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What Kinds of Mortgage Loans Are Available?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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When it comes to financing the largest purchase you’ll ever make in your life — your home — it’s essential that you approach it as an informed consumer. Not educating yourself during the mortgage process could mean ending up with a more expensive loan than necessary and could cost you tens of thousands of dollars.

To avoid that, make sure you have an understanding of all your financing options. In this guide, we’ll go over the different types of mortgage loans to help you find the one that best meets your needs.

Mortgages are classified based on a few overarching criteria.

  • Government-backed or conventional. All mortgages fall into one of the two categories.
  • Fixed-rate or adjustable rate. This refers to how the interest rate on the mortgage is structured.
  • Jumbo or conforming. The amount of the loan dictates whether it is a conforming or jumbo loan.

Tendayi Kapfidze, chief economist for LendingTree, the parent company of MagnifyMoney, said multiple factors dictate which loan product is best for an individual. You’ll need to consider the size of your down payment, the price of the home, your credit history, your risk tolerance and your eligibility for specific loan programs. “Once you have some preferences on those, then you shop around and see what kind of deals you’re getting,” Kapfidze said.

Let’s take a look at the various loan options.

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Government-backed vs. conventional home loans

Loans are defined one way by whether they’re a government loan or not. The government offers three loan programs: FHA, VA and USDA. A conventional mortgage is any loan that is not a part of one of these programs.

Government-backed loans target and serve consumers who may be underserved by traditional financing. Because lenders potentially take on greater risk by extending credit to these borrowers, the government provides protection to lending institutions by insuring the loans. The cost of insuring or guaranteeing the loan is passed on to the buyer through fees built into the mortgage.

Federal loans tend to be more expensive than conventional loans, but they are easier to qualify for. You may need a lower credit score to qualify, and you may be able to put down a smaller down payment.

Let’s review the three types of government loans.


FHA loans are insured by the Federal Housing Administration. These loans let you purchase a home with a down payment as low as 3.5% and a credit score as low as 500, depending on the size of the down payment.

You’ll be limited in the amount you can borrow, based on the market rate for homes in a specific area. With FHA financing, homebuyers usually pay mortgage insurance premiums through an upfront charge of 1.75 of the loan amount, which can be rolled into the mortgage. Additionally, you’ll pay an annual mortgage insurance premium that is built into the monthly payment.

You can finance properties of between one and four units as well as mobile and manufactured homes that meet FHA program requirements. You apply for FHA loans through FHA-approved private lenders.

Advantages of an FHA loan:

  • Low down payment
  • Lenient credit requirements
  • Low closing costs

FHA loans are best for:

  • First-time homebuyers who don’t have home equity already built up that could go toward a down payment
  • Buyers with lower credit scores
  • Buyers with low down payments


The Department of Veterans Affairs backs mortgages for veterans, service members and eligible surviving spouses. Borrowers can purchase homes with no money down and lenient credit requirements.

There is no purchase price limit with a VA loan. However, there are limits on how much you can finance without putting money down.

Applicants will need to meet the VA’s residual income guidelines, which establish how much income you must have left over after covering all debts and living expenses.

VA loans do not require the borrower to pay mortgage insurance, but you will pay an upfront funding fee, which is a percentage of the loan amount. You can apply for VA loans through approved private lenders.

Advantages of a VA loan:

  • No down payment (unless a lender requires one)
  • No minimum credit score (unless a lender requires one)
  • No mortgage insurance required
  • No maximum loan amount
  • No maximum debt-to-income ratio (DTI) (unless set by the lender)

VA loans are best for:

  • Veterans, service members and eligible surviving spouses
  • First-time homebuyers
  • Buyers with low or no credit score
  • Buyers with little or no down payment


Buyers in rural areas can seek financing through the United States Department of Agriculture.These programs are income-sensitive, and you must purchase a property in an eligible rural area.

