Your Free Guide to Home Ownership

Your Free Guide to Home Ownership

Introduction to Home Ownership

Becoming a homeowner is considered to be an important benchmark of economic progress. Home value is a major part of most homeowner families’ net worth and owning a home can help you build wealth as property values increase over time.

Owning a home also gives owners security, stability and a close connection to their communities.

If you are a first-time homebuyer, congratulations! Even if you have owned a home for some time, there is still a lot to learn about protecting and maintaining your property.

Buying and Selling a Home

Buying a home is a complex transaction, financially, legally and personally. According to a 2023 Redfin study, U.S. homeowners stay in their homes for an average of 12.3 years. That same study found that older homeowners tend to stay longer, while younger homeowners move more frequently.

This section will talk about real estate professionals, what to look for in a new home, how to negotiate the best price and home inspections. 

While there are federal real estate laws, each state may have its own laws that govern real estate. Where this is the case, state laws will be noted in the section of this guide to which they apply.

General Steps to Buying a Home

Finding and buying a new home is exciting, but it may also be confusing because there are so many factors to consider. Here are the steps.

1. Determine where you want to live. This will be a city, town or general area. Price and your ability to pay will impact which neighborhood you should look into. 

Typically, people choose a location based on factors such as the location of an existing or anticipated job, proximity to family, cost of living and quality of life. For more details on choosing the location to move to, see the section “What to Look for in a New Home” in this guide.

2. Decide how big a home you need, including the number of bedrooms and bathrooms.

This will depend on how many people will be living in the home and others needs such as for a home office. See the section “Choosing the Right Size and Type of Home” for information on choosing the right size home.

3. Figure out how much you can afford to pay for a home. 

You can calculate this amount based on the amount of money you have for a down payment, your income and your credit. Find out how to calculate the amount you can afford to spend on a new home in the section “Determining What You Can Afford” section of this guide.

4. Shop around for the best mortgage rate and terms. 

The mortgage interest rate is the amount a lender charges you to borrow the money for a home. The terms of the mortgage are details such as the length of repayment, additional fees and whether the interest rate will remain the same or fluctuate.

Getting a mortgage with a lower interest rate and favorable terms can save you thousands of dollars. For more information on interest rates and terms, see the section “Types of Mortgages” in this guide.

5. If possible, get pre-approved by the lender with the best rate and terms. This will improve your negotiating position and streamline the buying process.

A pre-approval is when you submit all of the required information such as the amount of your down payment, income, expenses and credit to a mortgage lender before you decide which house to buy. The lender will pre-approve you up to a certain amount of money. When you are ready to buy a home, you submit the information about the purchase price and home to the lender to finalize the transaction. Find out more about home financing in the “Home Financing” section of this guide.

6. Optional but often recommended – Hire a real estate agent.

A real estate agent is a professional who can help you find homes that meet your price range, location and size criteria. Find out more about what real estate agents do in the section “How Real Estate Agents Operate.”

7. View homes in person or virtually.

8. When you find a home you would like to buy, make an offer. If it is not accepted, negotiate or keep looking.

An offer is when you give the seller a price you are willing to pay for the home. It may also include other requests regarding the property. See the section “Price Negotiation” for how to make an offer and negotiate with the seller.

9. When your offer is accepted, sign a contract and pay earnest money.

Earnest money is a part of the down payment that you put in a special account to demonstrate to the seller that you are serious about buying the home. If you change your mind, you could potentially lose this money. See the section “The Contract.”

10. Optional – Hire a real estate attorney. It is mandatory in some states to have a real estate attorney at the closing. 

Real estate attorneys are lawyers who specialize in real estate transactions.  They can help you to negotiate with the seller and understand the paperwork before you sign it.

11. Get appraisal, seller disclosure and necessary inspections. Negotiate further if there is anything unexpected in these documents.

An appraisal is a professional’s assessment of the value of the property, and the seller disclosure informs the buyer of anything else important that could negatively impact the value and useability of the home. Inspections are professional assessments of the condition of the home. Find out more about inspections in the “Home Inspections” section of this guide.

12. Close on the home.

The closing is the event where the final paperwork is signed and ownership of the property changes hands from seller to buyer. Find out what it entails in the section “The Closing.”

How Real Estate Agents Operate

There are two main types of real estate professionals: agents and brokers. Both agents and brokers are licensed professionals who represent the buyer or the seller in a real estate transaction. Real estate brokers typically have more training and may work independently or hire agents to work for them.

Real estate agents must work for a real estate brokerage. The term “realtor” refers to agents, brokers, salespeople and other real estate professionals who are members of the realtor association. Going forward, “agent” will refer to both real estate agents and brokers. 

An example of where you can find a real estate agent is: https://www.realtor.com/.

For Buyers

The first decision you need to make once you decide to buy a home is whether to use a real estate professional. The buyer is generally not responsible for paying any commission to either your real estate agent or the listing agent, so in most cases there is no direct cost to you to hire a real estate agent.

The only exception would be if you buy a property that is listed “for sale by owner” which means that there is no listing agent. If the seller refuses to pay the commission, you may need to pay it to your real estate agent by adding it to the purchase price.

Multiple Listing Services (MLS) are online platforms where you can see homes that are listed for sale or rent in specific locations yourself. An example of an MLS website is: https://www.mls.com. 

Real estate agents can quickly narrow down choices to those that fit your budget and needs and give you helpful information about neighborhoods, specific properties and the real estate market in the area. They can also guide you through sometimes confusing real estate terminology and contracts, assist you with home inspections and repairs, and represent your interest in price negotiations.

The main disadvantage of using a real estate agent is that sellers might build the commission into the listing price, increasing the overall price.

If you do not have a real estate agent, you may be able to negotiate a 3–6% drop in the listing price that otherwise would have gone to your agent in commission.

Some real estate agents ask you to sign a contract designating them as your exclusive agent and claiming commission on any home you end up buying. If your agent has not been helpful or given you value, you could do all the work of finding a home and they would still be compensated.

In many states, it is possible for the buyer and seller to both be represented by the same real estate agent. This is called dual agency. The benefits of dual agency is that the real estate commission may be negotiable since there is no other agent with whom to split the commission and quicker communication. On the negative side, because the agent represents both parties, neither side will have the benefit of the agent’s help in price negotiation.

In general, the agent’s self interest may skew to the seller, since the seller pays commission and the commission is based on the purchase price. This can leave the buyer at a disadvantage. Dual agency is prohibited by law in the following states:

• Alaska
• Colorado
• Florida
• Kansas
• Oklahoma
• Texas
• Vermont
• Wyoming

Real Estate Attorneys

If you decide not to use a real estate agent and you are not very experienced buying homes, hiring a real estate attorney might be a good idea. A real estate attorney can advise you on contract negotiations, real estate jargon and legal matters.

Some states require buyers to hire a real estate attorney and to have that attorney present at the closing. States that require this are:

• Alabama
• Connecticut
• Delaware
• District of Columbia
• Florida
• Georgia
• Kansas
• Kentucky
• Maine
• Maryland
• Massachusetts
• Mississippi
• New Hampshire
• New Jersey
• New York
• North Dakota
• Pennsylvania
• Rhode Island
• South California
• Vermont
• Virginia
• West Virginia

For the remainder of the states, hiring a real estate attorney is optional.

Since hiring a real estate agent is always optional, it is possible to go through a real estate transaction completely without expert advice.

For Sellers

The real estate agent who represents the seller is called the listing agent. He or she is responsible for listing the property on the Multiple Listing Service, or MLS. Listings typically feature one or more photos of the home, a description, the listing price and a list of all of the home’s details, such as the address, number of bedrooms and bathrooms, lot size and any special features. 

The listing agent also shows the home to potential buyers, sometimes holding open house events for multiple buyers at one time, and also represents the seller in negotiations with prospective buyers.

When a home is sold, the seller pays the listing agent a commission, which is usually 5-6% of the purchase price. If the buyer is also represented by a real estate agent, the listing agent will split the commission evenly with the other agent. Otherwise, the listing agent keeps the entire commission.

What to Look for in a New Home

Location

There are various factors to consider when looking for a location for your new home. These include but are not limited to the location’s proximity to:

Because your home is a major financial investment in addition to a place where you will live, consider choosing a neighborhood where property values have been going steadily up over the years.

By hiring a real estate agent, he or she may be able to help you find a home based on your preferences regarding the above.

Price

To avoid financial problems, it’s important to find a home that you will be able to comfortably afford. To calculate this amount, see the section “Determining What You Can Afford.” You may be able to find homes priced at less than market value by looking at foreclosures and fixer-uppers.

Foreclosures

Foreclosures are homes that have been seized by the lender because the homeowner defaulted on the mortgage loan. This means that the homeowner did not pay back the loan in the timeframe that was established when they obtained the mortgage. Oftentimes, lenders are eager to convert this real estate into cash and are willing to sell the properties for less than they are worth.

