Is Owning a Home the Right Choice?

Buying a home is the biggest financial decision many people make. Among the questions you need to ask yourself is why are you looking to buy?

“There is an emotional side to home ownership, particularly in the United States – it’s often baked into people’s vision of the future or part of the American dream,” said Tom Figgatt, president of Portolan Financial in New Orleans. “And it does feel good to own your own house; you can feel like it is a home and not just a temporary dwelling.”

But it’s not as simple as that. The benefits of home ownership don’t come without costs and limitations. Is renting a better option? The pros and cons of buying a house should be weighed up front.

Advantages and Disadvantages of Owning a Home

Before buying a home, it’s important to consider how such a purchase will affect your finances and your lifestyle. It makes sense to review all of the advantages and disadvantages of becoming a homeowner before making this big commitment.

What Are The Disadvantages of Owning a Home?

Equity doesn’t grow immediately: Most of the payments go toward interest in the early years of a mortgage, so you don’t gain equity quickly unless property values in your area skyrocket.
Illiquidity: Although houses have value, they typically don’t sell as quickly as stocks or other assets. While you’re trying to sell your home, you still have to keep making mortgage payments and maintain it.
High upfront costs: Closing costs on a mortgage can run from 2% to 5% of the purchase price, including numerous fees, property taxes, mortgage insurance, home inspection, first-year homeowner’s insurance premium, title search, title insurance, and points, which are prepaid interest on the mortgage. It can take about five years to recover those costs.
Less mobility: If one of the advantages of home ownership is stability, that means it will be more difficult to accept an attractive job offer requiring you to pick up and move to another city.
Maintenance costs: There is no property supervisor to take care of plumbing problems, and if the air conditioner goes out, you’re not only going to sweat until it’s fixed but you’ll be writing a check to get the cool air flowing again. The same is true of the landscape.
Property values can fall: That happened during the 2008 nationwide housing crisis, and more local conditions can cause this, too. Your building will depreciate over time, especially if you don’t maintain it.

What Are The Advantages Of Owning A Home?

Stable monthly payments: A fixed-rate mortgage means you’ll pay the same monthly amount for principal and interest until the mortgage is paid off. Rents can increase at every annual lease renewal. Fluctuating property taxes or homeowner’s insurance can change monthly payments, but that typically doesn’t happen as often as rent increases.
A good long-term investment: The Federal Reserve Bank of St. Louis reports that the average price of homes sold in the United States rose 28% in 10 years starting in 2009 and 10% from 2014 to 2019. Even if the value of the structure itself depreciates, the land on which it sits can become more valuable. You are investing in an asset for yourself rather than a property management company.
Building equity: Your equity is the difference between what you can sell it for and what you owe. Your equity grows as you pay down your mortgage. Over time, more of what you pay each month goes to the balance on the loan rather than the interest, building more equity.
Greater privacy: Also, since you own the property, you can renovate it to your liking, a benefit of home ownership that renters don’t enjoy.
Stability: People tend to stay longer in a home they buy, if only because buying, selling and moving frequently is difficult. Buying a home requires confidence you plan to stay there for several years.
Federal tax benefits: Mortgage interest is deductible, as is interest on home equity loans, property taxes and some closing costs when buying the home. However, Figgatt notes, tax law changes raising the standard deduction and capping deductions that can be taken on state and local taxes, make it less likely for younger people and those buying starter homes to enjoy those breaks.

Advantages and Disadvantages of Renting a Home

So, home ownership might not be for everybody, at least not in every stage of life. If renting a residence isn’t considered the American dream, not everyone in a nation of 330 million has the same needs or resources. So, before you buy, consider whether that is right for you right now.

Financial Disadvantages of Renting

No cosmetic improvements: If your home looks dated, you may just have to get used to it.
You can’t change the property: Would you like a deck for entertaining? Would you prefer a fenced yard? There’s nothing you can do about any of that in a rental except complain and see where that gets you.
Rent may increase: You may be comfortable with what you’re paying each month, but that could change when your lease comes up for renewal, typically in six months or a year.
You aren’t building value: When you leave your rental, all you take with you is yourself and the moveable property that belongs to you. It’s the property owner’s equity that grows, not yours.
No credit score improvement: While paying a mortgage on time improves your creditworthiness, you don’t get the same benefit from rent.

Advantages of Renting a Home

Low upfront costs: Except for a security deposit – often the cost of a month’s rent – you don’t have to write a big check or finance the costs required to get a mortgage. No HOA dues: Some homes are in developments with homeowner’s associations that require monthly dues on top of all the other expenses, and they aren’t optional. Not so with renting.
Rent payments may be lower: This certainly can be true if you’re renting an apartment, and it also may be the case when renting an identical house. If a mortgage is more than you can afford right now, renting makes more sense than being stretched too thin financially.
Repairs aren’t your responsibility: The property owner has to pay for that leaky faucet and anything else that breaks or wears out. So, you don’t have to factor those unplanned expenses into your budget.
Flexibility: If you want to relocate, having a mortgage can make that difficult. A house can take much longer to sell than you’d like, and if you move before it sells, you still have to make the monthly mortgage payments, so you’re paying for two residences while living in only one. Your obligation to a place you rent can’t exceed the length of the lease, and if the property owner can quickly find a new tenant, that can get you off the hook.

In assessing the pros and cons, Figgatt suggests you ask three questions.

1. Why are you looking to buy?

“If you’re looking at the purchase as an investment, it could work out very well, but high fixed costs mean the shorter the amount of time you hold the property for, the less likely you are to come out ahead relative to other investment opportunities out there,” he said. “Constantly buying and selling houses if you move frequently may be eating up wealth, not increasing it. And if you plan to rent the place out after you move, make sure you have a plan for managing the property – be ready to pay for that, too.”

2. Can you afford it?

“The down payment, closing costs and risk of sudden, very large expenses popping up combine to make it a very expensive proposition,” he said. “You need to save above and beyond your mortgage payment for infrequent yet major household expenses so that you keep it up properly. And making a smaller down payment and paying private mortgage insurance (which protects a lender in case you default on your mortgage) only increases the total cost of ownership.”

3. How long do you expect to stay in the house?

“It can be difficult to break even on a house if you stay in it for three years or less; the closing costs and commissions are significant, and expecting the house to appreciate in value enough within three years to make up for those costs may be setting your expectations too high,” Figgatt said. “And remember that your entire mortgage payment does not go towards the home’s equity. During the first year of your mortgage, depending on the terms, perhaps only about 30% of the principal and interest payments will actually go towards the principal of the home.”

How to Increase Your Home Value

Making your house more efficient, adding square footage, upgrading the kitchen or bath and installing smart-home technology can help increase its value.

Nearly two-thirds (65%) of U.S. homeowners believe the value of their home will continue to rise over the next 10 years, according to a NerdWallet survey conducted online by The Harris Poll among over 1,400 homeowners in August 2018.

That may be optimistic, considering that some factors that determine what a house is worth, like its location and the popularity of that market, are out of your control.

If, like 70% of American homeowners, you believe your house is your biggest asset, taking care of it is probably a top priority. The good news is, keeping up with repairs and making smart improvements are both proven ways to increase home value over time.

Whether you want to build equity or get top dollar when you sell, use the tips below to raise the value of your home.

