What to Expect the First Year

Be prepared for all the great pleasures and minor pains of homeownership.

Homeowners Insurance

Before closing, but after your offer has been accepted, you’ll be required to secure a hazard insurance policy, also known as homeowner’s insurance. This will not only protect your home from disaster and lawsuits, but will protect the investment made by your lender.

Your policy (or policies) should very clearly cover both the structure of your home as well as the personal property inside it. You should also be diligent about updating your policies to reflect the changing property values in your neighborhood or the rise and fall of construction costs.

Another policy type is flood insurance. Most homeowner’s insurance policies do not cover damage from flooding. If your new home is in a flood hazard area, you will be required by law to obtain a flood insurance policy.

Another policy type is earthquake insurance, which some mortgage programs may require on specified properties in California.

Taxes and Deductions

Most homeowners get a tax break due to their mortgage, but new homeowners aren’t always sure what they can deduct. The following items are usually deductible, but you should consult a tax professional to be certain they apply to you:

  • The mortgage interest you pay is deducted from your taxable income on a form called Schedule A. During the first years of owning a home, most of the mortgage payments go toward interest rather than the principal.
  • The first year you buy your house, you can also take any points paid on the mortgage. Most taxpayers take all the points in the first year, but you do have the option of amortizing the points over the life of the loan.Property taxes can also be deducted in the year paid. Make sure to take the whole amount of property taxes, as the bill usually comes in two installments per year.

 

Home Repairs and Remodeling

Almost everyone who moves into a previously occupied home has some ideas for personalizing the space. Some areas that you should look at carefully in your new home include:

  • Carpets and/or wood flooring
  • Wallpaper and paint
  • Porches and decks
  • Lawn and landscaping
  • Kitchen and bathrooms
  • Windows
  • Roof
  • Siding or exterior surface
  • Plumbing
  • The small things, like door knobs, locks, floorboards, and faucets
  • Heating and air conditioning systems

The cost of making even just a few of the changes mentioned above can be very high. Be sure you budget for improvements and repairs.

Adding Outdoor Beauty

A beautiful garden is the perfect complement to your new home. Start by learning the ground around your home; where does the sun hit most of the day, where are the shadier spots, what type of soil do you have, and would you like plants that come back every year?

If you have a very hectic, busy lifestyle, it’s best to choose plants that require little maintenance and will grow back every year. Shrubs, cactus and evergreens are wonderful. If you plan to spend a considerable amount of time gardening, perhaps you’d prefer more colorful, demanding plants such as flowers, fruits and vegetables.

Whatever you choose, make your new home your own and step back and enjoy the results of your hard work.

Money-Saving Tips

There’s no doubt that owning a home will absorb a large portion of your monthly budget. But if you plan carefully, conduct some research and think before you leap, there are ways to significantly reduce your homeowning expenses.

  • Mortgage. It can’t be stressed enough how important it is that you learn about your mortgage options before you sign a contract. With so many types of mortgages available, you should be able to find the one that suits your budget and lifestyle best.
  • Early Mortgage Payment Plan. EMPP is an easy way for you to pay off your mortgage early. It’s a program that withdraws half your regular payment every other week, for 13 full payments each year. The additional payment will be used to reduce your principal balance. In the long term, EMPP saves you money.
  • Homeowner’s Insurance. Don’t let the cost of homeowner’s insurance scare you. To lower the price, make sure you comparison shop. Raise your deductible and add smoke detectors, burglar alarms or extra locks.
  • Wants vs. needs. Once you can tell the difference between your “wants” and “needs,” you’ll save a lot of money by focusing on the things you need more often than the things you want for your home.
  • Become a handyman. With all the free information available on the Internet and TV about home repair and remodeling, you’ll discover that the jobs you thought required a contractor are simple do-it-yourselfers.

Enjoying Home Ownership

You’ve achieved something millions of Americans dream about accomplishing everyday: You own your own home! That brings with it new responsibilities–paperwork, property taxes, maintenance and yard work–but it also gives you added freedom. Enjoy the privacy and the sheer pleasure that comes from homeownership.
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