, it is bank-owned.
Through the third quarter of 2013, Reno has continued to reduce inventory at a rate of 19.8 percent and prices are up 28.2 percent compared to the third quarter of 2012. The median list price is $249,900.
With declining inventory, the Reno market is now moving into a far healthier balance than it experienced this time in 2012. Achieving both this balance and healthy growth is a remarkable achievement for a market that lost a significant amount of its value in years past.
The pictured home on Glacier Meadow Drive, has an upper-level loft that can be converted into a bedroom. Built in 2010, the three-bedroom home has engineered wood floors in the living room, kitchen, dining area and hallway. There's also a great view of the mountains and the valley.
Now in second place, Santa Barbara, is now the only remaining California market on this list, compared to reports from last quarter and the year-ago quarter, which were populated by six and seven California markets, respectively.
It is also the only one on the Top 10 list that appeared in turnaround town reports for the previous quarter as well as the same period last year. It's improving due to the young age of its inventory and the noticeable decline in its inventory count, which is down by 15.9 percent.
It's median list price is also up 27.1 percent, to $697,777.
And the top turnaround town for third quarter is Detroit. Last quarter it ranked seventh in the report, and this rapid jump to No. 1 speaks volumes about its pace of acceleration. The city's descent into bankruptcy clearly did not hurt the housing market as much as might have been predicted.
However, at the end of the buying season, prices in Detroit slowed in the third quarter, falling 4.8 percent from the previous quarter, but staying at 44.3 percent above the third quarter of 2012. Equally important is Detroit’s success at trimming its for-sale inventory and the age of its inventory, down 24.5 percent and 33.9 percent respectively, year over year.
The three-bedroom home pictured is listed for $125,000, the median list price for the area. It has 1,805 square feet and was built in 1927. It still has the original hardwood flooring, but also has marble countertops in the bath, as well as a jetted tub. The basement is finished.