1. Make it low-maintenance

Since many home buyers worry about buying a home that will need constant maintenance, replacing a major component before putting it up for sale — like the furnace, water heater or even the roof — may calm fears of an emergency repair in the near future and help get you a higher price.

Improvements that make things easy to clean and maintain may also increase home value. Consider replacing easily stained carpet with hardwood floors or replace high-maintenance wood siding with vinyl siding.

2. Make it more efficient

Energy conservation features can have a significant impact on home value, depending on what area of the country you’re in, Joanne Theunissen, chair of the National Association of Home Builders Remodelers, said in an email. Energy-efficient mortgages (EEMs) allow borrowers to take on additional debt to cover both the purchase of the home as well as energy-efficient upgrades. EEMs can also offer lower mortgage rates to increase purchasing power, according to Energy.gov.

Consider double-paned windows, enhanced attic insulation, LED lighting and efficient appliances as a way to increase home value and entice energy-conscious buyers.

If you’re willing to go bigger, put solar panels on the roof. Thirty-nine percent of agents surveyed recently by the National Association of Realtors said solar panels increased perceived property value. But since solar panels are a big financial and structural commitment, they only make sense if you’re hoping to increase value over the long term, not looking for a quick boost in resale value.

Schedule an assessment with a certified energy auditor or your utility company to determine where your home is wasting energy and which upgrades will save you the most money.

3. Make it more attractive

Curb appeal — how your home looks from the street — is your first chance to make a good impression, says James Murrett, president of the Appraisal Institute, a professional association for real estate appraisers. A home’s exterior needs to make a prospective buyer want to walk through the front door.

Make sure existing landscaping is well-maintained. If your yard seems dull in comparison with your neighbors, consider planting flowers or repainting the front door.

Once the exterior looks good, focus on the kitchen and bathroom. When these two rooms are outdated, they can keep a property from reaching its highest valuation, Lori Noble, a senior residential appraiser (SRA) in Charleston, West Virginia, said in an email.

And you don’t have to spring for heated towel racks or marble floors, either. A minor kitchen remodel recoups 81% of its cost in added value on average, versus 53% for an upscale kitchen remodel with stone countertops, custom cabinets and commercial-grade appliances, according to Remodeling magazine’s “2018 Cost vs. Value Report.”The same is true for bathrooms; a midrange remodel — new flooring and a few updated fixtures — delivers a 70% return on investment, while an upscale bathroom remodel — heated flooring, custom cabinets and designer fixtures — sees 56% on average.

4. Make it smarter

Safety-enhancing gadgets top the list of “smart” technologies buyers want in their new homes, according to a 2018 survey by Coldwell Banker. These safe and smart devices include thermostats, fire detectors, carbon monoxide detectors, security cameras, door locks and lighting.

While smart tech doesn’t always increase home value, it does add appeal, Tavia Galvin, a licensed Realtor in Arvada, Colorado, said in an email.

Those who see themselves as “techies” are more likely to pay more for these items, Martin said.

Unlike replacing the roof or renovating the bathroom, you can usually install these devices yourself for about $1,000 or less.

5. Make it bigger

“Square footage has a huge impact on value,” Angie Martin, director of operations at Hales and Associates in Overland Park, Kansas, said in an email. Price per square foot is one way she helps clients compare homes that are similar in style and upgrades.

Bigger homes often command higher values, and even if an appraiser doesn’t officially acknowledge the full value of added space, a buyer will likely notice.

Adding a room is the obvious way to make your house bigger, but you can also create additional living space by finishing the basement or building a deck.

How to pay for improvements that increase value

When thinking about how to increase home value, root your expectations in reality. Updates rarely recoup 100% of their cost, but they can make your family more comfortable and even help your home sell faster.

If you can’t pay for home improvements in cash, be sure to choose the right method of financing for you.

Cash-out refinance: This popular refinance option may be a good fit if you want to tap equity but don’t fancy a second mortgage. Of the 36% of homeowners who reported taking a cash-out refinance in the NerdWallet survey, over half (52%) used the funds for home improvements and repairs. A cash-out refinance doesn’t make sense if your equity is limited or current cash-out mortgage rates are higher than your existing rate.

Credit card: Putting home renovations on a credit card may be OK as long as you’ll be able to pay off the entire balance in a short amount of time.

Home equity loan or line of credit: These second mortgages turn your home’s equity into easily accessible funds. Home equity loans pay out in a lump sum while home equity lines of credit, or HELOCs, are a line of financing you can borrow against over time. Both home equity loans and HELOCs have interest rates, fees, monthly payments and tax advantages to consider.

Personal loan: If you don’t have enough equity for a home equity loan or HELOC, consider a personal loan. The interest rate will be higher than home-equity-based financing, but lower than a credit card in most cases.

How to Save Money on Remodeling Costs

We originally paid $200,000 for our 4,000-square-foot home and intend to own it for a good, long time. We’ve worked more or less nonstop since moving in three winters ago, and kept a close eye on rising housing prices in our (way undervalued) neighborhood, a historic district that’s home to the largest concentration of Victorian houses in the country. So, when our house appraised for over $340,000 after those three years, we took out a renovation loan thinking we could do an amazing kitchen, or convert a laundry room into a master bath. I decided we wouldn’t have to choose: I would make both renovations work for what money we had available. In this case, $50,000.

In the end, we spent exactly $50,000 redoing both the kitchen and the existing bathroom (even throwing in some upgrades to the dining room while we were at it). Yep, I stayed on budget and on schedule.

Was it worth it? Our realtor’s new estimate of what he would list it for now blew past my wildest expectations: $429,000 to $448,000! Based on his assessment, we added about $100,000 in value to our home.

So how did we spend $50,000 on what I’m calling a $100,000 remodel? There’s no one magic bullet; it meant saving on absolutely every aspect we could, large and small. Settle in for the full run-down:

1. Know when to go custom… and when to not go custom

I first priced out custom shutters for our very old kitchen windows and the quote took my breath away. So I went to The Shutter Store for made-to-fit wooden plantation shutters at (yep) half the price. I measured like sixteen times to be sure, and it was fine.

But I also knew I didn’t want a run-of-the-mill cabinet shop island. Dreams of repurposing a vintage French store counter had to give way to our limitations, so instead, I contacted a woodworker friend and told him what I had to spend and what I wanted. He was able to work within that budget to design and build a beautiful custom piece using reclaimed wood from the same time period as our house. The island is now the anchor of the kitchen.

2. DIY contracting

To start, I ran the projects myself. General contractors have great value (my dad is one so I know this firsthand). If we’d had the money and been able to line one up, I’d have done it in a heartbeat. It became a heavy part-time (veering into full-time) job and there are a lot of drawbacks to being your own GC. But, that’s 10 percent right off the top of your budget. What’s more, while a contractor will go a customary route, I had the freedom to bargain hunt to my heart’s content, like buying kitchen cabinets for dirt cheap on Facebook Marketplace, for instance. Which brings us to…

3. Floor model appliances FTW

Ok, so a Ferrari red Bertazzoni range was NOT part of the plan. But when we randomly walked into a floor model clearance at a fancy fixture store and saw the shiny red Italian range for half price? It suddenly happened. The $6,000 stove, something I’d never have dreamed of having, was $3,000. We also scoured the internet looking for a deal on the fridge we lusted after at Lowe’s, a gorgeous black stainless KitchenAid French door model that was an eye-popping four grand. Excessive Googling finally led me to a floor model at a Sears Outlet. Even after paying for shipping, we saved almost half (and ended up getting a refund on shipping costs).

