New Home Owner Advice
There are things that they did not tell you at closing. Little bits of information that you need to know to make the most of your new home and not get into trouble. There is always a catch to everything and home ownership is no different. Ready to find out, here we go.
Your Payment Will Go Up
Think that house payment is going to be the same forever. Nope, in fact it will probably go up dramatically on year two unless you take some precautions. Why, the second year? That is when the Appraisal District in your county makes the value adjustment and they can make a big one the first year.
If your house is brand new, they will be basing the value on that of the unimproved land. The next year when they re-appraise, it will be for the improved value of the land and the home. Meanwhile, your mortgage company will be basing your escrow payment on the unimproved value which will leave you with an escrow shortage at the end of the year. They will pay the difference for you, but they will get it back on year two with a big escrow adjustment.
It can be almost as bad with an existing home is undervalued on the property tax roles, which many are. The next year, the Appraisal District will make an adjustment based on the estimated sales price and it taxes can go up quite a bit. Just like above, your mortgage company will be basing their tax estimate and your escrow payment on last years taxes. They will pay the increase but will jack up your new escrow payment to make up for the escrow shortage.
The increase in your escrow payment can easily be $300 a month or more depending on the value of your home. It can be a very shocking surprise the next year which is why you should plan ahead to prevent it. Make extra escrow payments during the first year to cover the increase in taxes. This will keep you from having a huge escrow adjustment.
Besides the adjustments above, you can expect your payment to go up a little every year. Taxes will continue to increase slowly as your home gains in value. Also, homeowners insurance rates will rise with time and often with the age of your home. New homes get a very nice discount on hazard insurance because of those nice new roofs.
Things Will Break
If you bought a new house, you have a great warranty for the first year but after that, you are out of luck and it is on you. Sure, you can buy one of those home warranties that claim to pay for emergency expenses but they are not always that great. Many of them will simply put a bandaid on anything that needs repair. They are, after all, in business to make money. Getting them to actually replace something that breaks can be a nightmare.
Instead, take the money that you would have spent on that home warranty and put it in the bank as a home emergency account. Set up a monthly budget that allows you to contribute to this savings account. In the end you will come out ahead of where you would have been with a home warranty company and if something breaks, you can replace it with what you want.
There Are Hidden Expenses
If you are used to renting an apartment, you might not be ready for all of the hidden expenses. There are a lot of things that you will have to pay for that you did not in an apartment and the other things you are used to will cost more.
For starters, water and electric will be much higher. You will be in a bigger place, in most cases, and it will cost much more to heat and cool it. In addition, if you are purchasing a house, you will have an increase in water cost. You have to pay to water that lawn and the foundation.
Other expenses that you might not be used to paying are things like garbage pickup, security alarm monitoring and lawn care, unless you want to do your own lawn.
There Is Always A Project To Do
There is always something to do if you own a home. This can be maintenance or it could be home improvements that you want to do. The list of projects is never ending and this means two things. It means that you will either have to spend a lot of time doing the work or spend a lot of money hiring somebody to do it for you. The choice depends on your means and your ability.
You Will Worry About Your Home
This may not cost you anything but it will change the way you think about things. When you own something, you have an attachment to it. If you used to be a storm lover, for example, that approaching super cell will fill you with fear. Did you leave the stove on? Don’t want to burn down YOUR house. Owning a home is a great experience but it is an investment that you will worry about.
Maid Service Is Much More Important
When you have an apartment, it is probably not too hard to keep it clean. A maid might be the furthest thing from your mind, When you own a much larger home, it becomes a much bigger consideration. If you do not want to spend every free day cleaning, you might have to get used to the idea of someone doing it for you.