Ask your real estate agent if there are any foreclosed properties available in your preferred neighborhoods. You can also find listings on foreclosed properties through the federal government’s Department of Housing and Urban Development (HUD) page here: https://www. hudhomestore.com/Home/Index.aspx.

Fixer-Uppers

Homes that are in need of extensive repairs and updating are usually listed at below-market prices because sellers know that the buyer will need to invest a significant amount of money in the house after purchase.

Buying a fixer-upper may be a good option if you are very handy or have construction expertise, have additional cash set aside and have the patience to wait while repairs and update work are being done in the home. Even so, beware of major structural issues like cracked foundations and expensive upgrades like replacing the entire home’s plumbing system.

Other Recurring Costs

In addition to your mortgage payment, other recurring costs, property tax and homeowners insurance premiums, depend on the value of the property. They are not tied to the purchase price, but rather the value as determined by your local tax assessor.

If you do not pay your property tax, the government has a right to put a lien on the property. A lien is collateral that gives the government a claim to the house, and is meant to ensure that you pay back your loan. The government can also foreclose on the property. Foreclosing on the property means to seize/take ownership of the home if you do not pay back the loan based on the established terms.

Most mortgage lenders collect money each month from borrowers that they use to pay these third party costs. This collected money accumulates in a separate escrow account administered by the lender until the bills become due at which time they are paid.

By definition, escrow describes a situation wherein a third party holds an asset or money on behalf of two other parties that are currently going through a transaction. Escrow money is added to your monthly mortgage bill so it can increase your monthly payments.

Property Tax

Homeowners in all 50 states need to pay property tax. Property tax is an annual tax on a percentage of your property’s assessed value. The county assesses, or determines the value of, property periodically every few years. For this reason, the assessed value can lag behind the market value.

If you have a homestead exemption that applies to property taxes, the amount of your exemption is subtracted from the assessed value to produce the value that is taxable.

State and local governments use the revenue from property taxes to fund schools, the construction and maintenance of roads, government salaries and other costs and sometimes local police, fire rescue and emergency medical technician services. Property tax rates vary by state.

As of 2024, the highest effective property tax rate in the U.S. is in New Jersey at 2.46%, where the median amount of property tax is $8,928.

The table below shows the effective property tax rates across the country, ordered by the highest tax rate to the lowest. The data is compiled from the Tax Foundation’s 2023 report, which uses U.S. Census Bureau data from the 2022 calendar year, as it is the most recent data available.

Effective Property Tax Rates and Median Property Tax Amounts by Location

RANK	STATE	MEDIAN REAL ESTATE TAX PAID	EFFECTIVE REAL ESTATE TAX RATE
1	New Jersey	$8,928	2.46%
2	Illinois	$5,213	2.29%
3	Connecticut	$6,251	2.16%
4	New Hampshire	$6,235	2.09%
5	Texas	$4,399	1.90%
6	Vermont	$4,706	1.89%
7	New York	$6,217	1.73%
8	Wisconsin	$3,570	1.71%
9	Nebraska	$3,184	1.70%
10	Iowa	$2,700	1.59%
11	Ohio	$2,658	1.57%
12	Pennsylvania	$3,352	1.56%
13	Rhode Island	$4,526	1.54%
14	Michigan	$2,734	1.45%
15	Kansas	$2,556	1.40%
16	Maine	$2,868	1.29%
17	Alaska	$3,716	1.24%
18	South Dakota	$2,528	1.22%
19	Massachusetts	$5,113	1.19%
20	Minnesota	$2,860	1.10%
21	Maryland	$3,709	1.07%
22	North Dakota	$2,378	1.02%
23	Missouri	$1,830	1.00%
24	Oklahoma	$1,623	0.99%
25	Georgia	$2,151	0.95%
26	Washington	$3,841	0.93%
27	Oregon	$3,457	0.92%
28	Florida	$2,372	0.89%
28	Kentucky	$1,508	0.89%
30	New Mexico	$1,721	0.84%
31	Montana	$2,339	0.83%
31	Indiana	$1,373	0.83%
31	Virginia	$2,656	0.83%
34	California	$4,804	0.81%
34	Mississippi	$1,289	0.81%
36	North Carolina	$1,765	0.80%
37	Arkansas	$1,031	0.66%
38	Tennessee	$1,376	0.65%
39	Idaho	$1,741	0.63%
40	Louisiana	$1,223	0.62%
40	Delaware	$1,695	0.62%
42	Wyoming	$1,501	0.61%
43	Arizona	$1,717	0.60%
44	District of Columbia	$3,754	0.59%
44	West Virginia	$916	0.59%
46	South Carolina	$1,213	0.58%
47	Utah	$1,972	0.57%
48	Nevada	$1,793	0.55%
49	Colorado	$2,125	0.52%
50	Alabama	$742	0.43%
51	Hawaii	$1,915	0.29%

Homeowners Insurance

Homeowners insurance insures your home against damage and theft. Because damage to a home from a natural disaster, fire or flood can be so substantial that it can reduce property value, mortgage lenders require borrowers to have a homeowners insurance policy on the property.

In addition to protecting the lender, homeowners insurance protects homeowners from the bulk of major repair costs. For this reason, homeowners insurance is usually considered a must-have, whether you have a mortgage or not.

Homeowners insurance covers damage and destruction to the interior and exterior of the home as well as furniture and other personal items if damaged by a covered event. It also typically includes coverage for personal liability for damage or injuries. So if another person gets hurt while on your property or their property gets damaged from something on your property and sues you, the insurance company will pay to defend you and possibly pay damages up to a certain amount outlined in your policy.

Finally, homeowners insurance covers theft of items from your property, for example, if your home is broken into and items are stolen. Some policies can have other provisions, like paying for a hotel for you to stay in while major repairs are being done on your home.

The cost of homeowners insurance varies based on factors such as:

• The age and condition of the home
• The location, including its proximity to areas prone to natural disasters such as fires, floods and hurricanes
• Frequency of past claims
• Credit history 
• Pets

General Steps to Getting Homeowners Insurance

1. Shop around for reputable homeowners insurance companies in your area.
   
   The most reputable companies have an A++ or A+ rating.
   
   
2. Calculate what you want to cover.
   
   This should include the replacement cost for your home, any structures such as a garage, pool, or fence and any personal property including furniture, clothing, and household items. You can calculate the replacement cost of the home by multiplying the square footage by the average building cost per square foot in your area.
   
   
3. If the home is in an area subject to natural disasters like hurricanes, tornados, earthquakes, floods or wildfires, consider getting additional insurance to cover those hazards.
   
   
4. Decide what you want your deductible to be.
   
   The deductible is the out-of-pocket cost you will be responsible for paying when there is a covered loss. The higher the deductible, the less expensive the policy.
   
   
5. Contact agents from the top three insurance companies that cover homes in your area and get quotes from them.
   
   Some insurance agents represent multiple providers and can give you comparative quotes, while others can only quote you from one insurance company. You will need to give them information about the home such as the address, square footage, number of bedrooms and bathrooms.
   
   
6. Choose the insurance company with the best coverage and price.
   
   
7. Schedule an on-site inspection of the property with an insurance company reprsentative.
   
   
8. Sign policy documents and pay a premium, either directly or through your mortgage lender.

Before taking out a policy, read it carefully to make sure that the coverage limits are adequate (its coverage limits should be around what it would cost to rebuild the home if needed) and that there are no major exclusions. Some policies in areas with frequent natural disasters may exclude those disasters from coverage.

If this is the case, ask if they can provide a rider, which is a supplement to the policy with additional coverage, or try a different insurance company.

Associations

Some homes are in a community with a homeowner’s association or condominium association. These associations provide a range of amenities and services such as:

• A community clubhouse
• Community pool(s) and/or hot tub(s)
• Tennis courts
• A golf course
• Security
• Furnishing and maintenance for common areas
• Lobbying local government officials on behalf of the community
• Organizing community activities
• Concierge services for residents

To pay for these services and amenities, associations require monthly or quarterly dues. The more amenities and services provided, the higher the fees will be. If there is an association, the amount and frequency of the association fees should be included in the MLS listing. If there is an association, the amount and frequency of the association fees should be included in the MLS listing. According to a 2021 American Housing Survey performed by the Census Bureau, the national average HOA fee is $191 per month. However, in some places, you can see HOA fees as high as $600 per month or higher. 

Sometimes, in addition to homeowners or condo regular fees, an association has a special assessment. A special assessment is money that residents are required to pay toward a major unforeseen expense like replacing old elevators, replacing a common roof, repaving parking lots or making repairs after a natural disaster.

Many associations have reserve accounts where they keep money for this type of cost, but occasionally, the cost may be more than anticipated.

Another function of homeowners and condo associations is to enforce the community’s rules. Rules typically cover parking, resident and guest behavior, the age of the residents (in 55+ communities), pets, homeowner responsibilities and changes made to the exterior of the property. Make sure that you are willing to abide by any community rules before you decide to buy a home there.