4. Strategic timing

We couldn’t find the matching KitchenAid dishwasher on any kind of crazy deal, so we waited for Lowe’s to offer an extra 10 percent off to Lowe’s cardholders to buy that—while it was on sale, no less.

5. Create big impact with lower cost materials

We did an interesting twist on subway tile for the shower—the tile is longer than the standard 2″ x 6″ dimensions, and has a wavy texture. And then we took it all the way to the ceiling and wall to wall, set on thirds. It created instant drama with a (relatively) low cost tile. The shower floor was a much smaller space so we could splurge on a special order tile. Meanwhile in the kitchen, we balanced the pricey quartz countertop on the island with a butcher block top on the cabinets at a fraction of the price.

6. Love the one you’re with

We wanted to start completely over in both rooms, but to move plumbing in the kitchen alone was going to cost $2,500. So we opted to keep the same footprint. I spent a couple hundred dollars working with a design consultant, who helped me make smart choices on how to tweak what I could without expensive plumbing moves. That was money wisely spent.

7. Change gears mid-stream

We’d planned to install a high-end(ish) floor tile in the kitchen, then found original hardwood below the ugly old stuff on demo day. We’d budgeted about $3,000 for the tile and installation, so the $1,100 we spent refinishing the existing floor was a coup. That price included a sweet discount for being a repeat customer—we’d hired the same company who restored the beautiful floors in our third floor.

8. Stalk Amazon Warehouse and monitor prices

Buying the kitchen and bathroom fixtures refurbished or repackaged from Amazon Warehouse and third party sellers was a huge savings. We paid builder-grade prices for high-end finishes, saving as much as 500 bucks on one faucet alone. I also used the price tracker camelcamelcamel to watch for prices to drop on whatever we needed.

9. Big money for boxes? No way

I have a thing about spending a ton of money on cabinets. Cabinets are normally a massive expenditure in a kitchen reno. So we did a couple of things here: no upper cabinets, instead opting for open shelving. Besides the island, we also only had room for two lower cabinets, which also saved money. And those were a fortuitous, albeit somewhat, shady find: A longtime employee of a local cabinet shop was selling their practice runs and samples. They’re slightly imperfect and they cost 50 bucks apiece.

10. Price match

I bought a lot of stuff online, but wanted to see some things—lighting, for instance—in person, so we went to a local lighting store. I found a great fixture I’d never have chosen online, but cost more than any of the cheap lighting stores on the web had it. No problem—the sales assistant just had me show him the lowest price I could find for the same thing and he matched it, to the tune of a couple hundred dollar savings.

11. Use the big box stores wisely

I avoided the big box stores for the most part, because I wanted a more unique look. But when I couldn’t find an affordable bathroom vanity/medicine cabinet/linen cabinet set anywhere, I turned in desperation to Menards, where I found some very similar versions of items I’d eyed at the high-end shops online, but for a fraction of the cost. I also tracked down a farmhouse sink online at Home Depot for about half what I’d seen from the high-end places.

12. Shop around

Yes, this isn’t a secret. But let’s take the quartz countertop I had my heart set on. I called practically every cabinet and counter place in town to get prices, and the cost varied tremendously. I went with the cheapest, and while I can’t give them any compliments on their service, they did the job and the Silestone Eternal Calacatta Gold I chose is just delicious.

13. Don’t forget to thrift!

My first purchase for the new kitchen was vintage brass knobs for the cabinets. I found them at my old stomping grounds, Architectural Salvage Warehouse in Detroit for 50 cents apiece.

14. Shop the house and make it fun

When it came time to accessorize the kitchen, there wasn’t really anything left. But I realized that an old, heavy mirror I’d found in the house and stashed in the garage would be perfect. And we took advantage of a painting workshop to collaborate on a small mural to hang on a wall. A free mirror and $40 workshop to make a statement on two walls? Done.

15. Take advantage of contractor discounts

I asked for a discount everywhere and from everyone. Many vendors offer ‘to the trade’ pricing so, since I have a side gig helping Airbnb hosts with their listings, I explained that I’m a short-term rental hospitality and design consultant, and several shops gave me 10 percent off my orders. Your mileage may vary, but it seems like a lot of places are willing to work with shoppers.

I scored even bigger discounts using my sub-contractors’ connections. The bathroom and the kitchen backsplash tile both dropped drastically in price at the specialty tile shop after they plugged in our tile installer’s info. And, after giving my plumber’s name at the plumbing supply house, they dropped about a hundred bucks from the toilet’s price.

At the end of the day, getting this kind of savings boiled down to a lot to time, a lot of work and research, and being willing to take a non-traditional approach. And it couldn’t have happened without advice from people smarter than me, and sub-contractors we knew and trusted and who were patient with my frequent lack of knowledge.

Financial Tips After Buying Your First Home

How do you protect your investment in your first home? Despite the relief of finally being there after all the work of finding and buying the property, the financial planning and budgeting don’t stop once you collect the keys to your new home.

All the work you’ve already done should help the process. You had to determine how much home you can afford, pull together funds for a down payment and apply for a home loan. According to a survey by FREEandCLEAR, 75% of home buyers likened the mortgage-acquisition process to visiting the dentist or undergoing a physical exam.

Read our list of what you need to do next to keep the momentum going in securing this key stage in your financial life and building a firm foundation for your future.

Review Your Retirement Plan

Whipple says that, if your budget’s changing and increasing after buying a home, it’s important not to neglect your other financial goals. That includes saving for retirement. According to a report by GOBankingRates, 64% of Americans are on track to retire broke, and you don’t want to be one of them.

Check your contribution rate to your employer’s plan if you have a 401(k) or similar retirement account at work. Compare that with your newly updated budget to make sure that the amount is sustainable and determine if there’s room to increase it. If you don’t have access to a 401(k), consider substituting a traditional or Roth IRA.

Saving an emergency fund for non-housing related expenses and putting money into college accounts for your kids may also be on your list of goals. Hill says that new homeowners should be aiming to save at least six to 12 months’ worth of expenses in a liquid savings account for rainy days.

Whipple says that, if you’re struggling to make any progress toward saving after buying a home, you should take a closer look at your spending. “Making a budget is a great idea but sometimes that starts with tracking where your money is going so you know how much you actually need to budget.”

Revisit Your Budget

Agent Elizabeth H. O’Neill of Warburg Realty in New York City says it can be daunting to think about establishing a homeowner-oriented financial plan after you’ve just gone through the buying process, but it’s an essential step you can’t afford to skip.

“Sitting down and working out a budget will pay dividends,” O’Neill says, and your budget should thoroughly cover all the costs of owning a home. That includes your mortgage payment, as well as any increases in expenses associated with higher utility costs, homeowner’s association or condo fees, and maintenance or repairs.

The latter two are a significant consideration if you’ve recently made the transition from renting to owning. Having to fix a leaky toilet or replace a broken window out of pocket can come as a wake-up call if you’ve never owned before, O’Neill says.

According to a Bankrate survey, the average homeowner spends $2,000 per year on maintenance, including landscaping, housekeeping, and minor repairs. That amount, however, doesn’t cover larger expenses you may encounter as a homeowner, such as having to replace your HVAC system or roof, both of which can easily surpass $5,000.

