Buying a home means something different to each person. But one thing is the same for just about everyone – it’s going to be expensive. In addition to saving up 5-20% for a down payment, on average home buyers pay 2-5% of purchase price in closing costs as well.
If you want to realize the American dream of home ownership, you don’t have to be house poor. There are ways you can use your living situation to save money each month and offset the cost of buying.
Negotiate Expenses
As a buyer, you can negotiate just about any expense, including one-offs like the rest of the property taxes for the year and upcoming HOA dues. However, don’t expect to get these kinds of extras in a seller’s market. In a buyer’s market, go for it. Essentially the worst that could happen is the seller counters with an offer that doesn’t include the extra expense coverage.
Choose a Budget-Friendly Energy Provider
One of the primary living expenses is paying for utilities. You probably paid these at a previous rental but as a homeowner, you have complete control over who your service providers are when you live in a deregulated area. In deregulated areas there are numerous gas and electric providers that compete for business. Each one offers unique rates and plans.
Take the deregulated city of Corpus Christi, TX for example. The electric rates Corpus Christi residents pay can range from 6.5¢ to 13.3¢ per kilowatt hour (kWh) depending on the provider and plan. Getting just 1¢ less per kWh can have a huge impact on your electric bill.
Choose Energy Saving Products and Improvements
Another way to reduce your energy bills is by making energy efficient choices at home. If you’re renovated or adding onto the home you bought make sure to check the ENERGY STAR rating of mechanical systems, windows, insulation and appliances. Products that receive the ENERGY STAR approval have to meet certain energy efficiency standards. As noted below, you can also get a tax deduction when you make energy efficiency improvements to your home.
There are also less expensive ways to improve the energy efficiency of your home and save more on utilities. Weatherizing around the doors and windows with weather stripping and/or caulk costs about $10. You can also use smart power strips to reduce vampire energy use in the home office and the entertainment center.
Take Advantage of Tax Breaks
You may have to pay property taxes as a homeowner, but you also get to take advantage of numerous tax breaks. Some deductions and credits are so substantial they can lower the taxes you owe by thousands of dollars. The top homeowner tax breaks to factor in on your 1040 include:
- Property tax deduction
- Mortgage interest deduction
- Insurance premiums deduction
- Mortgage insurance deduction
- Origination points deduction
- Pre-paid loan points deduction
- Moving expenses deduction (if you moved for work purposes)
- Energy efficiency improvement credits
Be careful to review all of the potential deductions and credits each tax season since they can change from one year to the next. If you take advantage of all the tax benefits it can quickly negate the costs of buying a home.
Get a Builder or Seller to Throw in a Home Warranty
Are you looking to buy a new build? There can be a few financial benefits of buying a new home from a builder or developer. One of those benefits is getting a home warranty included with the sale.
A home warranty is like additional insurance coverage for a home’s systems and appliances that aren’t typically covered under homeowners insurance. Purchasing a home warranty plan provides certain coverage for a specified period of time, usually 12 months. Typically, an owner with a home warranty pays a much lower service provider rate. Even though everything is brand new that doesn’t mean there won’t be a failure or repair that’s needed within the first year or so. Now that you’re the homeowner maintenance and repair experiences are on you.
Even if you buy a resale you can request that the sellers cover the cost of a home warranty plan. Because the home is older and you’ll probably use the systems and equipment differently than the seller, the chances of needing a repair in the first year are pretty good.