The USDA has two loan programs:

Guaranteed loan program. In this program, loans are offered by local lenders and guaranteed by the USDA. Your income must fall within the income limits established for low- or moderate-income households, determined by the location of the home and your family size.

These loans carry an upfront loan guarantee fee and may also include an annual fee, both of which are at the borrower’s expense. The lenders set the interest rate for these loans, but rates are capped by the USDA.

Direct loan program. In this program, you can finance a home directly with the USDA. Your income must fall within the established guidelines for very low or low-income households. And the property itself must meet specific criteria. For example, homes must be 2,000 square feet or less in most cases.

Additionally, this program limits the purchase price based on location. Interest rates are lower in the direct loan program than the guaranteed loan program, and there is no mortgage insurance or guarantee fee. Some applicants may qualify for a payment subsidy, which can lower the effective interest rate to as low as 1%.
Advantages of a USDA loan:

  • No down payment required
  • Flexible credit requirements
  • Closing costs can be financed
  • Longer loan terms can reduce the monthly payment

USDA loans are best for:

  • First-time homebuyers
  • Low-income borrowers
  • Rural residents
  • Buyers with low or no credit score
  • Buyers with little or no down payment


As mentioned previously, any loan that is not a part of a government program is a conventional loan. These loans are issued by private lenders and are not backed or insured by the federal government.

Conventional loans require higher down payments than government-backed loans — typically, a minimum of 5% — although some lenders offer programs with down payments as low as 3%. Borrowers who put down less than 20% will need to pay for private mortgage insurance, or PMI, which is added to the loan payment.

Credit requirements are a bit tighter with conventional financing and vary by lender. Borrowers with higher scores will qualify for better rates.

Advantages of a conventional loan:

  • Lower fees than government loans

Conventional loans are best for:

  • Applicants with good to excellent credit
  • Applicants putting down 5% or more

Fixed-rate vs. adjustable-rate mortgages (ARMs)

Mortgages are also classified by the structure of their interest rate. Loans have either a fixed rate or an adjustable rate.

Fixed-rate mortgages

The interest rate and monthly payment on a fixed-rate mortgage remain the same throughout the life of the loan. That means your payments are predictable, and you’re protected from interest rate hikes. Conversely, it also means you cannot take advantage of any interest rate drops unless you refinance the loan.

Advantages of a fixed-rate mortgage:

  • Stability
  • Easier to plan for
  • Protects you from rate increases

Disadvantages of a fixed-rate mortgage:

  • Cannot take advantage of interest rate decreases
  • Higher rates than adjustable-rate mortgages

Fixed-rate mortgages are best for:

  • Most buyers
  • Borrowers who are risk-averse
  • Borrowers who cannot afford an increase in their payment


Unlike fixed-rate loans, the interest rate on adjustable-rate mortgages adjusts throughout the loan. The rate is tied to an index that the lender uses. As the index goes up or down, the mortgage rate and the monthly payment increase or decrease.

Interest rates on ARMs are usually lower than fixed-rate loans initially, but as the market fluctuates, the rate could increase significantly.

Adjustable-rate mortgages can differ in how they are structured. But generally, these loans have a period when the rate is fixed, which can range from one month to 10 years. The most common fixed terms are three, five, seven and 10 years.

Once the fixed period ends, the interest rate will adjust at predetermined intervals — monthly, quarterly, annually or every three or five years. The most common adjustment period is one year, which means the interest rate and payment will change once per year until the end of the loan.

When comparing ARMs, you’ll notice that they are written with two numbers such as 3/1, 5/1 or 10/1. The first number represents the fixed period while the second number represents how often the rate will adjust.

For example, a 3/1 ARM will have a fixed rate for three years and will adjust annually after the fixed period ends. A 5/1, 7/1 and 10/1 ARM will have fixed periods of five, seven and 10 years respectively, followed by annual adjustments.