Tad Hill, founder and president of Freedom Financial Group in Birmingham, Alabama, says that first-time buyers should set up a separate homeownership savings fund to cover bigger repairs. “The price range for these services is not small, so I’d suggest planning to keep at least $5,000 to $10,000 in cash so you have it available when something breaks.”

You’ll also need to leave room in your budget to set aside money for upgrades if you plan to overhaul your kitchen or update the bathrooms. Homeowners spent a median total of $15,000 on renovations in 2018, according to the latest U.S. Houzz & Home Annual Renovation Trends survey. Of the 142,259 respondents, 37% were likely to use credit cards to fund a renovation, but paying cash (as 83% did) can help you avoid high interest and finance charges.

In addition to avoiding new debt, you should also prioritize paying off any existing debt you have. Eliminating car loan, credit card or student loan payments can free up more cash that you can funnel into your home savings fund, and it can give you more breathing room in your budget. If you’re struggling to make progress with debt due to high interest rates, consider a 0% APR credit card balance transfer offer or refinancing student loans.

Update Your Insurance

As a first-time buyer, homeowner’s insurance is a must, but there may be other types of insurance you need as well, starting with life insurance.

“Life insurance is like a self-completing plan,” says Kyle Whipple, a financial advisor at C. Curtis Financial Group in Livonia, Mich. Insurance is used to reduce risk, and if you pass away, “it’s nice to know that proceeds, which are tax-free, can help pay off a mortgage.” That’s critical if you’re married and don’t want to leave your spouse burdened with debt. Life insurance can also be helpful in providing cash flow to cover monthly expenses or pay college costs for your children if you have a family.

O’Neill says that, when buying or updating a life insurance policy, you should ensure that you have at least enough coverage to pay off your mortgage and cover living expenses for your family for the first few years after you pass away. One question you may have is whether to choose a term or permanent life insurance policy.

Hill says that term life is the least expensive option since you’re only covered for a specific term. This type of policy can make sense if you’re a first-time buyer and you only need coverage while you still have a mortgage. Permanent life insurance, such as whole or universal life, lasts a lifetime and can offer cash value accumulation, but it can be much more costly. If you’re unsure of which to buy, Whipple suggests that you discuss your options with a licensed insurance broker or agent.

Disability insurance is something else to consider. According to the Centers for Disease Control (CDC) (CDC), 22% of adults in the U.S. have some type of physical or mental disability. If an injury keeps you out of work in the short-term or a serious illness requires an extended leave of absence, that could affect your ability to keep up with your mortgage payments. Short- and long-term disability insurance can help protect you financially in those types of scenarios.

Whipple says that you may also want to investigate insurance policies or home warranties to help with repair costs, especially if you have an older home. O’Neill recommends looking into whether you can get a discount by bundling homeowner’s insurance and other insurance policies together.

The Bottom Line

Buying a home creates new financial responsibilities, but with the right planning, you can keep from becoming overwhelmed. Ideally, preparing yourself financially begins before you ever buy a home, but even if you’re getting a late start, it’s important to make planning a priority.

Being a Homeowner: Pros & Cons

Homeownership has always been part of the American Dream. Because of that, many people accept owning a home as the right, even obligatory thing to do without considering the benefits and the risks. If you are contemplating buying a home, you should know and review the pros and cons of the investment you are about to make—as you would any investment decision—before signing on the dotted line.

Pros:

The Tax Cuts and Jobs Act’s Effect

The Tax Cuts and Jobs Act, passed in December 2017, made substantial changes to the parts of the tax code that have to do with homeownership. Unless a future Congress amends the law, all provisions will expire after Dec. 31, 2025. But for now, changes in that law have reduced the value of owning a home.

The law limits mortgage interest deductions to $750,000 of total mortgage debt, including for a first and second home and any home-equity or HELOC loans. The previous limit was $1,000,000 in mortgage debt plus an additional $100,000 in home-equity debt.

There is an exception allowing $1,000,000 in total mortgage debt if you bought your home on or before Dec. 14, 2017. This provision even applies if you refinance that older mortgage. Home equity loan interest is only deductible if the money is used for substantial improvements to the home on which you took out the loan. Previously, interest on up to $100,000 was deductible no matter how the home-equity money was used.

The law also set the SALT deduction limit to $10,000. Previously, all SALT payments were deductible, unless you were subject to the alternative minimum tax.

Other new provisions include restrictions on claiming casualty losses except for federally declared disasters. The moving expenses deduction no longer exist except for the active-duty military moving for reasons of work.

All these changes have lowered the value of owning a home—including the fact that, with the doubling of the standard deduction (another feature of the Act), fewer people will have enough deductions to file Schedule A instead of taking the standard deduction. So the fact that you are eligible for a tax deduction does not mean that it will end up being useful to you. The severe limiting of the SALT deduction will be particularly detrimental in lowering available deductions for people who live in highly taxed states.

Attractive Long-Term Investment

Appreciation represents the increase in home values over time. Real estate prices are cyclical, and homeowners shouldn’t expect the property’s value to increase drastically in the short-term. But if you stay in your home long enough, there’s a very good likelihood you will be able to sell your home for a profit because of appreciation later in the future.

Despite some dramatic dips, such as that in 2008-10, residential real estate tends to rise in value. According to the Federal Reserve Bank of St. Louis, the average price of sold houses in the U.S. rose from $340,400 in Q3 2014 to $380,300 in Q3 2019—a 10% increase in value over five years. Go back a decade, when the average home fetched $274,100 (Q3 2009), and you have a 28% increase. That’s not a bad return on an investment that also provides you with a place to live.

Consider a home that is rundown and dilapidated to the point that it’s uninhabitable. The land underneath the home may still be worth a significant amount of money—more than the residence, in this case,. A seller may consider selling it as is—with the structure still intact—or spending a little extra to demolish the home and sell the land at a higher price on its own.

Capital Gains Exclusion

Eventually, you will sell your home. When you do, the law allows you to keep the profits and pay no capital gains taxes. Well, not necessarily all the profits. There’s a tax-free profit of up to $250,000 for single homeowners and $500,000 for married couples. This is for your main residence only—not for a second home or vacation property.

There are a few requirements you need to meet in order to qualify for this exclusion. You must own the home for at least two years—24 months—within the last five years up to the closing date. The residence requirement dictates that you should have lived in the home for at least 730 days, or two years, during the five-year period leading up to the sale. The final requirement, the look-back requirement, outlines that you didn’t profit from selling another primary residence during the two-year period leading up to the most recent sale.

Tax Deductions

After appreciation, the benefit of homeownership that is cited most often is tax deductions or savings. When you buy a home, you can deduct some of the expenses of owning that home from the taxes you pay to the government. This includes mortgage interest on both your principal residence and a second home, which can amount to thousands of dollars per year.

Interest on home-equity loans or home-equity lines of credit (HELOCs) is also deductible if the funds are used to substantially improve your home.

You can also deduct up to $10,000 in state and local taxes (SALT), including property taxes.

Home equity represents the difference between how much you still owe on your mortgage and the market price or value of your home. Home equity and appreciation may be considered together. As noted above, your home is likely to grow in market value over time. Your equity also grows as you pay down your mortgage, with less of your payment going toward interest and more toward lowering the balance on your loan.

Building equity does take some time because it takes time to lower the principal balance owing on the mortgage loan—unless, of course, you make a large down payment or regular prepayments. One thing to keep in mind, though, is that the length of time you have your home is a big factor in how much equity you build and the appreciation you can realize. The longer you keep it, the more equity you obtain.

