Owning a Home Congratulations on becoming a homeowner! Now that you have successfully made your way through the home-buying process, no doubt you're anxious to move into your new home. Here are a few tips on settling in, taking some steps to protect your investment, and the importance of getting to know your home and how it operates. A New Neighborhood Make it a point to introduce yourself and your family to your new neighbors as soon as possible. Neighbors can be a great source of information and support in a new situation.
Check out your neighborhood's description by following the Home Room "neighborhood" link. This page will tell you if your new neighborhood has a neighborhood association. Most groups of this kind offer membership for a small fee and can be a great way to meet people in your community and learn about services and issues that affect all neighbors. Emergency Numbers
"911" - In the city, residents can call "911" to get fire, ambulance or police assistance. "911" should always be used to report life-threatening situations, violent crime or crimes in progress.
"311" - Recently, the Rochester Police Department added a "311" call service for non-emergency situations. Barking dogs, illegally parked cars, property crimes not currently in progress (graffiti, theft, vandalism), are all good reasons for calls to "311". "311" service is for City of Rochester residents only.
Both "911" and "311" can be dialed free from any pay phone in the city. The Rochester Police Department reminds residents -
If in doubt, call 9-1-1! Safety Precautions for Your New Home Fire safety An immediate precaution that you will want to take is attention to fire prevention. Make sure that smoke detectors are installed outside each bedroom door and in or near the living room. Check them periodically to ensure they are in working order. Buy at least two fire extinguishers, and hang them so they are easily accessible from the kitchen and from the main living area. For a larger house, place additional extinguishers in the garage, in the basement, and on each floor. Theft prevention
Change the cylinders in all the door locks right away and have a new set of keys made. You have no way of knowing how many sets of keys there might be to the existing locks and who has them. Make sure that all doors and windows have locks. Insurance You bought homeowner's insurance as part of the mortgage process. Now, be sure it has an inflation rider or that you check at each renewal to make sure the replacement value keeps pace with inflation.
Mortgage life insurance pays off the mortgage in the event of the borrower's death. Depending on your circumstances, this may be a prudent investment or it may duplicate your existing life insurance. Home Maintenance
Major systems You need to learn enough about the major systems of the house to do routine maintenance and to know how to handle various emergencies.
For example, do you know the location of:
- the main cutoff valves for the water and gas supply
- the thermostat for the hot water heater
- the fuse or circuit breaker box and the main electrical switch
- the shut-off for outdoor faucets
The professional home inspector whom you hired before finalizing your purchase contract should have pointed out these items to you. A tour with the former owner around the time of closing is a great way to find out many of these things. If you still need help, an experienced home owner can guide you.
Do-it-yourself repairs
You can save literally hundreds of dollars a year by taking care of small repair and maintenance jobs yourself. If such things are totally new to you, you may want to take a home repair course. The Landmark Society of Western New York sells a great book for city home owners called "REHAB ROCHESTER: A Sensible Guide for Old-House Maintenance, Repair and Rehabilitation". You'll be pleased to discover that you don't need to hire a carpenter to replace a broken window pane or a plumber to fix a leaky faucet.
You can do a lot with these few basic tools:
- Hammer
- Straight-blade and Phillips screwdriver
- Slip-joint pliers
- Handsaw
- Wall scraper
- Tape measure
- Flashlight
- Plunger (one that works for both sinks and toilets)
Seasonal maintenance
Rochester has a harsh climate and your home is exposed to the elements year round. You can extend the life of many systems in your home and avoid expensive repairs by doing routine maintenance.
Major repairs/ Home improvements
The do-it-yourself approach is good as far as it goes, but sooner or later, you'll undoubtedly need to hire an expert. When hiring a contractor, be sure to:
- Interview several contractors. Get recommendations from neighbors and friends. A neighborhood hardware store may keep lists of reputable contractors.
- Ask for references and check them.
Get cost estimates, and find out whether these are estimates or a firm bid. In older houses, contractors will not give a firm bid because it's impossible to know until they start the work what they'll find and how hard it will be to fix.
- For a larger job, be sure you have a contract that specifies exactly what work is to be performed, when payments are due, and so on. Always hold back part of the payment until after the job is finished.
- Does the job require building permits? If so, who is responsible for obtaining them?
Budgeting for Home Ownership
Home ownership brings new financial responsibilities. Your biggest responsibility is to pay your mortgage on time, every month. Organize your new expenses to help plan for emergencies.
- Know what bills are due and when. Plan for bills that are not monthly, such as water and sewer bills, car insurance, taxes and homeowner's insurance (if not escrowed).