Choosing the Right Size and Type of Home

Type of Home

Once you have narrowed your search down to a general area and are looking at several neighborhoods, think about what type of home you need. Depending upon your family size, budget and lifestyle, a condominium apartment, townhouse or house may be your best choice.

Apartments and townhouses typically have less square footage, but may have a community clubhouse, pool or other amenities. According to the Census Bureau, the average American condo unit has 1,107 square feet, compared to 2,443 for single family homes.

Density is higher in apartment and townhouse communities compared to single family neighborhoods, giving you more opportunity to socialize. However, this could also attribute to potential problems like noise, odors and crowded elevators, parking lots and common areas.

Because associations maintain the areas outside resident units, apartments and townhouses are easier and less expensive to maintain, although maintenance savings are offset by association fees. Single family homes have outside areas that owners can enjoy but that also require maintenance.

Size

Home size encompasses both square footage and the number of bedrooms and bathrooms. In homes with two or more bedrooms, bedrooms take up on average 28.8% of the home’s total square footage. Kitchens and family rooms are the next largest areas with approximately 11.5% of square footage each.

While determining your preferred home size, ask yourself the following questions: 

• How many people will be living there?
• Is that number of people likely to increase, decrease or stay the same for the next 10 years?
• Doyouwantadditionalspaceforahomeoffice, guest room or utility room?

The answers can help you determine the number of bedrooms you need.

Next, decide how many bathrooms you will need. A good rule of thumb is one bathroom for every two residents. However, if you plan on entertaining regularly, you might also want a powder room (half-bath), which has a sink and toilet but no shower or bathtub.

Other Important Home Characteristics

There are a few more characteristics that you will want to consider before buying a home. They are as follows:

• Age and condition. You may want a newly constructed home that is modern and ready for move-in. Alternatively, you might prefer an older home for its charm, historical value and architectural details. Unless an older home has been through a recent renovation, it is likely to require more investment in updating systems like plumbing, cooling/heating, roofing and insulation. For older homes in particular, a thorough home inspection is critical. Refer to the Home Inspections section of this guide for more information.
• “Fixer-upper” status. Homes that need extensive updates and repairs sell for less. If you are able and willing to take on the inconvenience and expense of updating a fixer-upper, you can often save money on the purchase price.
• Floor plan. When you tour a home for sale, imagine yourself living there and decide if the floor plan would work for you and your family. You might want some rooms to be close together for easy access and others to be further so that they are quieter. Rooms that are heavily used should be easy to get to from other rooms. Homes with high ceilings and lots of windows are light and expansive, but also more expensive to heat and cool.
• Outside area. You should generally like the way the outside of the home looks, but keep in mind that you can always make changes later, like painting it a different color or adding landscaping. You may want a large yard for children to play in, shade from trees, a pool, water access for a boat or a view of the surrounding area. Homes with these features typically cost more than comparable homes without them, so make sure that the additional cost will fit into your budget. For example:
  • A home with an unobstructed ocean view is generally worth more than a comparable home with no view.
  • Attractive front yard landscaping, including multiple garden areas and a variety of plants, can increase a home’s value by 15-20%, according to Bankrate.
  • Homes with in-ground pools cost on average 7% more than comparable homes without pools.

Negotiating

Much like buying a car, it is often in your best interest to negotiate when buying a house. There are several steps in the process:

1. Offer (buyer to seller)
2. Counter-offer (seller to buyer)
3. Negotiation (seller and buyer)
4. Acceptance of the offer (seller)
5. Contract (seller and buyer)

Price Negotiation

Once you have found a home that you want to buy, it is to your advantage to get it for the lowest possible price. A starting point of price negotiations is the listing price, but you are not tied to this. Your goal as a buyer is to pay a fair market price or less.

The listing price is the price that the seller would ideally like to get, and as such is usually the most you would have to pay. In very hot markets where there are several buyers bidding against each other for a specific property, the buyer often pays more than the list price.

Remember, only your real estate agent represents your interest; the listing agent represents the seller. So, when you initially walk through the house, try to keep your excitement about the house under wraps. 

If the listing agent knows that you love the house, he or she may advise the seller not to be too flexible on the price. Only discuss the positives while alone with your agent and well out of earshot from the seller or listing agent.

When you are serious about making an offer on a home, the first step is to ask your real estate agent to “pull comps.” Comps are listings of similar homes in the neighborhood that have recently sold along with how much the buyer paid. You can compare those selling prices with the listing price of the home you are considering, taking into account any size or location differences, to estimate how much the home is worth in the current market.

If significant repairs or updates are necessary, the seller might be willing to accept a lower purchase price. Some repairs might be readily apparent when you do a walk-through of the property, while others will be uncovered by the home inspection, discussed in the next section.

Seller Disclosure

Most states (except Alabama, Arkansas, Georgia, Massachusetts, Montana, New Hampshire, New Jersey, Utah, Vermont, West Virginia and Wyoming) require sellers to provide buyers with a disclosure report. Disclosure reports are communicated in a state-supplied form in some states, while other states let the sellers provide the information in their own format.

Seller disclosures cover features about the home that may be problematic. This may include questions about the following topics:

• The condition of the interior, appliances and structure
• The condition of the land (drainage, flood zone, presence of a hole under the property)
• Water supply/sewage/septic system
• Mechanical system status (HVAC, plumbing, electrical)
• Environmental issues (contaminated well water, asbestos, radon)
• Noise in the area
• Pending building or zoning violations
• Crime or violence on the property (methamphetamine manufacture, murder or suicide)
• Fire damage
• Remodeling done without a permit
• Past or present infestations of wood-eating pests
• Titles and encumbrances
• Homeowners association fees and common areas
• Utility and gas companies
• Property tax rate
• Pets that have lived in the home

Each state has specific requirements for sellers in regard to what they are required to inform prospective buyers about prior to a sale. Check your state’s requirements here: https://www.nolo.com/legal-encyclopedia/state-state-seller-disclosure-requirements

Seller disclosures cover any defects or problems with the property that are known to the seller. The timing of when the seller needs to give the seller disclosure form to the buyer varies by state, but it is always before the closing so the buyer has the opportunity to cancel the transaction as a result. In addition to state laws governing seller disclosure, federal law requires sellers to disclose if the property has lead paint.

Making an Offer

Since this is a major investment, you should take your time. After going over the comps — which are listings of similar homes in the neighborhood that have recently sold along with how much the buyer paid — and any repairs or upgrades that are needed, come up with a price that you think the seller might accept.

Communicate this price to the seller or listing agent. This is called the offer. Sometimes the seller will accept the offer, but usually there is a counter-offer from the seller with a higher price. This process generally continues until you and the seller have agreed to a price or conclude that agreement is not possible.

Negotiating in a rush is a sign to the seller that you will be willing to pay more to get the property. Revealing that you have a strong desire to buy the home will also indicate that the seller does not have to be flexible with the price. Be willing to walk away if you do not get a price that you think is fair.

Non-Price Negotiation

There are a number of other financial and non-financial aspects of the real estate transaction that you can negotiate with the seller.

Closing Costs

In addition to the selling price, the buyer is required to pay closing costs when the property legally changes hands. Closing costs are cash payments from the buyer to the lender to fund the escrow account from which the lender will pay property tax and homeowner’s insurance premiums when they become due. 

If you are short on cash after paying the down payment, you can negotiate with the seller to have them pay the closing costs. Sellers will only agree if this amount is added to the purchase price. While the switch is a financial wash for the seller, this negotiation means you will be able to finance the closing cost.

Closing Date

If the seller is eager to get capital out of the sale of the home in order to put it into another property, the buyer can often trade a quicker closing date for some other concession or discount. 

Alternatively, a buyer may prefer a closing date closer to the first of the month, since the next mortgage payment is skipped. With an early month closing, the buyer has more time in the property without paying the mortgage. The seller could use this to get concessions from the buyer.

Financing Contingency

Many buyers, especially first-time buyers, opt for a clause in the contract stating that the contract depends on whether they get approved for financing. If they do not get approved, the contract is void and the seller can find a new buyer. 

If a seller has two prospective buyers and one is offering cash while the other one wants a contingency clause, the seller almost always prefers the cash buyer to avoid uncertainty. One way for a buyer to get around the disability of a financing contingency without having enough cash to buy the property outright is to get financing completely pre-approved before the contract phase.

Home Warranty

If the home is older or has older appliances, air conditioning, heating, electric and plumbing, the buyer may request a home warranty. A home warranty is a service plan that covers major appliances, air conditioning and heating, electric and plumbing systems in a home. 

According to Forbes, the average cost of a warranty is $600 a year. If anything that is covered under the home warranty breaks, the service company will send someone to fix it for a small fee or replace it if necessary.  Providing a home warranty can give the buyer peace of mind so that he or she proceeds with the transaction.