The initial low rates of ARMs can be appealing for some buyers, but those rates will likely increase. “If you do consider an ARM, make sure you’re very comfortable with the possibility of your payment going up,” Kapfidze advised.

Advantages of an ARM:

  • Lower rates initially
  • Interest rates and payment could decrease

Disadvantages of an ARM:

  • Very risky and unpredictable
  • Interest rate and payment can increase significantly

Conforming vs. jumbo loans

Conventional loans are defined by another classification: conforming or jumbo.

Conforming mortgage loan

Conventional loans have maximum price limits in place set by the government as well as other guidelines established by Fannie Mae and Freddie Mac, the government-sponsored companies that insure a majority of conventional loans.

Limits are based on geographical area, with higher loan amounts allowed in counties that are considered “high cost.” Conforming loans are those that fall within the loan limits. In most of the United States, the limit for one-unit properties is $484,350 in 2019.

Jumbo mortgage loan

Borrowers who want to purchase above the conforming loan limits will need to take out a jumbo loan.

Qualification requirements are usually stricter for jumbo loans, with borrowers needing higher down payments and a strong credit profile.

Determining the right mortgage for you

Now that you have a better understanding of the types of loans, you can compare various options to see what is best for you. Again, give thought to the size of your down payment, the price of the home you wish to buy, your credit history and your risk tolerance.

Additionally, Kapfidze said one of the most important factors to consider is your bottom line. Before shopping for a loan, he advises that consumers should ask themselves how much they are able and willing to pay for a mortgage. The best way to answer that is to come up with a monthly budget projecting the prospective mortgage payment and expenses related to the home, including taxes, insurance, maintenance, repairs and utilities.

“Get a complete all-in monthly housing cost that you’re comfortable with,” Kapfidze said. He added that once you have that number, you can review the loan options that line up with your budget.

Doing this before you begin shopping is crucial, as it’s easy to get swept up in the emotion of buying a home. He also said consumers should talk to several lenders. “There’s always a lender out there that will work with your situation, you just have to find them,” he said. “The more lenders you talk to, the more chances you’ll have of finding that lender that fits your particular circumstances.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Alaya Linton
Alaya Linton |

Alaya Linton is a writer at MagnifyMoney. You can email Alaya here

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Life Events, Mortgage

The Hidden Costs of Selling A Home

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.


When you decide to sell your home, you may dream of receiving an offer well above your asking price. But putting your home on the market requires you to open your wallet, which could cut into your potential profit.

While some line items probably won’t come as a surprise, you may find that there are a handful of hidden costs.

Below, we highlight those unexpected expenses and everything else you need to know about the cost of selling a house.

The hidden costs of selling a home

It’s easy to fixate on the money you expect to make as a home seller, but don’t forget the money you’ll need to cover the cost to sell your home.

A joint analysis by Thumbtack, a marketplace that connects consumers with local professional services, and real estate marketplace Zillow, found that homeowners spend nearly $21,000 on average for extra or hidden costs associated with a home sale.

Many of these expenses come before homeowners see any returns on their home sale. Money is spent in three main categories: location, home preparation and location.


Your ZIP code can influence how much you pay to sell your home. Many extra costs are influenced by regional differences — like whether sellers are required to pay state or transfer taxes.

For example, if you’re in a major California metropolitan area like Los Angeles, you may pay more than double the national average in hidden costs when selling your home.

Below, we highlight 10 of the metros analyzed in the Thumbtack/Zillow study, their median home price and their average total hidden costs.

Metro Area

Median Home Price*

Average Total Hidden Costs of Selling

New York, NY



Los Angeles-Long Beach-Anaheim, CA



Chicago, IL



Dallas-Fort Worth, TX



Philadelphia, PA



Houston, TX



Washington, D.C.



Miami-Fort Lauderdale, FL



Atlanta, GA



Boston, MA

$ 466,000


Source: Thumbtack and Zillow analysis, April 2019.

*As of February 2019.