- Ask Rochester Gas & Electric Corp., 546-2700, if you can get on their "budget" plan . Based on the history of gas or electric use in this house, the company arrives at an estimated annual cost, then divides it by 12 months. You are billed for the same amount every month, although RG&E still keeps track of how much you use. Once a year, they will adjust your average monthly payment up or down according to your actual use.
- Budget for regular maintenance and unexpected repairs. Experts suggest budgeting 1% of the purchase price of the house for annual maintenance and repairs. Make this a top priority!
- Always keep an emergency fund on hand. You need to have funds on hand so you can, for example, replace the hot-water heater when it suddenly springs a leak.
Future Financial Opportunities
Refinancing your home
One way to reduce your monthly payment costs if interest rates are falling is to refinance your mortgage. This involves taking out a new mortgage and using it to pay off your existing mortgage. Even if your new loan is with the same lender, refinancing means going through closing (including payment of closing costs) all over again. In spite of this expense, it is still often worth refinancing because paying a lower interest rate over the life of a new mortgage can mean a savings of many thousands of dollars.
Generally, it is only worth refinancing if interest rates have dropped at least 2 percentage points below your current rate. A prepayment penalty on your existing mortgage could be your biggest deterrent to refinancing.
Prepaying your mortgage
At some point in the future your monthly payment may seem much more manageable than it does today. If your income rises, your mortgage payment will be a proportionally smaller bite of your total income. At that time you may become interested in paying off your mortgage faster — especially if you stop to realize how much interest you are paying.
Principal is paid off very slowly during the first years of a mortgage. Let's assume you have a 30-year, $50,000 mortgage with a 10 percent interest rate. Your monthly payment of principal and interest is $439 — with the allocation between principal and interest changing slightly each month.
You can save very substantial amounts in interest payments over the life of your mortgage by making extra payments on your mortgage, either on a regular basis or even once in a while. Most kinds of lenders are required by New York State Law to allow partial prepayments. In fact, most lenders have a place on the payment card marked "additional principal payments" just for this purpose. If you were to make one extra payment per year (for example, when you receive an income tax refund), you would pay off your mortgage years ahead of schedule. Even paying $25 a month extra will save you a great deal in interest.
Financial Troubles
Handling Financial Adversity
Your mortgage is your most important debt. Starting with your very first mortgage payment, you need to establish a strong history of making your payments on time. If you've built this kind of track record, your lender is much more likely to be helpful should trouble arise.
Income Problems
If you should lose your job or experience a reduction in salary, don't panic but act quickly! If you are having trouble making your mortgage payment, call your lender immediately. The faster you make contact, the easier the solution may be. The lender may agree to suspend your payments for a few months (to be made up later) or may even extend the loan term to reduce your monthly payment. Keep in mind that no one benefits if you lose your home, so your lender wants to help you. If you wait for months before explaining your problems and seeking help, your chances of keeping your home are less. Early communication of problems is key!
Unexpected Debts
Remember that your mortgage is your most important debt, and it deserves top priority. If you're having trouble making your other payments, try to work out easier payment plans with the businesses that you owe. Hospitals, medical professionals, utilities, bank credit card companies, and others may be willing to extend payment terms. To maintain a good credit standing, the key is to communicate with your creditors as soon as you know you're having difficulties. Please do not think of your situation as embarrassing, because in today's economy financial difficulties can happen to anyone.
Seek Professional Help
There are community groups that offer credit counseling and financial advice. These organizations can help you develop a solid plan for regaining control of your finances. Call for help:
Consumer Credit Counseling Service of Roch, Inc. (585) 546-3440
The Housing Council at (585) 546-3700
Foreclosure
If you cannot make your mortgage payment and your lender cannot find a practical solution, your lender will be forced to foreclose on your property. Foreclosure is the legal process that the lender goes through to gain control of a property and sell it to help offset the loss from a loan in default (payments not made as agreed). Foreclosure proceedings can begin as soon as 90 days after a missed payment.
Many people who have never owned a home or faced financial difficulties do not understand the effects of defaulting on their mortgage and walking away from their home. Effects of foreclosure can include:
- unfavorable credit rating - most lenders will not approve a mortgage loan for anyone who has let their home go into foreclosure in the past. A foreclosure can stay on your credit record for at least 7 years.
- liability for the portion of the mortgage loan debt that is not recovered by the mortgage holder when the property is sold. This is called a deficiency judgment.
Homeownership can be tremendously rewarding and tremendously stressful. The most important thing to do is to educate yourself on all aspects of the process, including maintaing your home. Start follwoing the steps now for a positive and happy homebuying and homeowning experience.