How to Cover Costs for Unexpected Home Repairs

How to Cover Costs for Unexpected Home Repairs

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It’s normal for homeowners to occasionally deal with unexpected expenses. What are your plans if you need a major home repair? While insurance can help in some circumstances, there are sometimes concerns that aren’t covered, caps on benefits, and limits on replacement and values. With good planning, however, you can be prepared when those issues come along. 

 

Rainy Day Fund 

Any number of things can happen to your humble abode, and coming home to a flood from a plumbing problem, damage from fallen trees, or other surprise calamities can be upsetting at best. Not only is your home damaged, but you also need to contact your insurance, hire repairmen, clean, and change around your schedule. Insurance companies don’t always cover all damages, either. Repairs stemming from neglect, power outages, flooding, sewage, or mold are all outside of coverage for most insurances. What’s more, the national average cost for a major home repair or renovation is around $10,390.

 

Most people don’t have that kind of money close at hand, so your first priority should be establishing an emergency fund for home repairs. As Dave Ramsey explains, you can actually build your emergency fund quickly by taking on a second source of income, selling items you own, or paring down your budget. You’ll find your fund comes in handy for replacing items when they wear out as well. The expenses involved with maintaining a home become unwieldy sometimes, especially when things like furnaces, refrigerators, ovens, microwaves, and garage door openers break, particularly if they are beyond repair. 

 

Finding Quality Repairs 

When it comes time to hire a contractor to work on your home, the last thing you want is to fall victim to a scam artist. Steer clear of hiring anyone who tries to pressure you into work, as well as those who want payment in advance. Always get everything in writing, and before you even contact a repairman of any sort, US News notes that you should have a plan for your expectations. Know what you want worked on, and have an idea of what your outcome will be.  For instance, decide in advance if you want a bathroom completely gutted, retiled and refitted, or if a new toilet and vanity top will suffice.

 

Not surprisingly, good contractors tend to stay busy, so you can expect to wait a while before work begins. Check references and licenses, and you can even research local court records to see if there is a history of litigation against someone. Always get at least a few bids on your project as well. Another suggestion is to check online reviews to see what other people have to say about contractors you’re considering. 

 

Staying Affordable

There are many ways to cut costs when planning home repairs or renovations. One idea is to do some of the work yourself. If you can pull up carpet, apply paint, or take down molding, you could save yourself some of the labor costs involved with your project. You can also put off some of the work until later. For example, if you are replacing flooring, perhaps the high-traffic rooms will be your priority and you can do the rest later.

Another idea is to check local hardware and home improvement stores for good deals on materials and make the purchases yourself. If you’re replacing appliances, keep your eyes peeled for energy-efficient models so you can take advantage of tax credits. One place where you don’t want to pinch pennies too much is on whom you hire. As This Old House points out, a contractor who gives you a lowball bid is probably going to be a problem. Consider it a red flag that the contractor is taking shortcuts or does slipshod work. 

Home repairs can become expensive quickly. It’s to your advantage to set aside money to pay for repairs, and then do your research before hiring contractors and scheduling projects. With good preparation, you can take things in stride when a rainy day expense comes along. 

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Dawyn Clemens

Dawyn F. Clemens has 30 years experience as a real estate agent in Montgomery County, Pa.Honesty and integrity, along with determination and dedication, are philosophies that Dawyn strives for in all aspects of her life. Applying these principles to her business has allowed her to be a top producing real estate agent over her 30 years in the industry.

Dawyn has a proven record of directly impacting her client’s financial success and propelling smooth transactions by applying refined management, selling, and negotiation skills.

If you are planning on buying or selling in Montgomery or Bucks Counties, contact Dawyn Clemens, your local neighborhood expert for a personalized real estate experience. Dawyn Clemens takes pride in servicing her clients by delivering exceptional service and establishing lifelong relationships.

(I NEED 20% DOWN) Home-Buying Myths About Mortgages Explained

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By: Kelley Walters
Published: July 12, 2018

Tips for shopping around for a mortgage -- even if you think you don't qualify.

Think you're not ready to unlock home ownership yet? That the financial hurdles are too high? You may be short-changing yourself. Many of the things renters believe about home-buying are myths.

Here’s the real deal

Myth: I Have to Put Down 20%. 😢

Saving 20% of the price of a home in many places isn't just a challenge; it's a roadblock. And it's not a must-do. Roughly 60% of home buyers put down less than 6%. How can you become part of the {{ start_tip 115 }}less-than-20 club{{ end_tip }}?

  • FHA Loans: The Federal Housing Association (FHA) is an old friend to first-time buyers and others who are ready to become homeowners with less than a 20% down payment. If you qualify, you may be able to get a loan with as little as 3.5% down.

