Getting your ducks in a row when buying your first home

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Published Date 12/15/2020

Believe it or not, many a homebuyer who may have saved up meticulously for years for the down payment on a house can end up flat-footed after the close of escrow. Why? Because often they have not thought about the expenses of homeownership that have nothing to do with their monthly mortgage payment.

PennyHoarder's Nicole Dow reminds readers about a brand spanking new set of expenses that present themselves after the fact — not just property taxes, but several other budget items to prepare for as well.

"Homeowners insurance generally protects against losses or damages to your home and belongings, plus liability coverage for accidents that may occur on your property," says Dow. She explains how the items covered by your homeowners' insurance policy will differ based on your policy, and that will determine the cost as well. For instance, a house with a pool or those located in flood plains or earthquake zones will cost more because of risk factors. Even if you aren't required to get flood or earthquake insurance, however, you may opt to do so to protect against damage your homeowner's insurance doesn't cover. It's your call.

If you prefer, you can set up an escrow account so that when you make your monthly house payment, you are paying a portion of your property taxes and homeowners' insurance as well, saving you the trouble of keeping a separate savings account for them.

Unfortunately, you can't roll the cost of your utilities into an escrow account, even if it was once part of your rent before you became a homeowner. To get an idea of what the monthly bills are for your various utilities (water, sewer, electricity, garbage) you can either call those companies and ask for a survey for your property or check online for customary charges for a property your size. Your Realtor might be able to get those numbers from the previous owners as well.

If you're buying a newly built home, maintenance and repairs are not a huge concern. For the first year, your builder may warranty your home. But for those buying a home "with experience," however, personal finance experts suggest homeowners save 1 to 2% of their home value each year for maintenance and repairs. Dow suggests keeping these rainy day funds in a high yield savings or money market account, but make sure you can easily access the funds when an emergency arises.

A home warranty often covers repairs to specific systems and appliances, like your HVAC system or your fridge. "Weigh the costs of the warranty (plus any related service fees) against how much you would save on your own for future repairs," says Dow.

If you are not one to wield a lawnmower and a pair of pruning shears, lawn care is another task you might plan to outsource. Are you hiring a lawn care company? Be sure to shop around for the best prices or talk to your neighbors for recommendations. Other sources are websites like Angie's List, HomeAdvisor or Nextdoor.

While not everyone sees the need for a security system, it's an expense to consider. As your home is your biggest asset, it may feel wise to protect both the dwelling and its belongings." When considering security systems, budget for the initial cost of buying and installing the system, plus the monthly cost for monitoring," says Dow. "At the bare minimum, when you move into a new house, you'll want to pay to get all the locks changed."

Of course, if you have other questions about owning a home, please reach out. We're always here to help!

Sources: PennyHoarder | TBWS

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