As you pay down your mortgage and reduce the amount you owe, without realizing it, you are saving as the value of your home is increasing—just as the value of savings account increases with interest. When you sell, you will likely get back every dollar you paid out and more, assuming you stay in your house long enough. Over time the average 6% return (interest rate) on your savings should more than
cover your outlay.

Another plus: Home equity provides flexibility to get a loan that is tied to the amount of your home equity. Many investors follow their home equity and home appreciation simultaneously. If an investor believes their home value is greatly appreciating they may put off a home equity loan to have a better opportunity to realize seller’s appreciation.

Cons:

Illiquidity

Unlike stock, which can be sold within a matter of days, homes typically take much longer to unload. The fact that you may have access to $500,000 in tax-free capital gains doesn’t mean you have ready access. Meanwhile, you still must make mortgage payments and maintain the house until you sell it.

High Upfront Costs

The cost of investing in a home can be high—there’s more to your expenses than the property’s selling price and the interest rate on your mortgage. For starters, you can expect to pay anywhere from 2% to 5% of the purchase price in closing costs. Some of the most common closing costs include an application fee, appraisal fee, attorney fees, property taxes, mortgage insurance, home inspection, first-year homeowner’s insurance premium, title search, title insurance, points (prepaid interest), origination fee, recording fees, and survey fee.

Experts say you should plan to stay in your house at least five years to recover those costs.

Pride and Financial Responsibilities

One often-cited benefit of homeownership is the knowledge that you own your little corner of the world. You can customize your house, remodel, paint, and decorate without the need to get permission from a landlord.

Ownership comes with responsibilities, however. You must pay your mortgage or risk losing your home and the equity you’ve built. Maintenance and upkeep are your responsibility. You can’t call the landlord at 2 a.m. to have a leaky water pipe repaired. If the roof is damaged, you must repair it—or have it repaired—yourself. Lawn mowing, snow removal, homeowners insurance, and liability insurance all fall on you.

Potential Depreciation

Not all homes grow in value. The housing crisis of 2008 resulted in many homeowners being underwater, which means owing more on your mortgage than your home is worth. It doesn’t take a housing crisis for home prices to stagnate or drop. Regional or local economic conditions can result in home values that don’t keep up with inflation.

Remember, as well, that the actual structure you live in will depreciate over time. This can be due to wear and tear on the property, or a lack of maintenance and repairs.

The Bottom Line

A home is an investment that comes with many investment benefits but also risks, which makes it an investment that is not for everyone. Weighing the investment benefits against the risks is important. A rational comparison of pros and cons can help you decide whether to put your money into a home investment or potentially find better returns elsewhere.

How to Save Money for a House

Buying your first house is the pinnacle of adulthood. But as you’re probably well aware, the road to home ownership isn’t exactly easy to navigate. Unless you’re completely debt-free and disciplined enough to live below your means to save money, buying your first home in the near future can seem more like a fantasy than an actual possibility. In fact, a 2017 Zillow survey of 13,000 adults found that only 39% of millennials are able to make the standard down payment on a home, and just one in five can pay the bare minimum to secure a home loan. Yeah, it’s tough out there.

The good news is that buying a house doesn’t have to be something you only wish you could do. You can definitely make it a reality. But it may require you to make a bit of an adjustment. Fortunately, experts shared some sneaky ways you can save money for a house — and the timing’s perfect, since April is Financial Literacy Month.

What you need to know before you even think about buying your first house

When you’re looking to buy your first home, it is crucial to understand how to save money. As Dottie Herman, finance expert and CEO of Douglas Elliman, one of the largest real estate companies in the United States, tells us,

But before you even begin your search, Herman says it’s in your best interest to meet with a qualified mortgage lender. They’ll be able to help guide you through the process of qualifying and buying a home. Most importantly, constantly check your credit score. The higher the score, the better interest rate you will receive.

“For most people, buying a home is an exciting time. But it can also be a very long process that may seem like a financial hurdle that requires short-term sacrifices for long-term success,” Herman says. “By following a few smart and savvy ways to lower your expenses, you will be able to save enough money to purchase that dream home in less time than you think. In the end, it all comes down to discipline, desire, and you.”

So how can you save up for a house without making it seem like such a huge sacrifice?

Sneaky ways to save up for a house

1. Use cash as much as possible

Using cash may seem like such a hassle, but Adam Jusko, founder and CEO of ProudMoney.com, tells us it can save you a lot of money down the line.

“Many studies show that people spend more when paying with credit cards, so use cash instead,” Jusko says. “You’ll not only spend less on food and other items, but taking away the convenience of using credit means you simply won’t buy frivolous impulse purchases.”

According to him, the pain of going to the ATM to get cash will have a way of slowing down your spending. Just think, when you only have $10 in your wallet and no credit cards, you start to think of ways to prevent that money from being spent.

2. Split your paycheck into two separate accounts

This may not seem like a sneaky way to save at first, since you know you’re doing it. But if you have direct deposit, have your paycheck deposited into two accounts.

“I have my employer put the bulk of my paycheck into my everyday checking account, and then I have a specific amount from each paycheck that automatically goes into a savings account at another bank that I rarely use,” Jennifer Beeston, VP of mortgage lending at Guaranteed Rate Mortgage, tells us. “When it comes to saving, out of sight, out of mind can be very powerful.”

3. Skip online shopping every other month

Online shopping is the number one way people “mindlessly spend” money these days, Beeston says. Just think about your own online shopping habits. Are your purchases typically impulse buys, or do you mostly buy things you actually need? According to Beston, the nature of online shopping makes it difficult to truly understand or feel the cost of purchases.

That’s why she suggests banning online shopping every other month. Do a digital detox on your wallet. “This is a great way to save extra money,” she says. Just try it one month and see how much you end up saving. If it’s a lot, you might be more motivated to make it a regular thing.

4. Be flexible with your grocery list

When you’re trying to save money, flexibility is key. For example, if you really like Heinz Ketchup but there’s a sale on the generic store brand, go with the generic store brand.

Same goes for meals you’re trying to make. “When you see a sale, try to swap out a meal you’d planned to make with a cheaper meal using the discounted food,” Jusko says. This allows you to be a little creative, and can save you a bit of money at the same time.

“What are little things you can do to constantly remind yourself of the goal so you keep doing the right thing? No matter how frugal you are, there is one thing you are buying that you could leave at the store,” he says. “Make a game of figuring out how you could replace that item with things you already have at home or how to simply live without it.”

5. Make a calendar of things you’re not going to do

Most of us like to plan events on our calendar, but more often than not, those events mean spending money. Instead, Jusko suggests making a calendar of what you could do, but won’t. For instance, put down, “Not having dinner with Kim and Sam at that new restaurant on Friday.” Then, calculate how much money you saved by not doing those things.

“This may sound corny, but one of the hardest things about saving money is filling the time that would normally be spent on entertainment,” he says. “Being silly about the process by making it a game is key to making it happen.”

6. Buy a French press

If you’re a coffee lover, you probably know your daily drink of choice can seriously add up. You can even check your bank or credit card statements to see just how much you’re spending. But there is a way to save money without having to forego your caffeine addiction altogether.