Leaseback

If the seller’s new home is not ready and the buyer is not in a hurry, the buyer can offer to rent the home to the seller for a few months after the closing. This flexibility may convince the seller to accept the buyer’s offer over other offers or to have a quicker closing.

Furniture and Fixtures

If the home contains furniture, light fixtures or other moveable features that the buyer wants, the buyer might ask the seller to include them with the home. This can sweeten the deal for the buyer if the seller is motivated to sell. On the flip side, the seller may see this as an advantage because they can increase the purchase price accordingly. 

Normally, homes are sold empty except for major appliances (dishwasher, garbage disposal, trash compactor, washer and dryer, stove/cooktop, oven, refrigerator), systems (cooling/heating, plumbing, electric) and installed fixtures (cabinets, alarm and security systems, high hat lights, thermostats, doorbells, intercoms, wall vacuums, sinks and faucets) unless specified otherwise in the contract.

Homeowners/Condo Assessments

If the property’s association has levied a special assessment that has not been paid off at the time of sale, the buyer can ask that the seller either pay the balance of the assessment to the association or credit that amount on the purchase price.

Home Inspections

One of the most important stages of buying a home is the home inspection. A home inspection is when an independent home inspection company is given access to evaluate the home to make sure that it is sound structurally and in good repair before the sale.

Home inspection is so important that most real estate contracts include inspection contingency clauses. This means that if the inspection identifies structural or major repairs that are needed, the buyer can cancel the contract without penalty.

If the property has major problems, it is usually in the seller’s best interest to correct them because it will be difficult to find a buyer to take a property in poor condition unless the price is extremely low.

The inspector will write a detailed report with the findings and will give it to the buyer, who is responsible for paying for the inspection. Home inspections cover:

• Exterior
  • Walls
  • Foundation
  • Grading
  • Garage/carport
  • Roof
• Interior
  • Plumbing
  • Electrical
  • Heating/cooling/ventilation
  • Kitchen appliances
  • Dryer vent/laundry room
  • Bathrooms
  • Fire safety
  • Insulation

What Inspections Do Not Include

Home inspectors only examine and report on issues they can see. If there are any problems inside the walls, pipes, interior electrical wiring or foundation, they could be missed during an inspection. 

Also, cosmetic improvements will not be included in the inspection report. For example, if the kitchen cabinets need to be updated because they are unattractive, it will not be included as a problem on the report. But if the countertop is warped, that will be noted. Unattractive patterned tile floors will not be noted, but cracked or buckled tile flooring will.

What If Repairs Are Needed?

Inspections of most homes (other than new construction) often find that at least minor repairs are needed. However, if the inspection report shows structural or major repair issues, there are four options:

1. Seller decides that the home is for sale “as is” and the buyer needs to decide whether to go ahead with the transaction
2. The seller completes the repairs before the closing
3. The buyer negotiates a lower sales price to cover the cost of the repairs
4. The buyer activates the inspection contingency clause in the contract and backs out

Pest Inspection

You may also want to get a pest inspection. A pest inspection looks for evidence of both wood eating insects (termites and carpenter ants) and rodents. Even a small infestation can grow and cause a major structural problem. Some home inspectors can do this as an add-on service. If your inspector does not offer pest inspections, you can contract a pest control company to do it.

The Contract

The last stage of the negotiation process is the signing of the contract, which is a legal document that outlines all of the terms of the transaction. Although the signing of a contract does not mean that you now own the property (this happens at the closing), it is a binding document saying that both parties intend for this transaction to take place.

Standard real estate contracts include:

• The names of the seller and buyer
• A description of the property
• The sales price and other terms 
• Contingencies that must happen for the deal to go forward
  • Financing contingency
  • Appraisal contingency
  • Inspection contingency
• The fixtures, appliances and other items included in the sale
• Closing costs and who will pay them
• Anticipated closing date

Earnest money

Along with signing the contract, the buyer will deposit earnest money into an escrow account. Earnest money is a good faith deposit that shows that the buyer is committed to buying the property. 

An escrow account is a special bank account that is administered by a real estate company, attorney or title company. The money can sit in that escrow account until the transaction is finalized, at which point the money would transfer to the seller.

Earnest money is usually between 1% and 2% of the purchase price, but could be more in very hot markets. If the buyer backs out of the contract for any reason other than those specified in the contract’s contingency clauses, the seller would keep the earnest money.

If any of the contingency clauses are activated or if the seller backs out, the earnest money will be returned to the buyer. If the sale goes forward, the earnest money is credited toward the buyer’s down payment at closing.

The Appraisal

If the buyer is financing the home, the lender requires a property appraisal. An appraisal is a professional appraiser’s assessment of the property value. Lenders require this to make sure that if the buyer defaults on the mortgage that they can recover at least the loan amount by selling the property in foreclosure. 

The buyer is responsible for the cost of the appraisal during or before closing. Appraisal costs vary by location, but nationwide, single-family home appraisal can be $500, according to a 2023 survey by the National Association of Realtors.

The appraisal takes the following factors into account:

• The location
• The condition of the exterior and interior of the home
• Total square footage and layout
• Any upgrades that have been done
  • New roof
  • New flooring
  • Additions
  • Upgraded kitchens or baths
  • Renovated decks, patios, porches and pools
  • Landscaping
  • Appliances, cooling/heating, electrical, plumbing, septic
• Comparison with sales prices of similar properties in the area (comps)
• Market conditions
• Average time on the market compared to similar properties
• Anything else that impacts the property value
  • Ambient noise
  • Nearby traffic
  • Difficult access or shared private road
  • Crime/security
  • Property and community amenities
  • Quality of school district

If the appraisal comes in at or above the selling price without any issues, the lender usually approves the mortgage loan. If the appraisal is less than the selling price, the lender usually declines the loan. 

The lender could also decline the loan if the appraisal report shows that the property was on the market for longer than average, even though the selling price is at or above the comps. In the latter case, the lender would want to see a road maintenance agreement, where all the residents on the road agree to share road maintenance costs.

If the lender declines and the buyer and seller still want to proceed, they can renegotiate the selling price to be in line with the appraisal, get a second opinion from a new appraiser, or provide comps to the lender to justify the agreed-upon sales price. Otherwise, the buyer would need to either look for another lender or cancel the deal by activating the appraisal contingency clause in the contract.

The Closing

The closing is a meeting, which usually occurs in-person, at which the sale of the property is finalized and ownership changes hands from seller to buyer. In some states (like California), closings can take place virtually with the seller and buyer never meeting face to face. 

During the closing, the buyer signs the mortgage and other documents, transfers the balance of the down payment to the seller and pays closing costs (See Down Payment section). The seller signs and provides documents, transfers the title to the property and hands over the keys. Once the closing is successfully completed, the transaction is complete.

Last Steps Before the Closing

Since buyers cannot make changes in the deal after the closing, there are some final things they should do a few days before the closing.

If you receive an email shortly before the closing saying that the wire information has changed or asking you to verify your personal information, it may be a scam. Double check with your lender, real estate agent and attorney to make sure that the information is correct and you are sending the money to the right place.

What Happens at the Closing

Buyers should bring closing disclosure documents, promissory notes and mortgages received ahead of time to the closing. They should also have a government-issued ID and a checkbook to pay any additional expenses, if any.

Sellers should bring the keys to the property as well as any garage openers or access cards needed to access the property. They should also bring a cashier’s check for their share of the closing costs and any repair credits, a checkbook and a government-issued ID.

The documents at closing include:

• Promissory note – This is a legal document in which you agree to repay the mortgage loan. It outlines the amount of the loan, the interest rate, late payment penalties and if you have an adjustable rate mortgage, an explanation of how it can change and the maximum rate allowed.
• Mortgage – This document reiterates the terms in the promissory note and gives the lender the right to foreclose on the property if you default on the payments. It also explains your rights and responsibilities as a borrower.
• Initial escrow disclosure – This document breaks down what you will pay into the escrow account each month and what costs the lender will pay out of the escrow account on your behalf. This includes property tax, homeowner’s insurance and private mortgage insurance.
• Deed – The seller will sign this to transfer ownership of the property to the seller.
• Closing disclosure – This will detail the closing costs.
• Association documents – If there is a homeowners or condominium association, you should receive the documents with the association’s rules and fees at closing for your records.

Carefully read all of the documents at the closing to make sure that they are correct and that you understand them. Compare the documents at closing to the ones you received prior to closing to ensure that nothing has changed. If you have questions about anything, ask your real estate agent, attorney or the seller to clarify it for you.

Once the documents are signed by all parties and payments are made, the transaction is complete and you are now a homeowner.

Who Attends the Closing?

