Welcome To Homeownership
Congratulations! You are officially a homeowner.
You’ve saved for a down payment, found a home, signed the sales contract, secured your loan, and closed on your new home; all of which took planning. Buying a home can be one of the most satisfying purchases in your life and it comes with an abundance of both freedoms and responsibilities. Think of buying your home as just the beginning.
In this final module, we’ll walk you through some of those homeownership responsibilities such as paying your mortgage on time, how to plan for ongoing expenses, how to maintain the value of your home, and a few things to build your homeownership knowledge.
Responsibilities as a Homeowner
Responsibilities as a homeowner can be different for everyone, but some of the basics that we’ll cover in this lesson include making sure that you are able to make your mortgage payments on time and keep accurate records.
Pay Your Mortgage on Time
First and most important, it’s absolutely crucial to pay your mortgage payment in full and on time each and every month. What’s important to know about making your payments is that it is not uncommon for your lender to transfer your loan to a servicer after the sale is complete and you have closed on your home. Servicers are responsible for the receipt of mortgage payments, customer service, escrow administration, investor accounting, collections, and foreclosures. These activities are called “servicing” of a mortgage loan. If and when a lender transfers servicing responsibility of your mortgage loan to a servicer, you should receive a letter in the mail within 30 to 60 days of the transfer.
Late payments can result in late fees and can negatively impact your credit report and score, which could affect your ability to borrow money or get loans in the future. Missing your full monthly mortgage payment could potentially result in losing your home to foreclosure.
If you face difficulty making your mortgage payments on time (due to circumstances such as unemployment, income reduction, increase in housing-related expenses, long-term or permanent disability, serious illness, divorce or legal separation, death, relocation, or disaster) it’s essential to call your Real Property Hero right away to talk through your options and work towards a solution.Real Property Hero
Another responsibility of owning a home is keeping really good records. Having a system for organizing important documents ensures you’re prepared for warranty claims, budget concerns and anything else that comes your way–whether it’s bills for utilities or your mortgage, receipts for purchases or repairs, your home appraisal and inspection, or even plans for future projects.
Save Money for Future Expenses & Pay more on Principal
Continuing to save money, including establishing an emergency fund, is important to cover the ongoing costs of homeownership. Here are a few expenses to expect as a homeowner.
Property Taxes and Insurance (forever cost)
For as long as you own the house, even after you’ve paid off the mortgage on your home, you’ll need to pay for property taxes and homeowners insurance. Depending on where you live, you’ll have local and state property taxes to pay that go toward funding things such as infrastructure, schools, and services like your local fire department and police. It’s important to pay your taxes on time or you could face penalties and/or a lien placed on your home.
You may be required to pay your property taxes and homeowners insurance through an escrow account every month in addition to your regular mortgage payment. This helps spread out your taxes and insurance payments over 12 months.
An escrow account allows you to allocate money on a monthly basis and often makes it possible to spread out larger expenses over time instead of large lump sum payments, which is often the case for property tax bills.
Your mortgage servicer will make payments on your behalf from your escrow account.
Homeowners insurance (sometimes referred to as hazard insurance) typically protects your home and personal property from damages caused by perils such as, fire, lightning, hail, and smoke, among many other scenarios, depending on your policy.
Most of the time, however, coverage for other perils such as, flooding and earthquakes (or earth movement) are specifically excluded.
Keeping up with homeowner’s insurance is critical. If your policy is cancelled, expires, lapses, or is insufficient, the lender or servicer can obtain insurance on your behalf, which could be costly.
Other Insurance Policies
If you live in an area that is prone to floods, earthquakes, or other risks which may be unique to your location such as, mine subsidence, hurricanes, or sinkholes, you may be required to purchase a separate insurance policy to protect your home.
Even though you are not required to obtain a separate insurance policy, you should discuss the risks and various coverage options with an insurance professional familiar with your community and specific needs.
