How to Make the Most of Your Home-Buying Budget


Your home represents one of the most expensive purchases you’ll ever make, so it is important to stretch your savings to maximize this important investment. Fortunately, there are proven tactics available to help you save money on your next home buy.

Home budgets vary, according to the amount a buyer has saved and the economic resources supporting each purchase. However, whether you are buying an exclusive property with a hefty price tag or a starter home to get you rolling on the path to financial independence, money saving strategies can be applied to most purchases.

Do Your Homework

Although homes are expensive and these types of purchases are not made frequently, preparing to buy property is similar to making other purchases. Impulse buys, for example, are typically not the best approach, regardless of whether you are buying consumer goods or real estate. As a result, the most successful home buyers do their homework ahead of time, so they are in the best position to move deals forward, when suitable opportunities arise.

As you prepare to become a home owner, start by gaining a general sense of the real estate market in your area. Is it a seller’s market? Or are homes lingering for many weeks before deals close? Do particular types of homes sell quickly, while others appear to remain on the market for longer periods of time? Is there a strong “for sale by owner” trend in the area you wish to buy? What are the seasonal trends influencing property sales in your area?

Answers to these and other important questions help set the stage for success, as your knowledge of the local real estate market can save you money during the purchase process. Once a general understanding is acquired, you’ll be better able to compare individual properties, in terms of asking price and typical sale values. Evaluating comparable sales, or “comps”, gives you direct insight into what’s being paid for the types of homes in which you’re interested, and gives you a sense of how aggressive you’re offer will need to be, in order to secure your dream home.

Should I Wait for Better Conditions?

Each person’s home-buying experience hinges on individual circumstances, so it is hard to generalize, when weighing the pros and cons of moving. Once you’ve accumulated knowledge about home prices and other factors driving the local real estate market, your home-buying strategy may warrant a closer look. For some, staying put makes more sense than moving forward with a property purchase.

If you are moving from a home you own, for example, its value may have an important impact on your decision-making. Recent conditions left many borrowers “underwater”, with home debt worth more than the actual value of their properties. In cases like these, moving on to the next property purchase may not be possible, because accounts must first be settled on real estate you already own. “Hot” real estate markets, favoring sellers, may also influence home prices, making it much more expensive to secure the home you want. Depending upon circumstances surrounding your home-buying effort, it may make the most sense for you to sit tight, until conditions enable you to make the most of your budget.

Frugal Financing Stretches Home-Buying Resources

In addition to purchase price and other factors, real estate financing has a significant impact on the ultimate cost of home ownership. As you assemble needed financial resources, it is essential to compare various loans and financing options. Your credit history has direct bearing on the types of credit available to you, so expect the best terms when your rating is strong. If past credit inconsistencies exist, however, you’ll likely pay more for financing you need. A free credit report will give you a snapshot of information lenders use to approve loans, so it is a good idea to review it yourself, before seeking funds.
Once you’ve applied, banks, credit unions, and mortgage companies will review your credit score, as well as your debt-to-asset ratio and other relevant financial information. The value of your down payment and prevailing lending policies will also influence how much money lenders will approve for your purchase. By preparing for scrutiny and shopping your business to multiple lenders, you’re sure to get the best available rates and terms.

These are only a few of the most important considerations for home buyers seeking to maximize their financial resources. Sticking to these proven practices will help move you toward a cost-effective property purchase.

About the Author

Financial professional and online entrepreneur, I'm best known as The Financial Blogger. I want to make money because I like enjoying life the way it should be; with a lot of great food and wine! I also love to spend time with my lovely wife and 3 kids!