“Instead of going to Starbucks in the morning and then again for your afternoon pick-me-up, go to Starbucks or another coffee specialty shop and buy the coffee grounds to make make your drink at home,” JJ Choi, an agent at real estate brokerage firm Triplemint, tells us. “A French press is an easy alternative vs. a big expensive machine. Coffee will net out to less than a dollar per drink compared to the $8 to $10 daily expense.”

Saving money to buy a house may take work and a lot of discipline, but if it’s something you really want, you can definitely do it.

7. Lock money away in a certificate deposit (CD) account

A CD is a savings account with a fixed interest rate and fixed date of withdrawal. Essentially, these are savings accounts with a catch. “A lot of people can save money, but they can’t avoid the temptation of spending the money when it’s sitting there,” Holden Lewis, home financing expert, tells us.

“You can buy a certificate of deposit for six or 12 months, and there’s a penalty for withdrawing the money early. That can help you keep your hands off it.” It’s definitely a good option if you’re known to tap into your savings account every now and then.

How to Organize Your Home

There’s no right way to organize your home. Whatever strategy you choose just has to work with your lifestyle, habits, and tastes. But there are a few tried-and-true strategies that can enhance the effectiveness of any system. From being aware of clutter hot spots to identifying red flags that your organizing method isn’t working, we learned some smart approaches to getting organized from the pros so you can save the time, money, and stress that come with living in a den of disorder.

1. Take a step back.

Often clutter becomes such a fixture, you look right past it. For a new perspective, imagine you’re a guest in your own home. Take note of things a visitor would notice that you’ve been ignoring, like the paper pile that has claimed the corner of the kitchen counter for months or the blankets strewn all over the couch. Then, refresh the room back to its original state by eliminating what’s making it appear disorganized. Still not seeing the junk? Snapping a picture of the room will force you to view your space through a different lens.

2. Make it easier to put things away.

“It always surprises me how difficult people make organizing for themselves,” says Kate Brown, certified professional organizer and owner of Impact Organizing LLC. Her suggestion: “Make everything a one-handed operation.” For example, don’t hide your laundry basket in the back of the closet. Instead, use an open bin that you can throw your clothes into from across the room. “And avoid lids at almost all costs,” she urges. Using open containers for things you use often like toiletries and cooking supplies makes it easier to put them away. This advice even applies to garbage cans. Brown recommends investing in one with a lever you can step on to pop the lid open. “The fewer steps, the better the organizing system,” she says.

3. Arrange items according to how frequently they’re used

Keep the items you use every day in plain sight—or at least at eye level. “The things you use daily should be the easiest to get to,” says Lowell. “While the things you use once in a while should require a step stool.” This is where high shelving comes in handy. “Things you use only once a year should require a ladder,” he adds. (Think attics or out-of-reach shelving in a garage.) Not only will this storage system make it easier for you to find the things you use often, but the items you don’t use regularly will stay organized until you need them.

4. Don’t buy storage containers until you’ve purged.

“When people want to get organized, the first thing they usually do is run out and buy storage supplies,” says Julie Isaacs, a professional organizer and founder of Uncluttered Home. “But that’s actually backwards.” The point, she explains, is to evaluate why you have so much stuff to begin with—not find new ways to house your junk. “You won’t have any idea of what you really need in terms of containers or shelving until you’ve purged.” While deciding what to keep and what to toss, always remember the “80/20 rule.” “It’s the theory that most of us only use 20 percent of what we have. That’s a good starting point to realizing you are surrounded by a lot of things you probably don’t need,” Isaacs says. Plus, not only will slimming down your stuff save you money on storage supplies, but it’ll save you the headache of going through excess items in an emergency or last-minute situation.

5. Eliminate clutter hot spots

Flat surfaces like your dining room table, entryway table and kitchen counters tend to accumulate piles faster than any other spot in the house, explains Isaacs, who advises clients to make clearing all flat surfaces part of their nightly routine—right along with washing their face and brushing their teeth. But if that doesn’t work, her last-ditch trick is to physically block any surface that has become a clutter haven. “For instance, if you put a flower arrangement in the middle of the dining room table and set it with placemats, you’re sending the message that the space is no longer a dumping zone,” Isaacs says.

6. Don’t treat drawers like catch-alls.

“There isn’t a drawer in your house that should not have container organizers in them,” says interior decorator Christopher Lowell, author of Seven Layers of Organization. They can be any material you want—wood, wire mesh or clear plastic—and are available at most home goods stores. “This allows you to separate the drawers into defined areas for specific things verses throwing everything into one big space,” says Lowell. For the bedroom, store everyday items—like underwear and socks—in top drawers, workout clothes in the second or third drawers and pants in the bottom drawers. In the bathroom, keep cotton swabs and other daily use items on the counter within arm’s reach, and tools you use occasionally under the cabinet. “With the things you only use now and then separated out and away from the things you need every day, those daily essentials will be better organized and easier to get to,” Lowell says.

7. Store a discard bag in the closet.

“I keep a shopping bag with a handle in the front of my closet. Every time I try on a piece of clothing and then take if off again because it’s unflattering, doesn’t fit, is pulled, stained or out of style, I put it in the bag,” Brown says. “If you’ve taken the piece of clothing off for any reason other than that it’s dirty or doesn’t match, that means it’s not right and will probably never be,” she says. When the bag is full, Isaacs explains, donate the clothes or trade them with a friend at a swap party.

8. Be picky about items in your home

Think carefully about what you allow into your home. Consider your needs before accepting hand-me-downs or agreeing to store a friend’s kayak for the off-season. If shoes aren’t your size, skip ’em. If you do have space to hang on to something temporarily, set a pickup date so your basement doesn’t become a free storage unit.

9. Sort smartly

When you’re ready to roll up your sleeves and take on an organizing project, follow these steps to restore (and keep!) order: First, do it in one shot. Set up a staging area, like the dining table, then empty whatever you’re organizing so you can spot doubles, giveaways, and must-saves fast. Then use organizers like clear containers and baskets without lids so you can quickly access what’s left of your pared-down collection. Lastly, label everything—even if you think you’ll remember, mark boxes and bins with easy-to-read descriptions so there’s no second-guessing later on.

10. Set limits for everything.

Assign things like memorabilia and craft supplies to a single shelf or bin, then let the designated area’s size dictate how much you keep.

11. Use your calendar

Give yourself real motivation to finally hang those family photos by planning to host a dinner party. Or try creating a deadline for the DIY project sitting in your basement. If the date comes and goes, donate the piece and any materials and move on.

12. Learn to make quick decisions.

Trying to determine what can stay and what should go? If at least one of the following statements is true about an item, then it’s a keeper:

I’ve used it within the last year. That’s enough time to have gone through all four seasons and special occasions. If you still aren’t sure, put the item in a “Donate Later” box, seal it and mark it with the date of one year from now. If you haven’t opened it by then, drop off the box at Goodwill without peeking inside.

I need it or I love it. If you don’t, there’s no real reason to hang on to it. Resolve to fill your space only with things that really work, give you pleasure or celebrate your family. Remember that you can’t appreciate what you have if it’s hiding in a dark corner of a closet. You should frame or display what you deem worth holding on to.

It fits into the life I want to live. If something supports you and your future goals (think exercise equipment or a book about starting a business), it can stay. If it’s a painful reminder of the past (think clothes that don’t fit anymore or items that belonged to an ex), let it go.