Homeowners Association Fees
Depending on the type of home you purchase, or the neighborhood you buy in, you may need to pay a homeowners association (HOA) fee, condo association fee, or planned unit development (PUD) fee. Homeowners associations are common if you buy a condo, townhouse, or single-family home in a planned community.
The purpose of the association and the fees you pay is to protect and maintain the common areas and neighborhood environment. These fees may cover, but are not limited to, landscaping costs for shared exterior spaces, snow or trash removal, and shared structures such as a gym, community room, or pool. The total cost of these fees depends on a number of factors like the size of your development and its location. Make sure you read your HOA’s covenants and restrictions carefully.
Maintaining the Value of Your Home
Your home is probably one of the biggest purchases you will ever make, so keeping it in good condition is essential to protecting your health, safety, and investment.
Maintaining the value of your home is incredibly important. You could lose money when it’s time to sell or refinance if you don’t make efforts to maintain your home’s value, and repairs could cost more in the long run.
Planning for Expenses
Some larger expenses may be replacing the roof, installing new windows, or replacing the furnace or water heater. There are many other expenses, but these tend to be the costliest. It’s always a good idea to save for these expenses, but they can be financed with personal loans or home equity lines of credit. Also, consider saving to help pay cash for smaller, more routine upkeep projects and repairs like landscaping, painting walls, replacing carpeting, and refinishing wood floors.
Now that you know what kind of expenses to plan for, let’s take a look at what maintaining your home can involve.
In addition to keeping the exterior of your home looking nice, it’s important to maintain it in order to protect the interior from things like water, insects, weather, heat, cold and unwanted pests. Cleaning gutters and downspouts. Keeping siding and trim clean and painted to prevent rot. Checking the seals of windows and doors to prevent drafts. Taking care of landscaping. Upkeeping and improving decks, porches, stairs and balconies. Ensuring proper ventilations to avoid mold.
Maintaining the interior of the homeis important for safety and the integrity of the home’s structure and finishes. Replacing the HVAC filters, cleaning vents, fixing dripping faucets or running toilets, making sure water drainage on the land and the building is moving water away from the home and not pooling or flooding in any manner. Ensuring smoke and carbon monoxide detectors work. Keep appliances, fixtures and outdoor elements in working order. Maintaining these things helps you to not only enjoy your home, but also keep the value of your home from depreciating.
Home improvements can often add value to your home. This is a personal decision but should be based on several factors, including your budget, experience, time, constraints, skill level, vision and discipline. Often times hiring a contractor for renovation is better than doing it yourself. Unless you love the hobby of working on your own house, and many homeowners do! Picking the wrong contractor can be a nightmare so make sure you get one with good referrals. Talk with you Lone Star Luxury Agent for referrals and general advice about renovations and updates.
Selecting and Working With a Good Contractor
Although some minor projects are small enough to be handled on your own or by a handyman, other projects such as larger updates or full remodels may require hiring a contractor. Having a good contractor (and knowing how to find one) makes all the difference.
While cost will most certainly be a consideration in choosing your contractor, it shouldn’t be the sole deciding factor. A good contractor will help you make the best choices for your home and your budget and they will be there to guide you every step of the way. They’ll also be transparent in their actions and the information they provide. They’re able to give you a fair estimate and adhere to that contractual agreement. In addition to online reviews, consider asking friends, neighbors, and your real estate agent for recommendations on service providers they’ve used. Conduct phone interviews and/or meet face to face so you can get a feel for how you might work together. Make sure the contractor you choose has the appropriate licenses and insurance for your home improvement project. Some projects may require permits, so you will need to discuss whether they’re required and who will obtain them.
Covering Your Bases
Once you’ve found the right contractor for the job, there are some things you need to keep in mind.
- Keep an open line of communication.
- Discuss your expectations upfront before construction begins regarding when the work will be started and completed, daily cleanup, and any special care that needs to be taken, such as not stepping on flowers or making sure all stray nails are picked up.
- Agree on a payment structure that works for you both. A portion should ideally be held back until the project is completed satisfactorily.
- Be sure any required permits for the work are obtained.
- Be proactive in checking the contractor’s work throughout the process.