Generally, selling costs correlate with the home price, so expect to pay a little more if you live in an area with a higher-than-average cost of living or one that has a lot of land to groom for sale.

Home preparation

Thumbtack’s analysis shows home sellers may spend $6,570 on average to prepare for their home sale. These costs can include staging, repairs and cleaning.

Buyers are generally expected to pay their own inspection costs; however, if you’ve lived in the home for a number of years and want to avoid any surprises, you might also consider paying for a home inspection before listing the property for sale. Inspection fees typically range from $300 to $500.

Staging is often another unavoidable expense for sellers and can cost about $1,000 on average, according to HomeAdvisor. Staging, which involves giving your home’s interior design a face-lift and removing clutter and personal items from the home, is often encouraged because it can help make the property more appealing to interested buyers.

It also helps to have great photos and vivid descriptions of the property online to help maximize exposure of the property to potential buyers. If your agent is handling the staging and online listing, keep an eye on the “wow” factors they include. Yes, a virtual tour of your house looks really cool, but it might place extra pressure on your budget.

You could potentially save hundreds on home preparation costs if you take the do-it-yourself route (DYI), but expect a bill if you outsource.

Closing costs

Closing costs are the single largest added expense of the home selling process, coming in at a median cost of $14,,281, according to Thumbtack. Closing costs include real estate agent commissions and local transfer taxes. There may be other closing costs, such as title insurance and attorney fees.

Real estate agent commissions range from 5-6% of the home price, according to Redfin. That amount is further broken down by 2.5-3% being paid to the seller’s agent and the other 2.5-3% being paid to the buyer’s agent.

The taxes you’ll pay to transfer ownership of your home to the buyer vary by state.

Other closing costs include title search and title insurance to verify that you currently own the home free and clear and there are no claims against it that can derail the sale. The cost of title insurance varies by loan amount, location and title company, but can go as high as $2,000.

If you live in a state that requires an attorney to be present at the mortgage closing, the fee for their services can range from $100 to $1,500.

There are also escrow fees to factor in if you’re in a state that doesn’t require an attorney. The cost varies and is usually split the homebuyer and seller.

If you have time to invest, you could try listing the home for sale by owner to eliminate commission fees. One caveat: Selling your home on your own is a more complicated approach to home selling and can be more difficult for those with little or no experience.

Other home selling costs to consider

Now that you have an understanding of the costs that may get overlooked, remember to budget for the below expenses as you prepare to sell your home.


It’s important that you make room in your budget to keep the utilities — electricity and water — on until the property is sold. (This is in addition to budgeting for utilities in your new home.) Keeping these services active can help you sell your home since potential buyers won’t bother fumbling through a cold, dark property to look around. It may also prevent your home from facing other issues like mold during the humid summertime or trespassers.

Be sure to have all of your utilities running on the buyer’s final walk-through of the home, then turn everything off on closing day and pay any remaining account balances.

Homeowners insurance

Budget to pay for homeowners insurance on the home you’re selling as well as your new home. You’ll still need to ensure coverage of your old property until the sale is finalized. Check the terms first, as your homeowners insurance policy might not apply to a vacant home. If that’s the case, you can ask to pay for a rider — an add-on to your insurance policy — for the vacancy period.

Capital gains tax

If you could make more than $250,000 on the home’s sale (or $500,000 if you’re married and filing jointly), take a look at the rules on capital gains tax. If your proceeds are less than the applicable amount after subtracting selling costs, you’ll avoid the tax. However, if you don’t qualify for any of the exceptions, the gains above those thresholds could be subject to a 15% capital gains tax, or higher. Consult your tax professional for more information.

