365 Ways to Live Cheap (18 page)

When you start to think about buying a home, request a sample copy of a H
UD
-1 form at
www.hud.gov
. The H
UD
-1 form explains in very clear detail exactly what you’ll be expected to pay during the process of buying a home, and many people are often surprised by all of the extra fees. Get a copy of this form and learn about each of the items and what you should expect to pay for them. Doing this will help to ensure that you’re not hit with some unpleasant surprises when you go to sign the papers, which could cause you to lose an escrow payment or have to take on significant credit card debt to cover things. If you don’t understand something, ask questions of any lender that you approach so that you do know what’s going on, and also ask for estimates on all of these numbers. Information is key here. Know what you’re going into, and you can save a lot of money.

231. G
ET A
S
HORTER
-T
ERM
M
ORTGAGE WITH A
L
OWER
I
NTEREST
R
ATE

The most important number concerning your mortgage isn’t the number of years you’ll have to repay it or the amount of your monthly payment, it’s the interest rate you’ll be paying. The lower the interest rate, the less money you’ll be losing to interest payments over the life of your loan and the more money you’ll be able to keep in your pocket. When you begin to look at your mortgage options, look seriously at shorter-term options with lower interest rates, like a fifteen-year mortgage. While the monthly payments may be higher, you’ll fully own the home in half the time, and by applying many of the other tactics in this book, you’ll be able to handle those larger payments.

232. K
NOW
E
XACTLY
W
HAT
Y
OU
C
AN
A
FFORD
B
EFORE
Y
OU
L
OOK

Before you even start looking at the real-estate listings, sit down and take a long and serious look at your finances. What sort of monthly payment can you realistically afford, especially when including homeowner’s insurance, property tax, and upkeep and maintenance costs in the mix? Be realistic in your calculations and know what you really can afford before you even start looking at homes so that you don’t waste your time (and tempt yourself) by looking at houses that are more expensive than you can possibly handle. Doing this sort of serious gut check before you even look will save you a lot of money and heartache throughout the buying process.

233. B
UY ON THE
L
OW
E
ND OF
W
HAT
Y
OU
T
HINK
Y
OU
N
EED

When you’re out looking at houses, it’s very tempting to push what you can afford and get one of the nicer houses. Don’t—you’ll just be putting the whole thing at risk. Instead, get the less expensive house, which will give you cheaper mortgage payments. Sock the extra money you saved toward home improvements or extra mortgage payments and enjoy the extra breathing room you get from owning a less expensive home. Then, if you’re tempted to upgrade later, you’ll have improved the value of the house, giving you more leverage to easily handle the leap to a better home.

234. L
OOK FOR A
F
IXER
-U
PPER
B
UT
A
VOID
H
OMES WITH
P
ROBLEMS
Y
OU
C
AN
’T F
IX

One great way to save money when house-shopping is to look for fixer-uppers, homes with minor problems that can be fixed with some effort and time. You can often find great bargains by looking at this category of house, but be realistic about your limitations. Don’t buy homes with serious structural integrity problems or problems that involve demolishing pieces of the house to fix properly. If you’re looking at options with these kinds of problems and feel like you’re up to the task, you’re probably better off just building the entire house yourself.

235. K
NOW THE
T
OTAL
C
OST OF THE
M
OVE
B
EFORE
Y
OU
J
UMP

There are many, many hidden costs in moving. Be sure you do an adequate calculation of all of your costs before you make the move, and know what financial resources you’ll need so that you’re not caught putting thousands of dollars’ worth of expenses on a credit card without being able to pay it off easily. Have you considered all of the closing costs listed on your H
UD
-1 form? Have you considered moving costs? What about the costs for any items you’ll need as soon as you move in, such as furniture or other necessary items that you won’t be bringing into the house with you? What about the fuel costs of the many trips you’ll have to make during the move? How about a small emergency fund to deal with any of the little issues that could happen during the move? These expenses can and will add up, so it’s best to be prepared up-front. Make sure all of the costs you can think of are covered by your savings, plus have a small additional emergency fund to handle things you didn’t think of. This way, you’re not tossing tons of stuff onto a credit card and having to pay high finance charges as you pay them off. Planning ahead saves money, particularly when moving.