A closing is attended by multiple people. They include:

• The buyer(s) and
  • Buyer’s real estate agent (if applicable)
  • Co-borrower (if applicable)
  • Co-signer (if applicable)
  • Buyer’s real estate attorney (if applicable)
  • Lender’s representative (if the property will be mortgaged)
  • Closing agent (usually a title representative)
• The seller(s) and
  • Seller’s real estate agent (if not for sale by owner)
  • Seller’s real estate attorney (if applicable)
  • A notary public

Closing Costs

Buyer-paid closing costs range between 3-6%, of the purchase price. They include payments to the lender as well as payments to third parties:

• Lender payments
• Loan origination fee
• Discount fee (points)
• Processing fee
• Underwriting fee
• Third party payments
• Home inspection fee
• Mortgage broker fee
• Pest inspection fee
• Appraisal fee
• Recording fee
• Homeowner’s insurance premium
• Property taxes
• Escrow fees
• Title fees/insurance
• Attorney’s fees
• Prepaid interest
• Mortgage insurance fee

Buyers can negotiate with their lenders to include closing costs in the total amount of the loan so they do not have to pay closing costs out-of-pocket at the closing. While this reduces cash needed at closing, it ends up being more expensive in the long term because the buyer will pay interest on those costs over the life of the loan.

Sellers also need to pay closing costs, which include the listing agent’s real estate commission and any additional closing costs that the seller has agreed to pay as a result of negotiation with the buyer.

Homestead Exemption

A benefit of owning your home is that it may be protected by a homestead exemption. In most states, the primary residence that you own and live in is protected from creditors (other than your mortgage lender) by a homestead exemption. If a creditor, such as a credit card company or medical creditor, sues you for non-payment, all or a portion of your home’s equity is shielded from seizure.

Federal law protects up to $25,150 of your homestead home’s equity if you file for bankruptcy, although individual states may extend even more homestead protection during a bankruptcy. 

Claiming your homestead exemption may reduce the basis on which your local property taxes are calculated, so you should do this immediately after you have bought the home.

The following states automatically file your home as your homestead if you qualify:

• Alaska
• Arizona
• California
• Colorado
• Delaware
• District of Columbia
• Georgia
• Illinois
• Kansas
• Kentucky
• Louisiana
• Michigan
• North Carolina
• Oklahoma
• Oregon
• Tennessee
• West Virginia

In all other states, you will need to file for homestead exemption with your local county government, usually in the tax assessor’s office. Some counties allow you to apply online, while others only accept applications by mail or in person. Once you receive a homestead exemption, it automatically renews unless you inform the state that the home is no longer your primary residence.

The following states provide protection of 100% of your home’s equity:

• Florida
• Iowa
• Kansas
• Oklahoma
• South Dakota
• Texas
• Arkansas
• District of Columbia
• American Samoa
• Puerto Rico

The remainder of the states that have homestead exemption only protect up to a certain amount of your home’s equity (the homestead exemption limit). To find homestead exemption limits for your state, see below.

State/Territory	Homestead Exemption Limit	Limit for Married Couples/Joint Owners (If Different)
Alabama	$15,000	$30,000
Alaska	$72,900
American Samoa	Unlimited for Samoan residents. “Samoan” includes American Samoans of at least 50% Samoan descent and American Samoan residents who were born on other Pacific islands and are of at least 50% Micronesian, Melanesian or Polynesian descent.
Arizona	$150,000
California	$75,000	$100,000
Colorado	$75,000	$150,000
Connecticut	$75,000	$150,000
Delaware	$125,000
Georgia	$12,500	$43,000
Guam	$40,000
Hawaii	$20,000
Idaho	$100,000
Illinois	$15,000	$30,000
Indiana	$19,300	$38,600
Kentucky	$5,000
Louisiana	$35,000
Maine	$47,500
Maryland	$22,975
Massachusetts	$500,000
Michigan	$30,000
Minnesota	$390,000
Mississippi	$75,000
Missouri	$15,000
Montana	$250,000
Nebraska	$60,000
Nevada	$550,000
New Hampshire	$100,000
New Mexico	$60,000	$120,000
New York	$165,550 for counties of Kings, New York, Queens, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester & Putnam $131,325 for counties of Dutchess, Albany, Columbia, Orange, Saratoga & Ulster $82,775 for remaining counties in the state	$331,100 $262,650 $165,500 respectively
North Carolina	$35,000	$70,000
North Dakota	$100,000
Northern Mariana Islands	Based on amount of land needed to support oneself
Ohio	$136,925
Oregon	$40,000
Rhode Island	$500,000
South Carolina	$58,255	$116,510
Tennessee	$5,000	$7,500
Utah	$20,000	$40,000
*U.S. Tribal Nations	N/A – no property taxing authority
Vermont	$125,000	$250,000
U.S. Virgin Islands	$20,000
Virginia	$5,000	$10,000
Washington	$125,000
West Virginia	$25,000	$50,000
Wisconsin	$75,000	$150,000
Wyoming	$20,000	$40,000

Home Financing

Unless you have sufficient cash in a bank account to cover the total purchase price of a home plus closing costs and moving costs, you will need to get financing to buy a home. A loan in which the money is used to buy a home is called a mortgage.

In a mortgage, the lender loans the borrower money to buy a home. In order to protect itself in the event that the borrower stops making monthly mortgage payments, the lender holds the property as collateral. Collateral is property that the lender can legally take ownership of if the loan is in default.

Mortgages have two parts: principal and interest. The principal is the amount of the loan that needs to be repaid. The interest is a percent of the outstanding principal that you pay to compensate the lender for lending you the money to buy the home. The higher the interest rate is, the more you pay over the life of the loan.

General Steps to Getting a Home Loan

The general process of getting a home loan follows several steps. Although it can vary slightly depending on where you live or your preferences, here are the general steps you’ll likely follow:

Determining What You Can Afford

Before you start looking at homes, it can help to calculate how much you can afford to spend. This can allow you to narrow your search and avoid disappointment later.

According to lenders and financial expert Ramit Sethi, best-selling author of “I Will Teach You to Be Rich,” a general approach to affording a home is to spend around 28% of your income on housing expenses, and around 36% of your income on total debt. This is referred to as the 28/36 rule.

To find out the maximum you can afford to pay each month for a mortgage, multiply your monthly income by .28. If you have significant other debt, multiply your income by .36 and subtract your monthly debt payments from that number to calculate the amount remaining for a mortgage payment.

Example:

• Monthly income = $4,000 with no additional debt
• Maxmortgagepayment=$4,000x.28=$1,120
• Monthly income = $4,000 with $500 in additional monthly credit card and loan payments
• Max monthly debt payments = $4,000 x .36 = $1,440
• Max mortgage payment = $1,440 – $500 = $940

If you think you would like to buy a home that has a homeowners or condominium association, also subtract the likely monthly association fees from the maximum mortgage payment you have calculated.

Now that you have an estimate of how much you can afford, you can use a mortgage calculator to determine your price range. Remember, this is likely the absolute most you can afford to pay, so when you are looking at homes, you should look for ones that cost this amount or less.

This is an example of a mortgage calculator from NerdWallet.com: https://www.nerdwallet.com/mortgages/mortgage-calculator/calculate- mortgage-payment

Interest Rates

An interest rate is the percent that the lender charges you on the amount of money you have borrowed (the principal). The lower the interest rate, the lower your monthly payments will be.

The APR, which stands for annual percentage rate, is a broader rate. It includes not just the interest on the loan but also fees and other costs of getting the loan. Some lenders charge significantly more than others in fees. For this reason, when shopping for a mortgage, it is often better to compare the APR rather than just the interest rate.

What may seem like small differences in the APR can make a difference of thousands of dollars over the term of your loan because the loan amount is usually large and the term is long, so be sure to compare lenders and get the best rate possible.

Examples of where you can see mortgage rate comparisons online are: https://money.com/, https://www.bankrate.com/ or https://www.nerdwallet.com/. You can also ask the bank where you keep your accounts for a rate quote.

Lenders’ interest rates are influenced by the rate set by the Federal Reserve, and this rate tends to fluctuate with the economy. In a recession, the Federal Reserve will usually cut rates making it cheaper to borrow money, and rates will usually increase when there is a strong economy.

Average Interest Rates

Interest rates vary by location, by lender and, on an individual level, by creditworthiness based on the borrower’s credit score, income and loan amount. Property values also vary by location, so average loan amounts differ by state as well.

Interest rates tend to be lowest in the U.S. territories, and may be lowest of all in U.S. tribal lands because of the many special programs for Native Americans (see the “Federal Homebuying Programs” section of this guide for home buying programs for Native Americans). Of the U.S. states, California has, on average, the lowest interest rates in the country, and New York has the highest.

The table below shows average rates in the U.S. by type of mortgage as of April 2024.

Mortgage type	Average Rate (4/2024)
30-year fixed	6.32%
20-year fixed	5.99%
15-year fixed	5.64%
7/1 ARM	6.18%
5/1 ARM	6.55%
30-year FHA	5.65%
30-year VA	5.67%

Interest rates also depend on the borrower’s credit score. The table below shows average rates in the U.S. by FICO score of April 2024.