How to save money when selling your home

Keep the following tips in mind when you decide to put your home on the market:

  • Shop around and negotiate. Don’t settle on the first companies and professionals you come across. Comparison shop for your real estate agent, home inspector, closing attorney, photographer, etc. It could also work in your favor to try negotiating on the fees they charge to save even more.
  • Choose your selling time carefully. The best time to sell your home is during the spring and summer months. If you wait until the colder months to sell, there may not be as much competition for your home.
  • DIY as much as possible. Anything you can do on your own to spruce up your home — landscaping, painting, minor repairs, staging — can help you cut back on the money you’ll need to spend to get your home sold.

The bottom line

There are several upfront costs to consider when selling your home, but planning ahead can help you possibly reduce some of those costs and not feel as financially strained.

List each cost you’re expecting to pay and calculate how they might affect the profit you’d make on the home sale and your household’s overall financial picture. If you’re unsure of your costs, try using a sale proceeds calculator to get a ballpark estimate of your potential selling costs. Be sure to also consult a real estate agent.

If you’re starting from scratch on your next home, here’s what you need to know about the cost to build a house.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Crissinda Ponder
Crissinda Ponder |

Crissinda Ponder is a writer at MagnifyMoney. You can email Crissinda here

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When Is the Best Time to Buy a House?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Fall may be the best time to look for a house

Timing a new home purchase can be tricky. Should you start looking in the spring or in the summer? Should you wait for lower interest rates, or make an offer on a house you love even though the price is higher than what you budgeted? These are a few questions you may be pondering if you’re considering buying a house.

It’s common to look for cues about the best time to buy from the local housing economy or from what friends and real estate agents say, but the answer often lies closer to home — with an honest look at your personal finances. We’ll delve into some facts and figures to help you answer the question: When is the best time to buy a house?

The best time to buy a house is when you’re financially ready

Your kitchen table may be covered with listings of all the homes you’re interested in, detailed analyses of mortgage interest rate trends, historic home price appreciation and a plethora of other technical financial data about the timing of a home purchase. None of that information will matter if you aren’t financially ready to buy a home.

So how do know when you’re financially ready to buy your home? We’ve come up with five sings to help you determine if your homebuying timing is right.

1. You know your payment comfort zone

Before you ever speak to a loan officer, do some soul searching about your payment comfort zone — that is, how much you can comfortably afford to spend on a monthly mortgage payment alongside other regular expenses. This might be an unfamiliar concept, but taking the time to seriously consider your payment comfort zone may result in a different monthly payment target than the “maximum qualifying” number you’ll receive from a lender.

The Consumer Finance Protection Bureau considers 43% to be the maximum debt-to-income ratio (DTI) to meet the definition of a “qualified mortgage” — the stamp of approval from the regulatory powers that you’ll be able to afford your mortgage. Just multiply your monthly income by .43 and you’ll arrive at the government recommended total debt number. For example, if you earn $6,000 per month, your total debt including your monthly mortgage payment shouldn’t be more than $2,580. But is that really your payment comfort zone?

Start by asking yourself questions like how much do you take home every month after health insurance, retirement savings, local and federal taxes and Social Security deductions? What about your gym membership, the kids’ karate classes and the new organic food regimen that just pushed your grocery budget from $400 per month to $600?

When you start subtracting the realities of your month-to-month budget from your take-home pay, $2,580 of mortgage and other debt may not leave you much breathing room for a sudden pipe burst in a bathroom, or an air conditioner that takes its last breath on the hottest day of the summer.

Once you’ve worked the numbers backward from all of your monthly expenses — not just the ones the lender uses to get you preapproved for a mortgage — you’ll have an honest idea of what you can comfortably afford.

Here’s a side-by-side review of the money left over from a $6,000 monthly income when considering your organic fruit diet, martial artist kids and your monthly commitment to fitness, assuming you take home about 75% of your before-tax income.

Money left over just looking at 43% DTIMoney leftover after expense reality check
$6,000 before tax income$4,500 take-home pay
($2,580) suggested expenses for 43% DTI($600) (gym membership/karate/organic grocery markup)
($2,580) suggested by 43% DTI
$3,420 extra income suggested by lending guidelines$1,320 actual leftover real-life income

If your monthly income before taxes is $6,000 and you buy a house using the 43% rule based on your real life take home pay and additional expenses, you’ll have $1320 left over every month for gas, groceries, utility and all other bills.