- Obtain any changes in writing.
- Keep a written log of all changes discussed.
- Although it’s the contractor’s job to stick to the budget, consider keeping a small emergency fund just to give yourself a financial cushion.
- Set expectations for the project completion date and what to do if your project looks like it won’t be finished on time.
Before investing in heavy renovations or improvements, consider the overall potential value of your home and the most you think you could sell it for in your area. When investing in huge add-ons, renovations, or improvements, it’s a good idea to consider how long you intend to stay there and what you might be able to recover if you were to sell compared to what you put in. In some cases, you won’t care as it’s a much needed or desired renovation. In other instances, it’s a good check and balance for the decision to move forward.
Energy efficiency can be beneficial in many ways. Some energy saving features can be good for your long-term finances, as well as your home and the environment, by lowering your energy consumption and improving the comfort and health of your household. Energy efficiency improvements that help reduce allergens, mold, and mildew can also benefit family members with asthma or other respiratory issues. The more energy and water you conserve, the more consistently you can plan for utility costs. As you make more energy efficiency upgrades, you can also lower the overall cost of maintaining your home. In some cases, when making energy efficiency improvements, you can see the investment pay off sooner as energy costs decrease, saving you money on utilities.
Some energy upgrades may require considerable upfront costs. However, many energy improvements can be done by hand with minimal cost or effort.
Seeing energy savings can be as easy as using a different type of lightbulb. LEDs use as much as 75% less energy than incandescent bulbs, so converting some of your most frequently used fixtures can help lower your energy usage. You might also notice that you’re changing bulbs less frequently, as LEDs also tend to have a longer lifespan. Of course, you can save energy by turning off the lights when you leave a room, as that energy saving step won’t cost you a dime. And, if you have outdoor lights, a timer can be a great tool to make sure they’re on at night and off during the day, saving you the trouble of remembering to flip the switch.
REPLACE AND SEAL
When most people think about heating and cooling their homes, they think of their HVAC system, but before making any big investments make sure you’re not heating or cooling the outdoors. Cracks, gaps, or leaks, whether it be from a door jamb or a gap in a window, can make it harder to maintain a comfortable temperature and lead to increased utility bills. You can also make things easier on your HVAC by replacing your filters regularly, which decreases the amount of energy you’ll need to blow hot or cold air around the house.
OTHER SIMPLE ACTION
There are a lot of ways to make your home more efficient, and while smart devices can help, there are simple things you can do that make an impact:
- Your refrigerator and freezer are more efficient when they’re full, so keeping them stocked can cut down on their energy usage.
- Since it’s usually hotter during the day and cooler in the evenings, using heat intensive appliances like a dishwasher, washing machine and dryer at night can make it easier to keep cool during the day.
- When it’s time to replace old appliances, be sure to look for the Energy Star logo for more energy efficient options.
- Smart thermostats learn your schedule and can help decrease energy costs, but a simple programmable thermostat can also help ensure you’re not heating or cooling an empty house.
Home Safety and Security
A home security system can protect your home and possessions from theft and fire. Security systems range from simple alarms on windows and doors to installing cameras, motion detectors, and floodlights around the property. Choosing the right one for you depends on what you’re looking for in a home security system, as well as your budget. Some security systems connect to smoke detectors and will alert your security company if smoke is detected, even if you’re not home. In addition to protecting your home, security systems often provide peace of mind and a sense of safety whether you’re at home or not. Don’t forget to have fire extinguishers handy and regularly check their expiration dates.
Create an Emergency Plan
Although emergencies are rarely expected, having an emergency action plan is important to the safety and well-being of you and your family. Be prepared for the kinds of natural and other disasters common to your area and create an action plan suited for your family. Keep specific needs in mind for small children, aging parents, or pets. Things to consider are nutritional needs, medicine, and specialized equipment, to name a few. A well thought out exit plan, communication plan, and resource strategy (i.e., keeping a stash of critical items on hand) can greatly impact how effectively and comfortably you are able to get through the situation and will give you peace of mind.
