Turning the key in a lock that no landlord has access to, reading in a hammock in your own backyard and painting your dining room bright red - what could be more exciting than making the leap from renter to first-time homeowner? Getting swept up in all the excitement is a wonderful feeling, but some first-time homeowners lose their heads and make mistakes that can jeopardize everything they've worked so hard to earn.
1. Don't Overspend on Furniture and Remodeling
You've just handed over a large portion of your life savings for a down payment, closing costs and moving expenses. Money is tight for most first-time homeowners - not only are their savings depleted, their monthly expenses are often higher as well, thanks to the new expenses that come with home ownership, such as property tax bills and extra insurance.
Everyone wants to personalize a new home and upgrade what may have been temporary apartment furniture for something nicer, but don't go on a massive spending spree to improve everything all at once. Just as important as getting your first home is staying in it, and as nice as solid maple kitchen cabinets might be, they aren't worth jeopardizing your new status as a homeowner. Give yourself time to adjust to the expenses of home ownership and rebuild your savings - the cabinets will still be waiting for you when you can more comfortably afford them. (For further reading, see To Rent Or Buy? The Financial Issues.)
2. Don't Ignore Important Maintenance Items
One of the new expenses that accompanies home ownership is making repairs. There is no landlord to call if your roof is leaking or your toilet is clogged (on the plus side, there is also no rent increase notice taped to your door on a random Friday afternoon when you were looking forward to a nice weekend). While you should exercise restraint in purchasing the nonessentials, you shouldn't neglect any problem that puts you in danger or could get worse over time, turning a relatively small problem into a much larger and costlier one. (For tips on how to spot problems with a potential home before you buy it, see Do You Need A Home Inspector?)
3. Hire Qualified Contractors
Don't try to save money by making improvements and repairs yourself that you aren't qualified to make. This may seem to contradict the first point slightly, but it really doesn't. Your home is both the place where you live and an investment, and it deserves the same level of care and attention you would give to anything else you value highly. There's nothing wrong with painting the walls yourself, but if there's no wiring for an electric door opener in your garage, don't cut a hole in the wall and start playing with copper wires. Hiring professionals to do work you don't know how to do is the best way to keep your home in top condition and avoid injuring - or even killing - yourself. (For tips on finding qualified workers, read The Better Business Bureau's Tool Belt For Saving Cash. For home improvement projects most homeowners can tackle themselves, read Do-It-Yourself Projects To Boost Home Value.)
4. Get Help with Your Tax Return
Even if you hate the thought of spending money on an accountant when you normally do your returns yourself, and even if you're already feeling broke from buying that house, hiring an accountant to make sure you complete your return correctly and maximize your refund is a good idea. Home ownership can change some people's tax situations and the deductions they are eligible to claim. Just getting your taxes professionally done for one year can give you a template to use in future years if you want to continue doing your taxes yourself. (For more insight, see Crunch Numbers To Find The Ideal Accountant and Give Your Taxes Some Credit.)
5. Get Properly Insured
Your mortgage lender requires you not only to purchase homeowners insurance, but also to purchase enough to fully replace the property in the event of a total loss. But that's not the only insurance coverage you need as a homeowner. If you share your home with anyone who relies on your income to help pay the mortgage, whether it's a girlfriend or a child, you'll need life insurance with that person named as a beneficiary so he or she won't lose the house if you die unexpectedly. Similarly, you'll want to have disability-income insurance to replace your income if you become so disabled that you can't work. (For ideas on how to save money on your home insurance, read Insurance Tips For Homeowners.)
Bottom Line
With the great freedom of owning your own home comes great responsibilities. You must manage your finances well enough to keep the home and maintain the home's condition well enough to protect your investment and keep your family safe. Don't let the excitement of being a new homeowner lead you to bad decisions or oversights that jeopardize your financial or physical security.
This article is by Amy Fontinelle from Investopedia.com
1. Don't Overspend on Furniture and Remodeling
You've just handed over a large portion of your life savings for a down payment, closing costs and moving expenses. Money is tight for most first-time homeowners - not only are their savings depleted, their monthly expenses are often higher as well, thanks to the new expenses that come with home ownership, such as property tax bills and extra insurance.
Everyone wants to personalize a new home and upgrade what may have been temporary apartment furniture for something nicer, but don't go on a massive spending spree to improve everything all at once. Just as important as getting your first home is staying in it, and as nice as solid maple kitchen cabinets might be, they aren't worth jeopardizing your new status as a homeowner. Give yourself time to adjust to the expenses of home ownership and rebuild your savings - the cabinets will still be waiting for you when you can more comfortably afford them. (For further reading, see To Rent Or Buy? The Financial Issues.)
2. Don't Ignore Important Maintenance Items
One of the new expenses that accompanies home ownership is making repairs. There is no landlord to call if your roof is leaking or your toilet is clogged (on the plus side, there is also no rent increase notice taped to your door on a random Friday afternoon when you were looking forward to a nice weekend). While you should exercise restraint in purchasing the nonessentials, you shouldn't neglect any problem that puts you in danger or could get worse over time, turning a relatively small problem into a much larger and costlier one. (For tips on how to spot problems with a potential home before you buy it, see Do You Need A Home Inspector?)
3. Hire Qualified Contractors
Don't try to save money by making improvements and repairs yourself that you aren't qualified to make. This may seem to contradict the first point slightly, but it really doesn't. Your home is both the place where you live and an investment, and it deserves the same level of care and attention you would give to anything else you value highly. There's nothing wrong with painting the walls yourself, but if there's no wiring for an electric door opener in your garage, don't cut a hole in the wall and start playing with copper wires. Hiring professionals to do work you don't know how to do is the best way to keep your home in top condition and avoid injuring - or even killing - yourself. (For tips on finding qualified workers, read The Better Business Bureau's Tool Belt For Saving Cash. For home improvement projects most homeowners can tackle themselves, read Do-It-Yourself Projects To Boost Home Value.)
4. Get Help with Your Tax Return
Even if you hate the thought of spending money on an accountant when you normally do your returns yourself, and even if you're already feeling broke from buying that house, hiring an accountant to make sure you complete your return correctly and maximize your refund is a good idea. Home ownership can change some people's tax situations and the deductions they are eligible to claim. Just getting your taxes professionally done for one year can give you a template to use in future years if you want to continue doing your taxes yourself. (For more insight, see Crunch Numbers To Find The Ideal Accountant and Give Your Taxes Some Credit.)
5. Get Properly Insured
Your mortgage lender requires you not only to purchase homeowners insurance, but also to purchase enough to fully replace the property in the event of a total loss. But that's not the only insurance coverage you need as a homeowner. If you share your home with anyone who relies on your income to help pay the mortgage, whether it's a girlfriend or a child, you'll need life insurance with that person named as a beneficiary so he or she won't lose the house if you die unexpectedly. Similarly, you'll want to have disability-income insurance to replace your income if you become so disabled that you can't work. (For ideas on how to save money on your home insurance, read Insurance Tips For Homeowners.)
Bottom Line
With the great freedom of owning your own home comes great responsibilities. You must manage your finances well enough to keep the home and maintain the home's condition well enough to protect your investment and keep your family safe. Don't let the excitement of being a new homeowner lead you to bad decisions or oversights that jeopardize your financial or physical security.
This article is by Amy Fontinelle from Investopedia.com
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