236. A
SK THE
S
ELLER TO
P
AY
C
LOSING
C
OSTS AND
O
THER
F
EES

When you begin to negotiate the closing price of your home, one very useful tactic is to ask the seller to cover your closing costs. This has several benefits. First, it allows the seller to claim a higher sale price for their home, making them feel that they got a better deal (and they can tell their friends that they did). Second, it gives the buyer (you) some breathing room during the expensive closing process. Third, it’s often the perfect thing to break an impasse in negotiating, when there’s still a gap remaining between what you’re willing to pay and what they’re willing to offer. Having the seller pay the closing costs can often bridge that gap. In many cases, the end result is that the closing costs are effectively wrapped into the mortgage at a low interest rate, leaving you with cash in hand to take care of the moving costs instead of having to use the cash to cover closing costs and putting your moving costs on credit, which can be incredibly expensive. Paying for closing costs can be a great way for the buyers to keep some cash in their pocket right now while the seller gets the deal done.

237. S
HOP
A
ROUND FOR A
M
ORTGAGE

When shopping for a mortgage, particularly your first one, it’s often tempting to stick with the first friendly person you talk to out of familiarity and nervousness. Don’t. Instead, take the time to shop around at several places, including your local credit union. If you can shave an extra 0.5 percent off your mortgage now, it can save you thousands of dollars over the lifetime of your mortgage. There are times in life when doing the legwork really pays off and puts money in your pocket. Shopping around for a mortgage is one of these times. Use
www.bankrate.com
to find out national mortgage rates as well as the rates in your area and use their tools to help you find potential lenders, and don’t be afraid to talk to several different lenders to try to find the best deal for you. Be sure, however, that you’re not just chasing interest rates. Ask each place for a good faith estimate so that you know how many fees will be tacked on, as a lot of fees can eliminate any interest rate benefit.

238. A
TTEND THE
H
OME
I
NSPECTION
Y
OURSELF AND
A
SK A
L
OT OF
Q
UESTIONS

Most home sales today are contingent upon a successful home inspection. While it might be convenient for you to just have the home inspector visit the house while you’re at work, don’t do it. Go along on the trip, keep your eyes open, and ask lots of questions about everything you’re unsure about. Go online and search for a “home inspection checklist,” print it, take it with you, and make sure the home inspector goes through each step on the list. Take note of everything the inspector observes and points out to you and follow up on everything, regardless of whether it’s your responsibility or the responsibility of the seller. Your home inspection is one of the best opportunities to have someone fully examine your potential home and point out problems. Knowing those problems now can save you tons of money later or possibly even indicate problems severe enough that you back out of the home purchase. Go along, take notes, and pay attention.

239. B
E
A
WARE OF
A
NY
H
OMEOWNERS
’ A
SSOCIATIONS OR
C
OVENANTS
Y
OU
’L
L
H
AVE TO
A
DHERE
T
O

In many neighborhoods, there may be homeowners’ associations or covenants that you have to follow and perhaps even pay fees to join. Know what these are before you close the deal or else you may have a nasty financial surprise waiting for you when you move in that may involve home improvements, other requirements, fines, and monthly fees that you didn’t expect at all. If you don’t know about such arrangements with the home you’re buying, ask about them and get a copy of any covenants or agreements that will apply to this home. Any fees or other costs that you’re subject to as the owner just add to your housing cost, and they may be enough to tip the scales against buying the property. Find this out up-front so that there’s no confusion later on.

240. P
RACTICE A
M
ONTHLY
H
OME
M
AINTENANCE
S
CHEDULE

If you already own your home, one way to keep it in good shape (and thus maintain property value and reduce repair expenses) is to start and maintain a monthly home maintenance schedule. Make yourself a checklist of tasks to execute each month in order to keep your home in good shape. Simply do the ones that apply for your home or property.

Check for squeaky doors and oil them as needed

Check and clean range hood filters

Check and replace furnace filters

Check and replace other ventilation system filters