FICO Score	Average Rate (4/2024)
620 to 639	8.267%
640 to 659	7.721%
660 to 679	7.291%
680 to 699	7.077%
700 to 759	6.900%
760 to 850	6.678%

Getting Approved for a Mortgage

Lenders may be willing to make mortgage loans for up to 90% of the purchase price, depending on a variety of factors, including the size of the down payment and the borrower’s credit history and sufficient income to make payments.

Income

You should have a steady source of income, with pay stubs and income tax statements to show the lender that you have consistently earned enough money to pay your mortgage going forward. How much income they will require depends both on the amount of the loan and your credit history.

Down Payment

In most cases, in order to buy a home, you will have to pay a portion of the purchase price up-front from money you have saved. This is called the down payment, and must generally be at least 10% of the purchase price. The bigger the down payment, the more equity you have in the property to begin with, and the more willing lenders will be to finance the remainder of the purchase price.

Making a larger down payment can also benefit buyers in other ways. It reduces the total loan amount, and therefore the amount of interest you will pay over the life of the loan. Also, if you make a down payment of 20% or more of the purchase price, the lender will not require you to pay for private mortgage insurance (PMI).

Private Mortgage Insurance

Private mortgage insurance costs, on average, 0.5% to 1% of the purchase price each year, and your lender typically requires you to pay for it until your equity reaches 20% of the property value. This insurance protects the lender in the event that you default, and has no benefits for the homebuyer. So if you can avoid it, you should.

Credit

Other than your income, the most important thing that lenders consider when deciding whether to approve your mortgage application is your credit history and score. Your credit history is tracked and recorded by three independent credit bureaus:

• Equifax (www.equifax.com)
• Transunion (www.transunion.com) and
• Experian (www.experian.com).

What Is in a Credit Report

Each of the three bureaus keeps a credit report for you that lists your contact information, a list of companies that have extended credit to you and your credit history. It will also list other names you have gone by, former addresses, public records and a list of companies that have inquired about your credit.

Credit History

The credit history is the largest and most important part of the credit report. It lists each creditor, the credit limit, debt outstanding and status of the account. The status will show if the account is in good standing, if the account is in collection or has been written off as a bad debt. If you have made late payments on the account, it will show how many times that has happened in the last several years.

Your credit report will also include a section for public records. This includes bankruptcies and legal judgments against you. Both of these items, if present, will hurt your creditworthiness.

Although the information in each of your credit reports should be mostly the same, sometimes there are differences because some creditors only report to one or two bureaus rather than all three. You are entitled to get a free copy of your credit report from each bureau for free once a year. You can claim them at their websites listed above.

When you first start thinking about buying a home, order your credit report from all three bureaus. This can give you time to look at each of them and determine if there are any errors that need to be corrected.

Credit Score

A credit score is a single number between 300 and 850 that summarizes your creditworthiness. A higher score means that the bureau considers you to be more likely to repay a debt, and are therefore more likely to give you a loan.

Every person has more than one credit score. There are a few reasons for that.

There are different scores for specific products. For example, there are special auto and insurance credit scores. There are also different credit-scoring models, like FICO and VantageScore, which means you could have scores according to each model.

Lastly, there are multiple credit bureaus that provide credit reports on which scores are based. So, depending on the information each bureau gets from individual lenders the data used to compile your reports and build your scores could vary from bureau to bureau.

Even though there are quite a few different scores out there, there is a general range that is applied throughout all mediums that your score falls into.

FICO and VantageScore Solutions create the most widely used consumer credit scores and update their scoring models from time to time.

See a breakdown below.

• Poor (300 – 579): You have made numerous mistakes with your credit, such as having outstanding debts that have gone to collections, defaulted loans, or unpaid credit card bills.
• Fair (580 – 669): After having a bad credit history or no credit history, you are starting to get your rating back on track by paying back a few debts.
• Good (670 – 739): You may be working your way up from bad credit or no credit history and are starting to demonstrate good credit behavior.
• Very Good (740 – 799): You continuously demonstrate good credit behavior and are approaching an excellent credit rating.
• Excellent (800 – 850): Your credit is free of any recent marks or demerits. You have no major cases of debt, foreclosures, bankruptcies, collections or legal actions that could pose an impact to your credit.

Each bureau will give you a separate score based on the credit information it has for you. When you order your free credit reports, they will not include your credit score. If you want to see your credit score, you can get them for free online. An example of a site where you can view your credit score is: https://www.creditkarma.com/

FICO Score

In addition to the credit scores from each of the credit bureaus, you also have something called a FICO score. A FICO score is a score calculated by a company called the Fair Issac Corporation. The FICO score is what lenders use when evaluating mortgage applications.

The FICO scores for each bureau are included in a special report they use for loan applicants called the residential mortgage credit report (RMCR). The RMCR contains information from all three credit bureaus. Lenders typically make a decision based on the middle of the three FICO scores in the RMCR.

Bureau credit scores and FICO scores are each calculated using individual proprietary algorithms.

However, they all take the following factors into account:

• Payment history (35% weight in FICO) – no late payments is the best
• Amount owed (30% weight in FICO) – less money owed is better
• Length of credit history (15% weight in FICO) – longer is better
• New credit (10% weight in FICO) – few recently opened accounts is better
• Credit mix (10% weight in FICO) – a mix of revolving (credit cards) and installment accounts like a car payment or mortgage is preferred

Federal Homebuying Programs

To help Americans become homeowners, the federal government’s Department of Housing & Urban Development (HUD), Veteran’s Affairs (VA) and Department of Agriculture (USDA) offer several programs.

HUD Programs

The Department of Housing and Urban Development (HUD) has several housing assistance programs for low-income, elderly and disabled individuals. However, most of these programs provide assistance for rental units.

However, HUD partners with local public housing authorities (PHAs) that may sell public housing units to residents and other low-income families. Learn more about local PHA initiatives here: https://www.hud.gov/hudprograms/section32

Contact your local PHA to determine if it is selling public housing units. You can find PHA contact information here: https://www.hud.gov/program_offices/public_indian_housing/pha/contacts

Good Neighbor Next Door Program

This program is only available to law enforcement officers, pre-Kindergarten through 12th grade teachers, firefighters and emergency medical technicians and only for homes located in designated revitalization areas. Under this program, prospective homeowners receive a 50% discount on the price of the home.

Homebuyers have to commit to living in the home for a minimum of 36 months as their primary residence. As a guarantee that they will stay in the home for at least 36 months, homebuyers are required to sign a second mortgage for the amount of the 50% grant.

If they meet the requirement of living in the home for at least 36 months, there will be no interest or payments on this “silent” second mortgage.

See https://www.hud.gov/program_offices/housing/sfh/reo/goodn/gnndabot to learn more and find an eligible property.

Indian Home Loan Guarantee Program

The Indian Home Loan Guarantee Program is available only to American Indian and Alaska Native families, Alaska villages, tribes, or tribally designated housing entities. Eligible applicants would apply for a Section 184 loan with a traditional lender and work with the Bureau of Indian Affairs if leasing tribal land. The bank looks at the documentation, after which it goes to HUD’s Office of Loan Guarantee.

If approved, the applicant benefits from a low down payment and flexible underwriting. The loan is guaranteed by the federal government, protecting the lender and encouraging loans to Native Americans. The program is only applicable to single family housing (1-4 units), for a 30-year term or less and with a fixed interest rate. The Indian Home Loan Guarantee Program is not available in every state.

Reference HUD at https://www.hud.gov/program_offices/public_indian_housing/ih/homeownership/184 to see if it is available in your state, if you are a member of a participating tribe and to find a participating lender.

FHA Loan Program

The Federal Housing Authority (FHA) is a part of HUD and offers FHA-insured loans that have lower down payment requirements (as low as 3.5% of the purchase price), lower closing costs and easier credit requirements. As with the Indian Home Loan Guarantee Program, FHA loans are a partnership between FHA lenders and the federal government.

FHA loans are available to first time home buyers and seniors who need to take equity out of their homes via a reverse mortgage. They are limited to single family homes (1-4 units).

Learn more about FHA loans here (https://www.hud.gov/buying/loans) and search for an FHA lender here (https://www.hud.gov/program_offices/housing/ sfh/lender/lenderlist).

VA Programs

The Department of Veterans Affairs (VA) offers several programs available only to military service members, veterans and their eligible surviving spouses.

VA-Backed Home Loan

This is a similar program to HUD’s FHA loans. A VA-backed home loan is one that is guaranteed by the VA in the event you stop making your payments. Since the lender’s risk is reduced or eliminated, lenders are likely to offer borrowers favorable terms. Almost 90% of VA-backed loans are made with no down payment.