13. Look for signs that tell your system isn’t working.

If a room still somehow looks messy after you’ve cleaned, it’s time to improve your organizational system, which, according to Brown, should allow you to tidy up in 15 minutes or less. Once you’ve pulled out what you don’t need—to either throw away or donate—the next step is to group things together based on use or occasion and store them in open containers.

Buying a House: Working with Real Estate Agents

Real estate agents love working with people, but there are always clients who may unintentionally cross the line. Here are a few simple protocols you can use while shopping for a home that will keep you out of hot water and on good terms with real estate agents—especially your own agent.

Choose a Real Estate Agent

If you are interviewing agents, let each agent know you are in the interview stage.
Decide whether you want to work without representation, dealing directly with listing agents, or if you want to hire your own agent.
If you decide to hire your own agent, interview agents to find an agent with whom you are comfortable.
Never, never, never interview two different agents from the same company.

Understand Agents Work on Commission

Most real estate agents are paid a commission. If an agent does not close a transaction, they do not get paid. Agents are highly motivated to do a good job for you.
Agents are not public servants and do not work for free. Do not ask an agent to work for you if you intend to cut the agent out of your deal.
Very few real estate agents work on salary and if they do, you probably don’t want them.

Keep Appointments and Be on Time

If you are running late, call and let your agent know when you expect to arrive. Just show respect.
Be respectful, use common courtesy, and don’t expect an agent to drop what they are doing to run out and show you a home. You are probably not that agent’s only prospect or client. And if you are, it’s not a good sign.
Do not make an appointment with an agent and then forget to show up.

Do Not Call the Listing Agent If You Are Working With a Buying Agent

Listing agents do not want to do the buying agent’s job. Let your buyer’s agent do their job.
Listing agents work for the seller, not the buyer. If you hire the listing agent to represent you, that agent will now be working under dual agency. Conflicts of interest may occur.
If a listing agent shows you the property, the listing agent will expect to represent you. Ethics prevent a listing agent from showing preferential treatment. If you ask a listing agent to do you a favor and try to discount the price, it’s compromising integrity, and most won’t do it.

Sign a Buyer’s Broker Agreement With a Buying Agent

Ask about the difference between an Exclusive and Non-Exclusive Buyer’s Broker Agreement.
If you’re not ready to sign with a buyer’s broker, do not ask that agent to show you homes. Otherwise, a procuring clause may pop up.
Ask your agent if they will release you from the contract if you become dissatisfied. If they refuse, hire somebody else. Your agent should also be respectful of your goals.
Expect to sign a buyer’s broker agreement. It creates a relationship between you and the agent and explains the agent’s duties to you, and vice versa.

Always Ask for and Sign an Agency Agreement

The best and most practiced type of agency is the single agency. This means you are represented by your own agent, who owes you a fiduciary responsibility.
By law, agents are required to give buyers an agency disclosure. This document varies across state lines.
Signing an agency disclosure is your proof of receipt. It is solely a disclosure. It is not an agreement to agency. Read it thoroughly.

Make Your Expectations Known

Set realistic goals and a time frame to find your home. Ask your agent how you can help by supplying feedback.
If you expect your agent to pick you up at your front door and drive you home after showing homes, tell them. Many will provide that service. If not, they will ask you to meet at the office.
Let your agent know how you want them to communicate with you and how often. Do you want phone calls, emails, text messages, IMs, or all of the above?
If you are displeased, say so. Agents want to make you happy. Don’t be afraid to speak up.

Do Not Sign Forms You Do Not Understand

Realize agents are not lawyers and cannot interpret law. Don’t ask agents to give a legal opinion, prefaced by the statement you are not asking for a legal opinion.
Do not feel silly for asking your agent to explain a form to you. It’s their job. Many forms are second nature to agents but not to you, so ask for explanations until you are satisfied you understand.
Try not to sign forms titled “Consent to Represent More Than One Buyer.” This is never in your best interest. But sometimes you can’t help it because your agent could work for a large brokerage. That brokerage could represent more than one buyer, not your agent.

Be Ready to Buy

Bring your checkbook. You’ll need it to write an offer because an earnest money deposit may be required to accompany your purchase offer. And please, be preapproved.
If you aren’t ready to buy, you don’t need a real estate agent. You can go to open houses by yourself and call listing agents for showings—but be honest. Say you are “only shopping.” Look at homes online, but don’t waste an agent’s time if you aren’t ready to act.
If possible, hire a babysitter to care for children who are too young to stay out all morning or afternoon touring homes.

Practice Open House Protocol

Do not ask the open house host questions about the seller or the seller’s motivation. Let your agent ask those questions for you. Your agent will probably use a different approach that works.
Ask your agent if it’s considered proper for you to attend open houses alone. In some areas, it’s frowned upon to go to open houses unescorted.
Hand your agent’s business card to the agent hosting the open house. Sometimes this agent will be the listing agent, but often it is a buyer’s agent also looking for unrepresented buyers. Announcing you are represented protects you.

With a little respect and courtesy on both sides, you and your agent can have a successful relationship and smoothly navigate the process of buying a home.

How to Know If You’ve Found the Right House

It’s normal to be cautious when you’re shopping for a home. After all, a house is a huge investment, and you’ll want to be sure that you’re making the best decision possible. How you’ll know that you’ve found the right property can vary by person. Some people have gut instincts. Others may need more convincing. Some indicators can tell you if you’ve found the right property for you.

It can be as simple as a strong tug because the place reminds you of another in your past where you felt happy, and you’ll realize that right off the cuff. But the tell—or tells—could be a bit more subtle.

1. You feel defensive about the house. Maybe your agent points out a flaw or two or five and says, “There’s a stain in the kitchen sink” or “I’d update this, this, and this.” It could be a sign that you’re falling for the house if you find yourself getting defensive, sort of like the place is already yours. Just try to keep in mind how difficult (or not so difficult) it will be to remedy those flaws if you eventually find that you just can’t live with them.
2. You want to go inside the house. Part of the excitement of looking at homes is not knowing which could be your new home when you pull up to the curb. Is it the one on the left, or does the place on the right strike your fancy? If it’s the house on the right and you like it better than the home on the left, that could be a sign. Something about this house appeals to you. First impressions are everything.
3. You can’t wait to brag about it. Did you already snap a few photos and post them on Instagram? Did you text your mom about the house or hop on that group chat to tell your friends? You might have found the one if you’re feeling excitement after your first tour of the place.
4. The house embraces you the moment you enter. You’ll know within about three seconds of entering whether the feels warm and comforting. Does it seem to speak to you? Does it invite you to explore? Does it feel like home? If so, it probably is.
5. You don’t feel funny in the bathroom. Sometimes buyers feel so uncomfortable near a bathroom that they won’t walk into the room. They’ll stand outside, grab the door frame, and poke their heads in for a minute. This is your home if you walk into the bathroom and feel compelled to open the shower door or stroke the vanity marble.
6. You begin to envision the furniture arrangement. This might be your house if you walk into the master bedroom and can immediately envision your bed against a particular wall. You’re already hooked if you find yourself thinking that the living room window is a perfect spot to put a tree come Christmas. Or maybe you can already see yourself driving up the street, heading home after a hard day at work. There’s a neighbor across the street throwing a frisbee to a dog, and it occurs to you that they might be people you’d like to know. Neighborhood counts as much as furniture placement.
7. You want to stop looking at other homes. All the other homes you’ve been looking at no longer appeal to you. You compare each new property you visit to this one, and they’re not measuring up. The homes you had previously rated a “No. 2” have now fallen to a “No. 8” rating because they just pale in comparison to this one.
8. You’re already planning to go back. If you got in the car, chatted with your spouse, and immediately planned your next visit to the property before you even left the driveway, you’re a goner. You want to see it at a different time of day or take your mom or best friend with you the next time. Ask your agent to send over the seller’s disclosures to make sure it’s in top condition. You should probably start discussing offers, too, because you’ve probably found your house.
9. It checks the most important boxes. The property might not have every amenity on your want list, but it meets the basic requirements. It has the number of rooms and space you need. Maybe it doesn’t have a garage, and you realize in a flash of enlightenment that buying a house with a garage is really not that important after all. You realize you could build a garage if it turns out you really do want one. Sudden urges to be flexible are a good sign that you’re in the right place.

