First Timer? Reduce the Cost of Your First Home

Spring is in the air, and the first time home buyer tax credit is coming to an end.

With the available credit, low-interest rates, and prices still at low levels, there’s likely never been a better time to be buying your first home (I’m so jealous).

But just because you have all that to your advantage, it doesn’t mean you should just throw out common sense when it comes to keeping other costs down. Here are a few ways you can spend less on your first home. Most come down to taking the long term view versus worrying about your monthly payment.

Pay some costs annually. It may be the easier, more convenient way to do things, but I prefer to keep some costs out of the monthly mortgage payment. Lenders have it in their best interests to require you to pay them all your costs (property taxes, insurance, association dues) on a monthly basis. But you may have the option to pay these costs on your own annually. That means you get to keep your money the entire year and have your money working for you. Also, you may be able to avoid installment fees by paying annually on some of these charges.

Strive for a big down payment. The more you put down on the price of the home, the less in interest charges you’ll pay over the life of the loan. If total cost of ownership is what you want to keep low, then put a lot down, or work with a company like Unison that will help with the downpayment. And by putting at least 20% down, you’ll avoid that pesky private mortgage insurance (PMI).

Shorten the length of your loan. Another way to reduce your interest costs is to go for a loan with a smaller term than the typical 30 years. An alternative to this would be to set up a prepaid plan where you make an extra principal payment every year, or pay more per installment. I’ve found this to be difficult to stick to in my own life, though. If you want to guarantee fewer interest charges, then go with a 15-year loan versus a 30 year.

Consider furnishing the home as you go. It’s hard to have a home and not have furniture for it. However, it doesn’t mean you have to go out and rack up a bunch of high-interest debt to fill every room of your house with furniture. Take your time completing the rooms and use cheap or old furniture until you’ve saved enough for the stuff you want.

Shop for really low mortgage interest rates. One last thing you could do to reduce the overall cost of your home is to make sure you get the lowest rate possible. Just a few percentage points can shave off thousands of dollars in interest over the life of the loan. For an extensive list of the purchase(and refinance) interest rates in your area, check out my brand new mortgage rates page.


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About Philip Taylor, CPA

Philip Taylor, aka "PT", is a CPA, blogger, podcaster, husband, and father of three. PT is also the founder and CEO of the personal finance industry conference and trade show, FinCon.

He created Part-Time Money® back in 2007 to share his advice on money, hold himself accountable (while paying off over $75k in debt), and to meet others passionate about moving toward financial independence.


    Speak Your Mind


  1. Craig/FFB says

    We got in just under the wire for the home rebate. We’re working to close before month-end to make sure we qualify.

    Another point about furniture – Ask the people you are buying the home from if there’s anything they want to leave behind or sell you. They may be going to a home where the furniture doesn’t fit and you can end up with some bargain pieces!

  2. Money Smarts says

    My brother just bought a home on the last day of the first time homebuyer tax credit. Talk about sneaking in under the wire. They also saved by shopping around for the best rate, taking their time in furnishing – and by making sure that they got a good deal on insurance. Great post!

  3. Lakita, your lender might charge you an initial fee to not “escrow” taxes. If that’s the case, then consider initially escrowing with them, and then requesting to pay your own taxes after you close. This way you can possibly avoid the fee. Keep in mind though, that getting out of escrow will usually depend on paying at least 20% down.

  4. Lakita | Personal Finance Journey says

    I’m a first time home buyer and I just got locked in at a good rate 🙂 I was wondering if I could pay the taxes annually, so thank you for bringing out that point!