It may have taken months of searching, loads of documents, a flurry of texts, calls and emails, and thousands dollars, but at the end of the mortgage process, you have a home that’s finally yours! But what are the things to do after buying a house?
Here are a few tips to make your transition into homeownership a smooth one.
Save your loan documents
This is important—collect all of your documents and store them somewhere safe. May we recommend an actual safe? If you have digital copies, it doesn’t hurt to keep those handy as well.
Next, you’ll need to start making payments. But unlike rent, which is typically paid upfront, your mortgage is paid in arrears. It’s due a full month after the last day of the month you closed your mortgage.
For example, if you closed a loan on June 19th, your first payment wouldn’t be due until August 1st. Your First Payment Letter, which is a document you sign at the closing table, will give you the specifics about when your first payment is due and where to send it.
Make sure you know how to pay for your loan—this sounds basic but could be more confusing than you’d think. Many people are confused by this process and are late on their first payment. Make sure you know who your loan servicer is and how you pay them.
Also, remember in one of our first articles, we talked about how your mortgage company might sell your loan to an investor? Well that may happen relatively quickly. In some cases, it could be before your first payment is due. Keep an eye out for mail or emails notifying you that your loan was sold. If you set up auto-payments prior to the servicing transfer, you may need to do this again with your new servicer as well.
Escrow account changes
Over time, your monthly PITI payment has the potential to change. This is true even if you have a fixed interest rate mortgage. There are a number of reasons that could lead to your property tax payments increasing, from a rise in property values to the addition of new local taxes.
Your homeowners insurance premiums may also increase for a variety of reasons. If this is the case, there are steps you can take to lower your payment amounts. And you always have the ability to shop around for a new homeowners insurance provider.
If your PITI payment increases, you may also have to increase the reserve amounts in your escrow account. Keep an eye out for important notices from your mortgage servicer. If an increase in your payment creates an issue, be sure to proactively reach out to your servicer and let them know of your situation.
Monitor your finances
It’s important to stay on top of your budget after you move into your new home. Furnishing a new house can be expensive. It may be tempting to splurge on a big TV for your living room or that modern leather sofa you’ve had your eye on. Make sure you keep an eye on your account levels, and resist the urge to overspend on any of your credit lines.
When you buy a home, you are opening yourself up to a new world of expenses. Your monthly housing payment may have increased. You are also now responsible for any maintenance expenses that come up, from a leaky roof to a busted dishwasher and everything in between.
It’s important to increase your emergency fund to account for this. Personal finance pro Dave Ramsey suggests having three to six months worth of expenses saved in a way that it is easily accessible.
In addition to your emergency fund, it’s also a good idea to budget for your home maintenance expenses. You can typically expect to spend 1-2% of your home value on maintenance.
Some of these new expenses may be ongoing services, such as gardening and outdoor maintenance, snow removal, or pest control. Other expenses could come from one-time events, like a plumbing issue, appliance failure, or exterior maintenance like painting or gutter cleaning.
Proactive maintenance could prevent larger issues from happening down the road. Check out this great article for a list of preventative maintenance tips.
Get help early
If you find yourself in a situation where you can’t make a mortgage payment, we highly recommend reaching out to your loan servicer immediately. By reaching out to your creditors early, you may be able to adjust your payments temporarily while you work through any financial troubles. You may also consider working with a financial counselor early on to work out a budget or a debt-reduction plan.
The last thing you want to do is skip your debt payments, wait until you are months behind, and have all of your debts go to collection agencies. Proactive communication can go a long way in these situations.