Learn more about VA home loans here: https://www.va.gov/housing-assistance/home-loans/

Native American Direct Loan (NADL)

Native American veterans, service members and eligible surviving spouses can apply for a Native American Direct Loan. This is a loan that is made by the VA itself, without the involvement of a lender and has favorable terms including no down payment requirement, no need for private mortgage insurance, limited closing costs and a low fixed interest rate.

Direct loan borrowers can take out future direct loans under this program, unlike those who get FHA loans or a Homeowner Choice Voucher.

Find out if you are eligible for a NADL on the VA’s website here: https://www.va.gov/housing-assistance/home-loans/loan-types/native-american-direct-loan/ 

Interest Rate Reduction Refinance Loan (IRRRL)

If you already have a VA-backed loan and you want to lower your payments, you can apply for an Interest Rate Reduction Refinance Loan (IRRRL). You will apply through a lender, shopping for one that offers a lower interest rate than the one you are currently paying.

Like with the original VA-backed loan, the IRRRL does not require a down payment or private mortgage insurance. You may, however, need to pay a VA funding fee. The amount of the fee depends on the amount of the loan and other factors. 

To calculate your VA funding fee and to see if you are eligible to have it waived, visit the VA’s website here: https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/ 

Cash-Out Refinance Loan

This loan is an option when you either have an existing VA-backed loan and you want to take some cash out of your home equity or you have a non-VA- backed loan and you want to replace it with a VA- backed loan. The application process is the same as the IRRRL including the VA funding fee.

Learn more about the cash-out refinance loan here: https://www.va.gov/housing-assistance/home-loans/loan-types/cash-out-loan/

USDA Programs

The U.S. Department of Agriculture (USDA) has home buying programs for Americans living in rural or suburban areas. These are zero down payment loans with low interest rates for primary residences. Metropolitan areas are excluded from USDA homebuying programs.

Direct Loans

Low- and very low-income applicants can apply for a direct loan from the USDA. To be eligible, you would need to be without “decent, safe and sanitary housing,” be unable to get a loan from traditional lenders and meet or fall below income thresholds that are set according to the area. With subsidies under this program, your interest rate could be as low as 1%.

Direct loans are only available for homes under 2,000 square feet with a market value that is lower than the area loan limit.

Learn more about USDA Direct Loans here: https://www.rd.usda.gov/programs-services/single-family-housing-direct-home-loans

Types of Mortgages

Mortgage loans that are backed by government agencies (HUD, VA, state or local) are called government-backed loans. In addition, there are two organizations that buy and guarantee mortgages called Freddie Mac and Fannie Mae.

These organizations were both created by Congress and serve to provide a steady supply of funding for mortgages. Freddie Mac and Fannie Mae mortgages are also considered to be government-backed. If your mortgage is owned by one of these organizations, you have certain protections in case you later have trouble keeping up with the payments. See the section “Avoiding Foreclosure.”

To determine if your mortgage is owned by Fannie Mae or Freddie Mac, use the Loan Lookup tool here: https://fhmtg.com/freddie-mac-and-fannie-mae-loan-lookup-tools/.

All other loans are considered to be conventional loans.

Mortgage Terms

One factor you should consider when deciding what kind of mortgage to get is the mortgage’s term.

 The most common mortgage terms are 15 and 30 years, although some mortgages may have different terms. 

A 30-year mortgage gives the borrower lower monthly payments compared to a 15-year loan, but costs more in the long run because you pay interest on the loan amount for a longer period of time. On the other hand, a 15-year mortgage costs less in interest but has higher monthly payments.

Fixed vs. Variable Rate

Although the interest rate you will qualify for depends on your income, loan amount and credit history (see Getting Approved for a Mortgage on page X of this guide), you can typically choose whether your mortgage has a fixed or variable rate. 

A fixed rate stays the same for the entire term of the loan. Your mortgage payments will be the same each month for the duration of the loan, except for relatively small adjustments to the escrow to pay property taxes and homeowners insurance premiums that are higher or lower than anticipated.

A variable rate mortgage, also called an adjustable rate mortgage or ARM, has an initial interest rate for an agreed-upon time period (one, five, seven or ten years). The terms of interest rate adjustment are noted in the description.

For example, a 5/1 ARM will lock in the initial rate for five years, after which it will be adjusted once a year. A 1/5 ARM will have an initial rate locked for one year, and then it will be adjusted every five years.

An ARM’s initial rate is lower than that on a comparable fixed rate mortgage, but it can fluctuate up or down each year depending on the index rate plus a fixed margin. The index is based on one of three rates: the maturity yield on one-year Treasury bills, the 11th District cost of funds index, or the London Interbank Offered Rate, which increase or decrease because of the economy. That means that your mortgage payments can end up being more (if interest rates increase) or less (if rates decrease) than they were before.

Most mortgages (61.5%) are 30-year fixed rate mortgages. They give borrowers low monthly payments that are predictable. A little over 14% of mortgages are 15-year fixed, which is a good choice for borrowers who want to build equity quicker and save money on interest, while keeping payments the same.

About the same percentage of mortgages are ARMs. An ARM is a good choice for borrowers who only plan on staying in the home a short time or those who feel certain that interest rates will decrease over time. The remainder of mortgages are fixed rate for a term other than 15 or 30 years.

Interest-Only Mortgage

In an interest-only mortgage, you only pay the interest on the loan for a set period of time, typically 7-10 years on a 30-year mortgage. After the initial period, you will pay interest plus a portion of the principal in each monthly payment. In order to qualify for an interest-only mortgage, you will need to show the lender that you have significant savings and assets, a low debt-to-income ratio and good credit.

This type of loan is beneficial to borrowers who have variable income or who are expecting a large income influx like a bonus or proceeds of the sale of an asset with which they can pay down their principal.

Building Equity

Equity is the portion of the value of your home that you have paid for. This includes:

• The amount of the down payment
• All of the money you have paid toward your principal
• Any increase in the property value over and above the purchase price

Home equity is important because it is an important way to build wealth over the long term. Unlike most other assets purchased with loans like cars and boats, real estate tends to appreciate, or increase in value, over the long term. This is not always the case in the short term, since housing markets can get inflated due to a shortage of available housing, a particularly strong economy or rapidly growing cities and neighborhoods with high demand.

This is called a housing bubble; it is bound to “pop” eventually, causing home prices to fall back in line with value. Homeowners who buy during the bubble when prices are at their highest may end up eventually becoming upside down in their mortgage, which means that they owe more on the home than it is worth. In this case, the home is negatively impacting the homeowner’s net worth.

Home equity is an asset because it enables you to borrow against it if you need fast cash. Homeowners can take out a home equity loan, a home equity line of credit (HELOC), second mortgage or a reverse mortgage if needed. See the “Other Types of Home Loans” section.

As mentioned in the Home Financing section, a mortgage includes both principal and interest. The interest is calculated by multiplying the interest rate percent by the amount of the principal.

In a 30-year fixed mortgage, your payments will remain the same each month over the life of the loan. However, in the beginning of the loan, more money from each payment goes toward paying interest. As your principal balance decreases, a larger proportion of each payment pays down the principal amount and there is less interest on that principal.

For example, let’s say you have a $200,000 30-year fixed mortgage at an annual percentage rate (APR) of 6%.

• $200,000 x 6% = $12,000 in interest in the first year
• Monthly payment on this mortgage = $1199, or a total of $14,388 for the first year

Of the $14,388 you paid in year 1, $12,000 goes to interest on the principal of $200,000 and the remainder, $2,388 goes toward principal. At the end of year 1, the principal balance is less because some of it has been paid.

• $200,000 – $2,388 = $197,612 principal at the start of year 2
• $197,612 x 6% = $11,856 in interest year 2
• Total mortgage payments in year 2 – $14,388 (the same)
• $14,388 – $11,856 = $2,532 paid toward principal year 2

This process continues, with more principal paid as a portion of payments each year.

Accelerating Payoff

Homeowners can save thousands of dollars in interest if they pay more than their regular mortgage payment each month. Any money that you pay over the mortgage payment that is due is automatically applied to your principal. 

You can use a mortgage payoff calculator to see how paying more toward your mortgage can impact the remaining balance: https://www.mortgagecalculator.org/calcs/mortgage-payoff.php

You can also pay additional money toward your mortgage principal in a lump sum if you get a bonus, inheritance or other additional income at one time.

When the principal is completely repaid, the mortgage is paid off, and you will own 100% of your home.

Other Types of Home Loans

In addition to a traditional mortgage to buy a home, there are other loans that use the home as collateral. These are:

• Refinancing loans
• Equity loans

Refinancing

Refinancing is a process that a homeowner can choose to pursue after a mortgage is already in place. During a refinance, the owner gets a new mortgage with new terms to replace the existing mortgage. The new mortgage will pay off the original mortgage in full and start from the beginning.

You can refinance with the same lender you used for your original mortgage or a different lender that may offer you a lower rate. Shop around to see which lender will give you the best interest rate and terms using this worksheet: https://www.federalreserve.gov/pubs/refinancings/mortgage_shopping.pdf.

