You’ve changed the locks, unpacked the boxes and found a spot for your favorite armchair, but the work of moving into your first home is far from over.
Homeownership is a big commitment that requires planning for the unforeseeable, such as a storm that floods your home, and the unappealing, such as cleaning your gutters. This doesn’t have to be a herculean task, but it’s worth creating a game plan that’s right for you.
Let’s start with the basics.
Take stock of what you own. You’d be crushed if that new couch were lost in a fire or other accident, so why not take a picture and catalogue that sweet sectional? The homeowners insurance you signed up for before purchasing the house should have adequate replacement coverage.
Creating a spreadsheet of your valuables will make it easier to recover those things in the event of an accident. Update the file as you unpack and buy big-ticket items for your new home, and keep a copy of the document at work or in the cloud just in case your computer is among those valuables lost.
Map out a maintenance plan. Your home needs upkeep. The last thing you want to do is put off routine maintenance that could prevent problems down the line, said Karen Hoskins, acting vice president of homeownership programs and lending at NeighborWorks America.
“The home you just purchased is an investment that has to be protected, so don’t defer maintenance,” she said. “Just making a schedule to remind you to change filters every three months or so would be good.”
If spreadsheets aren’t your thing, apps can do the work of reminding you to change those filters and clean those gutters. The BrightNest app helps you build a list of chores tailored to the features of your home. It also sends tips for things like mowing your lawn and making your own cleaning products.
An inspection report is another helpful guide. If you hired a professional to examine your home, then you should have what amounts to a checklist of projects. Some experts will tell you that you don’t have to tackle everything on the list, but it is a good place to start.
“If you need contractors, just make sure you do your homework, get several bids, references and check their license,” Hoskins said.
Set aside an emergency fund. Saving money after you’ve just handed over your life savings sounds like a stretch. But the last thing you want is to be caught empty-handed when the toilet springs a leak.
Economist Dean Baker of the Center for Economic and Policy Research says you should expect to set aside 1 percent of the purchase price for repairs and maintenance. If you buy a $350,000 home, plan to squirrel away $3,500. You may not need a dime of that money from one year to the next, but it sure is good to have just in case, he said.
Automate that savings by directing a percentage of your take-home pay to an account earmarked for housing expenses. If 1 percent is more than you can afford, try half that amount over 12 months. At the very least, you’ll have some money to cover your repairs.
Consider home warranties. Another way of addressing maintenance concerns is to purchase a home warranty, a service contract that will repair or replace things such as a broken furnace or dishwasher. You pay a quarterly or annual premium that’s supposed to take care of those problems. When you buy a house, sometimes warranties are provided as part of the purchase. The thing is, you have to read the fine print.
“These warranties often exclude existing problems,” said Anthony Giorgianni, a writer for Consumer Reports. “Sometimes it can be really tough to prove that an appliance that broke down didn’t have that problem before you purchased the coverage.
And sometimes there are exclusions where they’ll cover the fridge, but not the ice-maker.”
Because most companies use third-party contractors, the service can also be spotty, Giorgianni said. Still, if you buy an older home, the peace of mind might be worth the expense.
On the other hand, Giorgianni says putting the money you’d spend on a home warranty into an emergency fund gives you more flexibility.
If your appliances remain in tiptop shape, you still have money available for other housing needs.
Research additional insurance coverage. Within the first month or two of moving into your new home, you’ll probably be inundated with offers for mortgage payment protection. This form of life insurance covers your monthly payments if you lose your job, become disabled or even die. It certainly offers peace of mind, especially if your health or job is shaky.
“For someone who feels like they’re at risk for having their employment interrupted or has a history of having to change jobs frequently, it might be advantageous,” said Barry Zigas, director of housing policy at Consumer Federation of America. “But disability insurance is probably a far better bet to cover expenses if you face disability on the job, and it covers far more than mortgage payments.”
Make sure to read the fine print before signing anything. Some job-loss or disability policies cover payments for only up to two years. What’s more, the value of the policy decreases as you repay your mortgage.
Zigas says the most important thing for consumers is to make sure they have good property-casualty insurance that protects their belongings in the event of a storm, fire or other catastrophe.
Avoid piling up debt. After closing on a house, it’s easy to get overwhelmed with the flurry of credit card offers that are sure to land in your mailbox. It’s also tempting to use the credit cards you have to go on a furniture shopping spree. Pace yourself.
“Be careful,” Hoskins said. “Wait several months before taking on any additional debt, until you become comfortable with that new mortgage payment.”
It’s important to get used to new expenses before adding nonessential ones.