What To Have
There are a myriad of things that can go into an emergency kit, so here are some essentials:
- Clean drinking water
- Non-perishable food for your family and pets
- First aid kit (including basic medications)
- Guns and ammo
- Solar powered or hand-cranked flashlight
- Thermal blankets
- Manual can opener
- Multi-use radio
- List of emergency contacts
- Clothing for a few days
- Waterproof matches
Regularly check these items for expiration such as food, medication, batteries, etc.
For suggestions on family emergency communications plans, action plans, and a full list of items to put in your emergency kit, visit ready.gov (opens in a new tab).
It’s what any homeowner dreads: damage to their property. Whether it’s from a natural disaster or theft, your house could be damaged as a result of many different causes.
Hopefully, the damage will be relatively minor and can be easily fixed, but it’s possible that something caused major damage. If this happens, it can feel overwhelming. If you think someone broke in, call 911 and be sure to get a police report, especially before filing a claim with your insurance company. If your house has been damaged by fire, severe weather, or natural disaster, call your insurance company as soon as possible. The length of the claims process often depends on the extent of the damage. Your insurance company will likely send a representative to evaluate the situation firsthand. If your home is uninhabitable, they might work with you to cover the costs of alternative accommodations, depending on your policy.
Now that you know the importance of paying your mortgage on time, how to keep records, plan for ongoing expenses, and maintain the value of your home, you’re all set and ready for homeownership, right?
Aside from making friends with your neighbors, there are many benefits to engaging with your community. You’re able to be more proactive in making improvements to the area you live in, which positively affects your experience there and may have the added benefit of boosting the value of your home.
Where Community and Equity Meet
Partnering with your neighbors can help you keep up with the pulse of what’s happening in your local community and provides an opportunity to beautify your block together and make connections with each other. Another way to connect is to check out neighborhood mobile apps as they offer all kinds of helpful information regarding your neighborhood, local businesses, and public services. Some offer local tips, buy and sell items, and referrals for local repair companies and handyman services. A more connected and friendlier neighborhood may be a more desirable place to live.
Getting together to make your neighborhood more visually appealing can be done individually and through the help of local services and civic programs. Clean up trash from streets and alleys, keep up with your front lawns or even plant a community garden; there are a myriad of ways to make where you live an inviting space. Also, consider creating or joining a Neighborhood Watch group to keep an eye out for each other and help make your community feel safer for everyone. All of this works together to improve your quality of life, increase your sense of purpose, and, at the same time, helps to increase the value of your home.
Checklist: Maintaining Your Home
Use this checklist to help keep track of maintaining the value of your home. VIEW CHECKLIST
(opens in a new tab) FannieMae.com
This website offers information and resources about financial relief options if you face difficulty making your mortgage payments on time. GET HELP
This website provides ideas on how to improve energy efficiency in your home with Energy Saver resources. ENERGY SAVER
This website provides ideas on how to improve energy efficiency in your home with “Energy Savings at Home” resources. ENERGY STAR
For suggestions on family emergency communications plans, action plans, and a full list of items to put in your emergency kit, visit ready.gov. READY.GOV
This glossary contains common terms often used in the homebuying process and their definitions. VIEW GLOSSARY
HUD-approved Housing Counseling Agencies
This website lets you search for HUD (U.S. Department of Housing and Urban Development) approved agencies by zip code. FIND A COUNSELOR
Housing Counseling Services
If you experience a life event that makes it hard to pay your mortgage on time, you do have options. Housing counseling services are available to offer free mortgage assistance through HUD-approved counselors. LEARN MORE
More First Time Home Buyer Info:
+ Rent or Buy.
+ Shopping with a Lone Star Luxury Agent.
+ Finding a Lender.
+ Understanding Debt.
+ Credit Score.
+ Things To Consider Before Buying.
+ Understanding the Mortgage Loan Process.
+ Basic Types of Mortgage Loans and Terms.
+ Looking at Types of Homes.
+ Submit a Home Offer, Get an Inspection.
+ Closing your Loan.