Some budgeting tips for new homeowners
In a market like this, with wildly competitive open houses, sky-high prices, and ever-escalating offers: there is a terrible lot to contend with when finding a new place to live. House hunting is fraught with frustration and challenges. Real estate is a lot like falling in love. Sure, sometimes it just happens at first sight, but most of the time it takes patience, understanding, and a lot of work. But there’s also no other process that deserves your time and attention, like discovering a new place to call your own. So, if you have just recently become a homeowner for the first time: I would like to congratulate you!
The last thing a home buyer wants is to be caught off guard. For one reason or another the most important thing a home buyer can do is be prepared. There was that initial financial hit, the down payments and closing costs were just the beginning. And if you were renting prior to buying, having reserves was not something that you needed to think about.
New homeowners, start budgeting sooner than later
As a new homeowner, the sooner you can get your budget together, the better. I get it, you finally made it after all those bidding wars, competitive open houses and finally getting those keys. The last thing you want to think about is budgeting. However, it will help protect your personal finances and investment in your new home. Some unpredictable circumstances are always possible and a balanced budget with a healthy savings account will better prepare you. This will leave you having peace of mind for the future. After all your home is your greatest investment!
Market Watch talks about some things to expect after purchasing a home,
Anticipate new expenses: When you purchase a home, one of the most considerable immediate changes is that you’ll have a monthly mortgage payment instead of rent. Typically, your mortgage payment will include items like property taxes and homeowners insurance
Homeowners insurance: Particularly when it comes to homeowners insurance, remember that you have options. If your premiums with your current insurance company increase enough to upset your budget, it may be time to look into other insurance providers.
Homeowners association fees: Some new homeowners, particularly in townhouses and condos, may be part of a homeowners association (HOA). The fees for these associations, which should go toward the upkeep of community spaces, can be steep, sometimes costing hundreds of dollars each month.
Maintenance costs: Unlike renters, homeowners are responsible for maintaining their residence and property. Typically, this will involve things like lawn mowing and HVAC tune-ups, but there’s always the possibility that something essential and expensive could break. Thus, you should have savings earmarked specifically for home repair - One way to keep your home maintenance costs lower and more consistent is to invest in a home warranty. This residential service contract helps cover the cost of repairs and replacements for covered home systems and major appliances that break down due to normal wear and tear, but these are not always worth the cost.
This is some great advice!! Owning a home may be your dream, but for the purchase to be the happy and satisfying experience it was meant to be, you need to ensure that you are financially and mentally prepared for the responsibilities that come with it. Some people have a notion that home ownership is like renting, but with the power to have pets and paint the walls whatever color you like. However, while these privileges are available to homeowners in most municipalities, they come with the responsibilities of a mortgage, taxes, and home maintenance.
Consider these other ideas as well. Have an emergency fund, paying your mortgage and credit cards on time to avoid late fees, monitor your utility bills and usage. Stay up to date on home maintenance and repairs and/or even getting creative with furniture and home decor can save you a lot of money.
Homeowners, what about budgeting for big projects?
Homeowners, unless you bought new construction and got to pick out all your finishes, the chances are you are going to make some improvements in your home down the road. The kitchen, for example, is what many homeowners save up for, and is considered "the heart of the home". So, plan for big projects, a big home improvement is something you probably don’t plan on tackling initially but you might a few years down the road. These could also include major, unexpected maintenance projects or upgrades you decide you want to do.
Market Watch goes on to mention that with home improvement,
Even if you didn’t purchase your home with the intention of remodeling your kitchen, for example, you might find that the existing structures don’t fit your needs as well as you thought. For example, if you’re a first-time homebuyer, perhaps you will need to add more usable space as your family grows. Or maybe you just get sick of the carpeting and would rather install hardwood floors. Regardless of the home improvement need, you may want to start saving for it now.
Remember to consider that not all renovations bring up home values, read my blog: Home renovations that are not benefiting your home value
Finally, consider all situations from catastrophic events from earthquakes and flooding. Consider revisiting your savings and life insurance. Create an emergency fund, and do not forget to think about budgeting around having kids or pets. After all, President Franklin D. Roosevelt states it best, “Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.”