Make sure that’s enough cushion for your month-to-month expenses, and if it’s not, start scaling back your monthly payment cushion until you’ve got more breathing room in your monthly budget to comfortably cover your day-to-day spending and other obligations.

2. You know your credit score and it’s as high as possible

Besides your DTI ratio, your credit score is the most important factor in getting you approved for and snagging the best rate on a mortgage. You’ll want to get your credit in good shape before you start shopping for a mortgage.

Start by checking your credit reports for errors because mistakes could be dragging your score down. You’ll want to initiate any disputes to correct errors at least six months before you shop for a mortgage, because lenders will require you to pause any disputes in order to get your mortgage approved.

Next, review your credit scores and the factors that may be bringing them down. (Find them at While it does take time to improve your score, one way to boost it quickly is to pay down your credit balances. This will improve your utilization ratio, or the amount of credit you’re using compared to the amount of credit available to you. Try to do this at least three to four months before you apply for a mortgage so the credit bureaus have time to reflect any payments you’ve made. And focus on making all your credit payments on time.

3. You have your down payment and emergency fund saved

When you were in the process of determining your payment comfort zone, you probably spent some time crunching down payment numbers. Generally, the more you put down, the lower your overall payment will be.

A 20% down payment will help you avoid mortgage insurance on a conventional loan, but even if you don’t have that much saved, every extra 5% down will save you money. Mortgage insurance (also called private mortgage insurance or PMI) protects lenders against losses if you default on your loan. The less you put down, the more PMI you pay monthly on a conventional mortgage.

The table below illustrates the impact every additional 5% down makes on a $200,000 house if you have a 760 credit score and take out a 30-year fixed rate of 4.25% on a conventional loan in Arizona.

Down paymentLoan amountMonthly mortgage insuranceTotal monthly PIMI (Principal/interest/mortgage insurance)

In addition to your down payment, financial planners often recommend having three to six months’ worth of basic expenses in an emergency fund. Lenders also like to see extra money in the bank so they know you have the funds on hand to make extra payments or cover unexpected home repair expenses.

4. Your job is stable

It’s easiest to qualify for a mortgage if you have a salaried job or a full-time hourly position. If you have a position that only has a temporary base pay that will end in the near future, you may have a hard time getting approved. If you’ve been in a commissioned or self-employed position for at least two years and show enough income to qualify on your tax returns, then this is a good time to buy.

5. You plan to stay in your current location for 5-7 years

You may hear the expression buying a home is one of the biggest investments you’ll make. The most disciplined investors also talk about looking at the long term versus the short term.

When it comes to real estate, the “5-year home sale rule” refers to the fact that you have a better chance of recouping the cost of buying a home if you stay in the home for at least five years. By that time, you’ll have made 60 mortgage payments, and in most cases, you’ll see home values in your area gradually rise.

The combination of these factors usually results in a sweet spot for reselling after five years. This is important because as a home seller, you’ll be paying all of the real estate commissions for the services agents provide to sell your home. Those fees can be as high as 6% or more, and that’s money that comes off the top of the profit you make.

The example below shows how the 5-year rule works. It assumes you put down 5% on a $250,000 home with mortgage rate of 4.25%, the market appreciates 6% per year for the next five years (it has averaged 7-8% per year since 2007-08), and selling costs total 8%.

Year since purchaseHome value at 6% annual appreciation*Principal balanceTotal equitySelling costs 8%Net profit at sale
*Average appreciation rate since the 2007-08 financial crisis

It’s best to buy when rates are heading down

It’s impossible to know exactly what interest rates are doing, but if you see a lot of news about rates dropping, it’s worth it to get a payment quote. From December 2018 to August 2019, mortgage rates offered for many mortgage programs dropped nearly one percentage point, which has a huge impact not only on your monthly payment, but on how much interest you pay over the life of the loan.

