How do you protect your investment in your first home? Despite the relief of finally being there after all the work of finding and buying the property, the work of financial planning and budgeting does not stop once you collect the keys to your new home.
All of the work you have already done should help the process, of course. You had to determine how much home you can afford, pull together funds for a down payment, and apply for a home loan. This can be a painful and stressful process. According to a survey by FREEandCLEAR, 75% of home buyers likened the mortgage-acquisition process to visiting the dentist or undergoing a physical exam.1
Read our list of what you need to do next to keep the momentum going in securing this key stage in your financial life and building a firm foundation for your future.
Revisit Your Budget
Agent Elizabeth H. O’Neill of Warburg Realty in New York City says it can be daunting to think about establishing a homeowner-oriented financial plan after you’ve just gone through the buying process, but it’s an essential step you can’t afford to skip.
“Sitting down and working out a budget will pay dividends,” O’Neill says, and your budget should thoroughly cover all the costs of owning a home. That includes your mortgage payment, as well as any increases in expenses associated with higher utility costs, homeowner’s association or condo fees, and maintenance or repairs.
The latter two are a significant consideration if you’ve recently made the transition from renting to owning. Having to fix a leaky toilet or replace a broken window out of pocket can come as a wake-up call if you’ve never owned a home before, O’Neill says.
According to a Bankrate survey, the average homeowner spends $2,000 per year on maintenance, including landscaping, housekeeping, and minor repairs. That amount, however, doesn’t cover larger expenses you may encounter as a homeowner, such as having to replace your HVAC system or roof, both of which can easily surpass $5,000.
Tad Hill, founder and president of Freedom Financial Group in Birmingham, Alabama, says that first-time buyers should set up a separate homeownership savings fund to cover bigger repairs. “The price range for these services is not small, so I’d suggest planning to keep at least $5,000 to $10,000 in cash so you have it available when something breaks.”
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