For everyone, buying your first home is exciting. You’ve achieved and saved for the biggest purchase most people ever make: A home! It’s an asset, you aren’t renting anymore, and you can make a house a home and build equity at the same time.
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However, the excitement of buying a new home can quickly result in major financial stress if you don’t avoid some costly mistakes.
One of the biggest and most common problems is that new homeowners often find themselves surprised by unexpected expenses. If that happens to you, it usually means saying goodbye to any extra money you’ve set aside for a deposit.
There is good news, though. If you know these pitfalls beforehand, it can help you protect your wallet during that first year of living in your new home.
Let’s dive into the seven most common mistakes that new homeowners usually make in the first year.
1. Not Doing Basic Home Maintenance
It may seem obvious, but it can be easily overlooked in the first year.
Failing to learn about home maintenance before buying and moving in can quickly become costly. It’s important to thoroughly inspect the property — or hire a professional to do it — before closing the deal. This is especially crucial for older homes or those that appear to need repairs before they’re fully livable.
In 2023, the average homeowner spent between $3,000-$5,000 on home repairs, a figure that has risen due to increasing material and labor costs. Older, larger houses in more expensive areas cost more to repair than newer, smaller houses in poorer neighborhoods.
There’s a useful financial rule of thumb: Homeowners should set aside 1% to 4% of their home’s value for a home maintenance fund. Otherwise, you risk being caught out if a sudden repair is needed. For example, for a house valued at $200,000, you should budget $2,000 to $8,000 per year for home maintenance.
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2. Not Budgeting for Hidden Homeownership Costs
Recent surveys show that new homeowner regrets include wishing they had saved more (23%), having savings for repairs (17%), and funding unexpected renovation expenses (15%) without resorting to extra credit or borrowing from family or friends.
In most cases, hidden costs can cause problems because they were unexpected.
Hidden expenses often include:
- Property taxes
- Homeowner’s insurance
- Utilities
- Homeowners Association (HOA) fees, if that applies to your home
- Maintenance expenses often exceed initial estimates, making home repairs even more expensive.
3. Spending Too Much on Immediate Renovations
New homeowners frequently want to make their space perfect immediately. But that costs money. Unless you’re desperate to impress followers on Instagram, it’s better to wait and go room by room, instead of spending too much money on renovations that aren’t essential.
Stop and think whether new repairs are needed immediately. Unless they are, get used to a new home first before starting to make changes.
4. Furnishing and Decorating the Entire Home at Once
Furnishing your home at once can easily cost $10,000 to $50,000 or more, often forcing homeowners to rely on credit cards or financing with high interest rates.
Instead of rushing, aim to furnish one room at a time. This way, homeowners can spread costs over time while making more thoughtful purchasing decisions.
5. Not Being Smart Shoppers for Essential Services
New homeowners often stick with the first contractor, insurance agent, or service provider they encounter. Most of us shop around, but when it comes to looking after a new house, that thinking goes out of the window.
However, this mistake potentially forces you to overpay by thousands every year. It’s better to shop around for essential services, especially if you’re going to need those services time and again.
For major projects, obtaining multiple quotes is essential. Labor and material costs can vary dramatically between contractors. In some cases, this can be 50% cheaper for identical work.
6. Not Having a Home Emergency Fund
Financial experts recommend homeowners set aside up to 5% of their incomes for home maintenance, as well as $10,000 to cover emergency repairs and system replacements.
While this may seem difficult, the key is starting small but starting immediately. Even $50 monthly builds to $600 annually, providing a buffer for minor emergencies while establishing the savings habit for larger goals.
7. Not Investing in Professional Inspections and Warranties
Nearly 1 in 4 homeowners (23%) said their inspector missed major issues, with the most commonly missed problems including leaks, foundation issues, roof problems, electrical issues, and appliance issues.
Home warranties provide valuable protection for new homeowners. Home warranties generally cost between $600 and $700 per year and can cover thousands of dollars in repairs. For new homeowners still building their emergency funds, this annual cost can provide peace of mind and financial protection against major system failures.
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This article originally appeared on GOBankingRates.com: The 7 Most Expensive Mistakes New Homeowners Make in Their First Year