We’ll look at how a one percentage point reduction in the interest rate can make a monthly payment difference for a $150,000, $250,000 and $350,000 loan. Using the 5-year rule, we’ll also look at how much extra equity and interest savings you realize by the time you make your 60th payment (12 months of payments x 5 years = 60 payments).

Loan amountMonthly payment at 4.75%Monthly payment at 3.75%Monthly payment savingsInterest savings over 5 years at 3.75%Extra equity at 5 years

The bigger the loan amount, the more the impact on your monthly payment savings, total interest costs and equity build up. This makes shopping around for a mortgage and locking in a rate when you find the best deal even more important.

It’s best to buy when home prices are leveling off

The price you pay is just as important as the interest rate when it comes to buying. When home prices level off or rise at a slower pace, sellers tend to put their houses on the market at a more rapid pace, as they worry they may miss out on getting top dollar if prices stall out.

That’s good news if you’re a buyer, because more houses for sales may mean lower prices. Sellers may also consider contributing toward your closing costs or help you buy discount points to get a lower rate. This is also known as a “buyer’s market,” because it tends to be more advantageous to buyers than sellers.

Sales price also affects how much money you need to put down, so getting the best price will help you leave some of that down payment money in the bank to build up your emergency fund even further. Here’s an example of the effects of a 5% difference in price on your down payment, and assuming the seller is willing to pay 3% of your closing costs.

Sales price5% down payment10% down payment3% seller paid costs

If you can buy a home for $200,000 versus $220,000, you’ll save $1,000 in down payment (assuming you’re putting 5% down), and the seller can potentially pay $6,000 in closing costs. The most common signs that the market is turning in your favor are “For Sale” signs. If you start seeing more of them popping up in your area or in a neighborhood you’ve had your eye on for a while, chances are you’re entering a buyer’s market.

The best times of the year to buy a home

Spring and summer are the most popular times to buy. Summer can be especially expensive for families to buy because sellers know there is pressure to find something and get settled before the start of the school year. Conversely, fall and winter are slower seasons for home sales. As a buyer, there are some months and even days when you might be able to save a bundle of cash if you’re able to make an offer and close during unpopular selling months.

The October homebuying advantage

October consistently ranks in the top three months for buyers, according to an analysis by ATTOM Data Solutions that examines dates from 2011 to 2018 during which sellers were least likely to charge a premium for single-family homes and condos. During this time, sellers are likely to accept premiums that are one-half to two-thirds lower than the highest premium months of the year (March to July).

With kids back in the full swing of school, sellers lose a big pool of prospective buyers, giving you an advantage as a prospective homebuyer.

December is the next best month for buying power

While many people are in the thick of holiday events and get togethers, homebuying may be the furthest thing from their minds. Sellers who need to sell in December will often give buyers extra motivation to consider their homes during the holiday season, and buyers prepared to forgo a cocktail party or two may be rewarded with substantial benefits.

Ringing in the new year with a cheaper home in January

If your New Year’s resolution includes home ownership, January may be a great month to look as well, according to ATTOM’s data. While most people are signing up for gym memberships, focusing on house hunting may save thousands of dollars in home costs instead of inches off your waistline.

Final thoughts about timing a home purchase

The good thing about home prices and interest rates is that they tend to move slowly, giving you time to prepare yourself for the homebuying journey. In order to take advantage of deals to buy a house, you need to have your financial house in the best shape possible.

Not only will you potentially save money with a lower rate or price on the home you buy, but the loan approval process will be much easier if you buy within your means and are able to demonstrate strong credit scores, solid income and plenty of money in the bank.

This article contains links to LendingTree, our parent company.

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Denny Ceizyk
Denny Ceizyk |

Denny Ceizyk is a writer at MagnifyMoney. You can email Denny here

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