Can You Sleep on It?

It’s important to act fast once you’ve found that perfect property. It might still be tempting to “sleep on it,” but that could be a big mistake.

Shuffle your feet, lose your seat, as the saying goes. It’s almost a given that you’re not the only homebuyer looking for a house with your specific criteria. Someone else could buy that home right from under you while you’re in bed counting sheep.

Housing markets are often highly competitive, so time can be of the essence when you find a property you like.

Most of the time, you can trust your instincts. You should probably submit an offer if you like a property and it’s in your price range. Talk to your agent, your spouse, or a trusted loved one and get guidance if you’re not sure, but acting quick is critical.

Don’t Overlook the Basics

Maybe you don’t want to sleep on it. Maybe you want to call the moving company now. Do be realistic in your fervor to have the house.

Don’t be tempted to slide outside your budget and what housing expenses it can reasonably accommodate. Check out the schools if you have children, and consider how long it’s going to take you to commute to work. Will that grow old if the house is some distance from your place of employment?

A home is a long-term decision. Be passionate…but treat it like one.

Survival Guide for New Homeowners

If you’ve recently taken the home-buying plunge, our survival guide is a must-read that will help you avoid common pitfalls, budget your time and money, and glide smoothly into the joys of owning your own home.

We hope you’ll take away two essential things from this guide: an awareness of what you can expect in the first year of living in your new home, and some sound advice on being prepared for the most important aspects of being a new homeowner.

SET UP YOUR UTILITIES
You’ll need to get all utilities into your name, so make a list and work through it. Call the electric, phone, and gas companies. Contact the county for your sewer and water, if it supplies both. Does the town pick up garbage/recycling, or do you need to contract for that yourself? If you want Internet and broader TV service than an antenna will get you, research your options and start calling for the best bargain. With all the digital entertainment options available, you may decide to cut the cord on cable.

Get on Utility Provider Budget Plans
With so many new variables, the first year in a new house is usually challenging financially. Get on budget plans where you can. Many utility providers will estimate your use for the year, and then break your bills into 12 equal payments. This reduces fluctuations in your charges throughout the year, which can be helpful. Money can feel extra tight after the big move.

Triple-Check Your Billing Address
Make extra sure each service provider has your contact information recorded correctly—down to the last digit of your zip code. If you don’t receive bills due to some administrative error, you may come home to find your water turned off.

PREPPING THE HOUSE… OR NOT
Some work is more easily done before you get all your stuff in the house. If timing and budget allow, consider doing painting or floor refinishing before your move-in date. Do you need help with cleaning? If you want professional help with anything, bundle that into your move-in budget.

Don’t fret if there’s no money left for these things right away. Sometimes it’s better to live in a house awhile before deciding on paint colors, carpeting, or a new kitchen backsplash. A home is a work in progress, and it takes time to get the feel for a new place. Doing too much at once can be overwhelming and can kill the joy of the experience. Feel free to take a slow approach and live in your house as is for six months to a year or more. Who knows—you might just grow to love that vintage 1950s tile in the bathroom and use it as the inspiration for your interior design.

MORTGAGE AND INSURANCE LOGISTICS

Homeowner’s Insurance
If you have a mortgage, homeowner’s insurance was probably required for the loan. But it’s smart to reassess your insurance needs within the first six months of owning your home. You may discover you have too much (or too little) coverage. Once the dust has settled, take a critical look at your policy and solicit a second round of quotes from insurers.

Escrow
Most mortgage companies require your taxes and homeowner’s insurance to be escrowed, which means that the mortgage company totals those expenses, then charges you one-twelfth of the sum each month. (Some mortgage companies allow you to opt out of escrow, for a fee.) If you don’t have escrow, remember to budget for your tax and insurance expenses! If you do have escrow, take pains to make sure that the mortgage company is making all payments on your behalf in a timely manner; after all, it’s your house and your credit that are on the line. Also, double-check the accuracy of the estimate made by your lender’s escrow department. If there’s a shortfall, you can expect a bill for the difference at the end of the year. And if that estimate was way off, the bill you receive could be a real whopper.

GET ACQUAINTED WITH YOUR SYSTEMS

Equipment
If you have a lawn, you’ll need to purchase some lawn-care equipment or hire a landscaping service. Start researching lawn mowers and learn how to use a string trimmer. If you don’t have them already, acquire a rake, shovel, and some pruning tools, at the very least. If you decide to fertilize your lawn, you’ll want to purchase a spreader or hire someone for the job. Your new neighbors should have good references.

Service Checks
Plan to have a service check on your HVAC, hot water heater, fireplace, and/or chimney, and any major appliances that require it. Check any filters, and replace if necessary. In short, evaluate all of your home systems.

Labeling
Go through all the breakers in your electrical box and label them. Label the incoming and outgoing pipes, as well as the shut-off valves, for your water and sewer service. Taking a little bit of time now will make it much easier to diagnose and fix any problems that may arise in the future.

Utility Location
Before you start any new landscaping, call a utility location service to come mark where all your services are in the yard. You do NOT want to break a water main or cut off your electricity while you’re planting a tree or installing a fence. It’s worth making yourself a map to keep on file for reference in the future.

Yes, moving into your first home is a lot of work. But you’ll reap so many rewards—you’re building equity, lightening your tax load, and establishing roots in a community. With any luck, some of those new neighbors will become lifelong friends. Congrats, again, on your new home!

MOVING IN!

Pack
If you’re packing your own boxes, pack them room by room, and label them very clearly, so they can be taken immediately to the right place after being unloaded. Make some quick signs for each room that correspond to the box labels. If you organize your move effectively, with any luck, you’ll be able to park in the garage by the end of the week.

Unpack
Set manageable goals for yourself. You probably have several wonderful years, if not decades, to enjoy your new home, so you don’t need to finish unpacking in one day. Decide how many boxes you’ll unpack each day—one or two is completely acceptable—and stick to that number. If you’ve unpacked them and still have energy, turn your focus to another task, like hanging window treatments or shopping for drawer organizers.

Change the Locks
You can throw out the keys got at the closing—right after you change the locks! You have no idea who has copies of those keys, and it’s better to be safe than sorry. So, before you do anything else, call a locksmith or do it yourself—just do it.

Set Up the Move
Will you hire someone or do it yourself? If you’re hiring movers, get as many references as you can and at least three quotes. Make sure anyone you consider has insurance. If you’re doing it yourself, reserve your truck. Get one that’s slightly bigger—and reserve it for slightly longer—than you think you’ll need. That’s one place you can reduce stress.