You finally made the big leap and bought your first home. Congratulations! Wondering now how you’ll live on your new homeowner’s budget? Here are five tips to keep you on top of homeownership through your first year:
1) Set aside money for big expenses TODAY. Taxes and insurance are two of the biggest expenses a homeowner has throughout the year aside from the mortgage payment itself. Generally mortgage lenders will require you to set up an escrow account for the taxes and insurance to protect their investment – especially if the loan exceeds 80% of the home’s value. However, if your loan is LESS than 80% of the home’s value or your mortgage provider did NOT require an escrow account, you should definitely consider asking your lender for an escrow account or setting up a savings account yourself for these expenses or take advantage of budget payments offered by some insurance companies.
Home Insurance
Many insurance companies offer budget payment options monthly or quarterly to help you chip away at paying your home insurance bill without making a huge, lump sum payment semi-annually or annually that could break your new home ownership budget. It’s easy to set up automatic payments from your CitizensFirst checking to pay your home insurance bill. Typically,n you’ll need to provide your checking account information to the insurance company, including account number and routing number information, and then sign a form allowing the insurance company to debit a certain amount from your account each month.
Property Taxes
When it comes to real estate taxes, some municipalities offer payment plans so that the lump sum isn’t due at once, but you still may need to save up for these payments depending on how large your tax bill is. Missing your real estate tax payment is not an option as the municipality can put a lien on your home making it difficult to sell down the road. To set aside money monthly for your tax bill, simply use payroll deduction to set aside money in a savings account each time you are paid, or utilize automatic transfers monthly from your CitizensFirst checking to a special savings account earmarked for your tax bill.
2) Build your emergency savings now. In this economy, the smartest thing you can do is start building the generally-recommended, 6-month emergency fund NOW just in case you should find yourself out of work down the road, and unable to make your mortgage payment, or need to pay a big maintenance bill when your furnace blows or your roof needs replacing. Set aside an extra $50-$100/month into a special fund that you never intend to use – except for emergencies (and that doesn’t mean for the time you want to go out to dinner with friends, but can’t swing it that month!). If you set up a payroll deduction for the emergency fund, it can come right off your paycheck and slip into a savings account painlessly -- without thought or discipline -- since it’s all done electronically! Set it up once and you’ll be amazed at how quickly this can grow – and multiply with interest. Alternatively, automatic transfers from checking can be made on a regular basis. Both services are free for CitizensFirst members, and quite helpful in building your emergency savings quickly!
3) Don’t use your home like a bank account. While one of the many benefits of owning a home is the easy access you’ll have to extra money through Home Equity Loans and Home Equity Lines of Credits as you build equity, be sure to exercise caution in cashing in on this option. Using the equity in your home for a vacation may not make as much financial good sense as using it for home improvements now when labor is cheap and the promise for payback is high-- if the improvements are done well. Well-planned improvements can be invested in using a home equity loan as long as you’ve done your research and have perhaps talked with a realtor to understand what “bang for your buck” you might expect to get in return down the road.
4) Be creative about outside maintenance. So you moved into a home with a large yard and long driveway and need both a riding lawnmower and a snowblower. Chances are you may not be able to afford both right away – new, at least – but you can be creative about maintenance in the short-term. First, consider using classified ads, rummage sales and Craigslist to locate higher-quality used items at cheaper prices. If nothing is showing up, try posting your own “Wanted” ad – maybe it will spur someone who was considering selling theirs to make the leap now. Additionally, consider hiring a neighbor boy (should be age 16 to operate a riding mower according to the American Academy of Pediatrics and age 12 to operate a walk-behind mower ) to cut your lawn each week (if the family has a mower!) until you can afford the equipment. Paying $20 to a college-bound, neighbor boy every 10 days throughout the summer will cost you $240 over the course of the summer (assuming 120 days), which might be a good choice until you can save up the thousands you’ll need for a new John Deere!
5) DIY. DIY. DIY. Once you signed the line on your mortgage documents, you also just became a student of the Do-it-Yourself-Home-Ownership program! You will need to conduct lots of research – in many new areas you’ve never even dealt with before, like sump pumps, well water and septic systems if you live in the country, and water softeners, furnaces, central air conditioning and more! Then you’ll need to determine the most cost-effective way to take care of these things as they wear out and break down. Local hardware stores like Lowe’s and Home Depot offer home owners lots of classes on how to take care of many of these types of things. Or, if you prefer learning from the comfort of your own home, cozy up on your couch with pen and paper in hand for an episode’s of HGTV’s DIY network specials, like Bath Crashers, Yard Crashers or I Hate my Kitchen. HGTV provides online support for do-it-yourselfers as well, with online tips and photos available on their DIY Network website. And, check out the Home Life section of your CitizensFirst website. It's also filled with tips and ideas for maintaining and decorating your home.
There’s no doubt that home ownership is a lot of work, but the payoffs are big if you simply continue to invest a little time – and money – into this dream you’ve finally made come true!
