How to Save Money for a Home – 10 Money Tips for Couples
Before the tips, a quip:
“A long marriage is two people trying to dance a duet and two solos at the same time.” ~ Anne Taylor Fleming.
Buying your first house as a couple can be like trying to dance as a duo and as a soloist at the same time…but with practice, you will learn to move in harmony! To learn the nuts and bolts of buying a home or condo, read 100 Questions Every First-Time Home Buyer Should Ask: With Answers from Top Brokers from Around the Country. And, here are ten tips for first time homebuyers from Ethan Ewing, of Bills.com…
How to Save Money for a Home – 10 Money Tips for Couples
1. Check your credit scores. While houses are widely available, financing is only for those with good credit. Credit scores range from 300 to 850, with the median U.S. credit score about 725. A score below 660 usually results in a higher interest rate or denial of credit. Check your — and your partner’s — credit score before making home-buying decisions. If your credit score is poor, wait a few months and work to rebuild your credit score by paying every bill on time, paying down as much debt as possible and disputing any erroneous information on the report.
2. Know the real costs of being a first time homebuyer. Don’t let your love blind you to the financial facts: the principle and interest on a mortgage payment are only the beginning of home-related costs. Escrow payments – the funds withdrawn to cover home insurance and taxes – and private mortgage insurance can add a few hundred dollars per month (or more) to a mortgage payment. In addition, couples saving money for their first house must of course pay for repairs and maintenance. A general rule of thumb is to budget 1% of the home’s purchase price per year for upkeep. If you’re buying your first home, be aware of the financial burden of home ownership!
3. Make sure you have enough money saved up. If you and your partner are first time homebuyers, remember that a down payment is essential (not like the old days!). Ideally, couples should put down 20% of the house purchase price. If not, talk to a mortgage lender about your options. And, focus on saving money as a couple – because saving up for a new home is a great way to strengthen your relationship.
4. Apply for a mortgage loan when home prices are low. Home prices dropped at a record annual pace of 18.7% last year. If you and your partner are first-time homebuyers, you can find real bargains.
5. Buy a new house when interest rates are good. While interest rates have risen from their historic lows earlier this year, they’re still are appealingly low. Last spring, interest, rates hovered around 5.25% for a 30-year fixed-rate mortgage. Remember – buying a home is one type of good debt.
6. Remember that tax credits help. Couples buying a new home can get money back from tax credits implemented as part of last year’s American Recovery and Reinvestment Act. An $8,000 credit is available to first-time buyers (a category that includes people who have not owned a home for several years) for homes purchased before Dec. 1, 2009. Legislators are considering increasing the credit to $15,000 and expanding it to include other home buyers.
7. Don’t stretch your financial budget too far. Standard guidelines call for keeping housing expenses below 35% of total income. “Breathing room” in your budget will help secure a home even if something unplanned does occur. If you are uncertain and don’t know if you and your partner can handle mortgage payments, wait to buy. If you’re having money problems as a couple, use the time to learn how to have healthy financial discussions as a couple.
8. Understand private mortgage insurance. Mortgages with less than 20% equity (which means a 20% down payment for those purchasing a home) require private mortgage insurance in case the owner defaults on the loan. When the home owner pays a conventional mortgage down to 80 percent or less of the home’s value, the home owner can request the lender to cancel the private mortgage insurance and then be able to stop paying the additional amount. Meanwhile, private mortgage insurance is tax-deductible at this point.
9. Avoid prepayment penalty on your mortgage. If the mortgage has a prepayment penalty, couples who are first-time home buyers face hefty charges if they pay it off early. This provision also can be triggered by refinancing down the road. Be sure to review the Truth in Lending disclosures that your loan officer sends you prior to signing your loan.
10. First time home owners: “Buyer beware!” Some of the lowest prices on homes today are “fixer-uppers” or homes sold “as is” because of foreclosure. Invest in a home inspection (typically costing under $400) before agreeing to purchase any home. An inspection informs buyers of any faults in the home, and helps determine the approximate cost to remedy those problems.
If you have any thoughts or questions on how to save money for a home — or these ten money tips for couples – please comment below…
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Category: Engagements & Weddings, Financial Purchases, Living Together, Love, Marriage, Money & Finances, Money and Expenses