  • DownpaymentResource.com and NeighborWorks: Some local and state agencies sponsor down-payment assistance programs that help prospective home buyers in different ways. Follow the links to find out if any are available near you.

  • VA, USDA, and Navy Federal Credit Union loans: Three government-related lenders offer mortgages with as little as zero down. The VA is for veterans and family members; the USDA is for buyers in qualifying locations (typically rural); and Navy Federal Credit Union is for the military, family members, and some government employees.

  • Gift Funds: Sixteen percent of buyers ask friends or relatives to help jump-start their home ownership with a gift. Talk to your lender first, though. There may be limits to the amount of gifted funds they'll accept, and they may require your benefactor to sign some paperwork.

Myth: My Low Credit Score Means I Can't Buy a Home

So, your credit could use a tune-up. That doesn't mean you have to forgo your home-buying dreams. Here are some options for those with a less-than-stellar credit score.

  • FHA loan: With a credit score of 500, you can apply for an FHA loan, but you'll need a 10% down payment to offset the risk. If your score is a tick better (580), you can participate in their down-payment assistance program, requiring only 3.5%.

  • A higher down payment: On the off-chance you have enough cash on hand to put down more than 20%, the higher down payment can help those with lower credit scores be less risky for lenders.

  • A co-signer. Find someone with better credit to co-sign the loan – but understand that if you don't make the payments, the cosigner will be financially responsible (and their credit will also suffer).

  • Check your credit report. Maybe your credit isn't that low after all. Order a copy of your report from all three reporting agencies (Equifax, TransUnion, and Experian). If you find inaccurate or old information, ask the agencies to correct it. (You can order a free report from each of the bureaus once a year at annualcreditreport.com.

Myth: I Can't Afford the Agent's Commission

Here's one you can immediately mark off your worry list. Typically, the commission is paid from the proceeds of the sale via the seller.

This is one of many reasons to contract with a buyer's agent. The seller's agent doesn't work for you, and you need a pro in your corner.

Myth: My Bank Will Give Me the Best Mortgage

There are a lot of positive things to say about working with your local bank, but assuming they'll give you the best mortgage is a mistake.

Banks are only one type of home-loan lender. Others include credit unions and mortgage companies. Mortgage rates aren't the same across the board, so contact several institutions to ensure you're getting the best price.

Or, if you prefer to let the lenders come to you, consider getting a loan through a mortgage broker. Brokers have access to several lenders, and they'll shop their market, getting you a wider selection of loans. But unless you contract with one, brokers aren't obligated to find the best deal for you. So you'll want to shop around for a broker, just as you would for a lender.

Myth: I Was Pre-Approved. I Got The Loan!

Well . . . no. Don't order that couch from West Elm or pack away your tax documents just yet.

You don't get the loan until:

(a) The seller accepts your offer

(b) Your lender approves the loan (which you'll need those tax docs for)

(c) You sign the loan papers 

Between (a) and (c), the lender will have the home appraised to ensure its value is in line with the purchase price, check your credit again, and ask you for more documents than you ever knew existed.

So what does "pre-approved" mean for a loan? It tells sellers you're eligible for a loan and shows them you're a serious, qualified buyer. This gives them confidence in your offer, increasing your chances of (a), (b), and (c) actually happening.

Myth: The Interest Rate Is What Matters Most

A low interest rate is important, but it's not the only thing to consider. When shopping around for a loan, check the annual percentage rate (APR). It includes all loan costs, such as origination and processing fees that can vary widely from lender to lender, in addition to the interest rate.

One loan may have a lower interest rate, but the up-front fees cost more than you'd save in interest. The APR lets you compare apples to apples.

Before you sign the loan, your lender will give you a loan estimate, a line-by-line estimate of fees. You'll find the APR there. Use that rate to compare the loans you're considering.

How about that? You may be closer to home ownership than you thought. Happy house hunting!


Comment

Dawyn Clemens

Dawyn F. Clemens has 30 years experience as a real estate agent in Montgomery County, Pa.Honesty and integrity, along with determination and dedication, are philosophies that Dawyn strives for in all aspects of her life. Applying these principles to her business has allowed her to be a top producing real estate agent over her 30 years in the industry.

Dawyn has a proven record of directly impacting her client’s financial success and propelling smooth transactions by applying refined management, selling, and negotiation skills.

If you are planning on buying or selling in Montgomery or Bucks Counties, contact Dawyn Clemens, your local neighborhood expert for a personalized real estate experience. Dawyn Clemens takes pride in servicing her clients by delivering exceptional service and establishing lifelong relationships.