Similar to applying for an original mortgage, you must meet the lender’s qualifications to refinance. 

Getting a Lower Interest Rate

Many owners choose to refinance to take advantage of an interest rate that is lower than the original rate on the mortgage. The interest rate may be lower either because market rates have decreased or because the owner’s credit score has improved. When you have a lower interest rate, your monthly payments will be less.

If you are a military servicemember, veteran or surviving military spouse, you may be eligible for a VA IRRRL. See the Interest Rate Reduction Refinance Loan section.

Switch From ARM

If your original mortgage was an adjustable rate (ARM) and you want the predictability of a fixed rate, you can refinance to a fixed rate mortgage. Another reason to do this is if you think that interest rates are increasing and you want to lock in a lower rate.

Cash-Out Refinancing

Another common reason for refinancing is to take cash out of the equity that has accumulated. For example, you may need to do some major renovations to your home but do not have the cash set aside to pay for them.

If you have built up equity in your home and you can get an interest rate that is the same or lower than you have on your original mortgage, you can refinance and add money for the renovation to the total loan on the property. This is like making a purchase at a store and getting cash back, but on a much bigger scale.

If you are a military servicemember, veteran or surviving military spouse, see the “VA Programs” section to learn if you are eligible for a VA Cash Out Refinance Loan.

Cost of Refinancing

There are several disadvantages to refinancing. If you replace your original mortgage with one that features the same loan term, you will be resetting the clock on your mortgage payoff and will pay more interest in the long run. 

In addition, you will need to pay a new round of closing costs. These can amount to 2-5% of the principal balance. Closing costs may include:

• Prepayment fee (1-6 months’ interest payment)
• Application fee ($75-$300)
• Origination fee (0%-1.5% of the loan principal)
• Discount points (0%-3% of the loan principal)
• Appraisal fee ($300-$700)
• Inspection fees ($175-$350)
• Mortgage insurance (.5%-1.5% of the loan principal)
• Title search and insurance fees ($700-$900)

Use the worksheet at https://www.federalreserve.gov/pubs/refinancings/#breakeven to calculate how many months into your refinanced mortgage it will take you to break even on the closing costs.

When Refinancing Is Not Recommended

Before you make a decision, determine if refinancing will end up saving you money or costing you money over the life of the loan. Refinancing is not recommended:

1. If you have owned the home for a long time and are at the end of the mortgage term. This is because most of the monthly mortgage payments are going to pay down principal.
2. If your current mortgage has a prepayment penalty, because it may cost you a significant amount to refinance. If you are planning to refinance with your current lender, ask if they will waive the prepayment penalty.
3. If you are planning to move in the next few years, because the savings you get from a lower interest rate may be less than what you pay in closing costs.

Home Equity Loans

A home equity loan allows homeowners to use the equity in their home for fast cash while keeping their original mortgage. Because of this, they are often known as “second mortgages.” 

A home equity loan is an alternative to cash-out refinancing, which replaces the original mortgage with a new one. Homeowners can use the cash for a variety of home-related expenses, such as home improvements and repairs, without restarting the term of the entire mortgage. Equity loans are limited to 85% of the equity you have in your home, but the exact amount for which you qualify is determined by the mortgage lender.

Defaulting on either the original loan or the home equity loan can result in foreclosure. A home equity loan uses the home as collateral, but the home equity lender has a secondary position when collecting if there is a default. In other words, if the homeowner stops paying bills, the primary mortgage lender has the first right to foreclose on the property before the lender for the home equity loan. 

There are two types of home equity loans: lump sum and home equity line of credit (HELOC). With both kinds of home equity loans, you will have to pay closing costs, including an application fee, title search, appraisal, attorneys’ fees, and points. These fees add to the overall cost of the loan. In addition, some lenders charge continuing costs, such as an annual fee or transaction fees.

Lump Sum

In a lump sum equity loan, as soon as the loan is finalized, the lender will transfer the entire amount to the homeowner’s bank account. As soon as that happens, interest begins to accumulate. A few months later, the homeowner will start making payments on that loan on a monthly basis until it is paid off.

Home Equity Line of Credit (HELOC)

In a home equity line of credit (HELOC), the loan amount becomes available and the homeowner withdraws against it as needed. In this sense, it acts more like a debit card. The homeowner only pays interest on that part of the loan that is withdrawn. This is a benefit to homeowners who are using the funds for renovations that require periodic expenditures over a period of months.

Most HELOCs have variable or adjustable interest rates and some include other fees like annual fees or transaction fees when you make a withdrawal.

Reverse Mortgages

If you are 62 years of age or older, have equity in your home and need cash, you may want to consider a reverse mortgage. A reverse mortgage converts your home equity back into debt and gives you cash each month that you can use for living expenses or healthcare costs. 

Usually, you will not have to repay the debt while you live in your home. But when you move out, sell your home or die, you (or your surviving spouse or heirs in the event of your death) would need to repay the loan, even if the house must be sold to do so. Most reverse mortgages have a variable rate.

There are three kinds of reverse mortgages:

• Single purpose reverse mortgages – These are primarily for low to moderate income borrowers and are offered by some state and local government agencies and nonprofits. One use of the funds is specified in the documentation and the borrower must use the money only for that kind of expense.
• Proprietary reverse mortgages – These are typically for higher value homes and are offered by private lenders.
• Federally insured reverse mortgages (home equity conversion mortgages or HECM) – These are offered by the federal government’s Department of Housing and Urban Development (HUD) and the proceeds can be used for any purpose. With a HECM, you can get the cash as a lump sum, in fixed monthly amounts for a certain time period, in fixed monthly amounts as long as you live in your home or as a line of credit that you can use as needed. Learn more here: https://www.hud.gov/program_offices/ housing/sfh/hecm/hecmhome.

The advantage of a reverse mortgage is that there are no mortgage payments; instead you get payments that you can use to support yourself or even invest. This enables you to be independent and age in place at home. These payments are tax free and will not affect your Social Security or Medicare calculations. For the rest of your life while you live in the home, it will not be subject to foreclosure unlike a home equity line of credit.

There are some disadvantages to reverse mortgages, including upfront and ongoing costs, a steadily increasing amount of debt as time goes on and the uncertainty of variable rates. Since you will still be living in your home, you will need to continue to pay all home costs including property tax, repairs and maintenance, association fees (if applicable) and homeowners insurance.

Reverse mortgages reduce or even eliminate equity in your home that otherwise would be passed down to your heirs or beneficiaries. In addition, unlike a traditional mortgage, the interest on the loan is not tax deductible.

Right to Cancel

If you take out a mortgage or home equity loan and realize that you made a mistake, you are protected by a federal law called the Three Day Cancellation Rule. You can cancel a credit application within three business days without penalty. The three-day period begins the day after you sign the credit contract, get a Truth in Lending Disclosure and get a Truth in Lending notice advising you of your right to cancel.

The three days include Saturdays but not Sundays or legal public holidays.

Foreclosure

If a borrower stops making mortgage payments for several months, the lender can send the borrower a notice outlining all of the money that is due for the missed payments as well as any additional fees including late fees, interest and attorney’s fees and demanding payment within a certain time period.

When payment in full is not made by the deadline, the lender has the right to foreclose on the home.

Foreclosure is a legal process where the lender shows a judge that the terms of the mortgage agreement have not been met by the borrower and asks that the judge authorize the lender to take full ownership of the property.

In a foreclosure, the borrower loses all equity in the property and the right to live in the home. The property will be sold by the lender to try to recoup some or all of the loan amount.

Avoiding Foreclosure

If you are having trouble making your mortgage payments, the first step is to contact your lender and explain the problem. Many times, lenders will work with you to give you some relief without resorting to foreclosure because they would prefer to have the loan and its interest repaid, even late, rather than have to be responsible for owning and eventually selling the property.

Forbearance

If your financial difficulties are temporary in nature, the lender may agree to give you a forbearance, where you will stay in your home and they will temporarily reduce or suspend payments until you can get back on your feet.

Negotiate with your lender whether the amount of the missed payments will be paid back all at one time once the forbearance period is over, gradually over time in a repayment plan or in a payment deferral at the end of the loan.

Modification

If you have a reduced, but steady income or if you are recovering from a period of unemployment, your lender may offer you a loan modification. This is similar to a refinance, but instead of replacing the original loan, one or more of the terms (interest rate, payment amount, term) are modified to be more affordable.

Selling Your Home

If you can no longer afford your mortgage payments, you can put your home on the market and sell it. Once it is sold, your mortgage will be paid off and you might even have some additional money from the sale with which to buy a new, less expensive home.

Short Sale

A short sale is when you agree with your lender to sell the home for less than the balance remaining on your mortgage. You would only choose this option if you were unable to get more for your home. The lender would accept the amount of the sale as all or part of satisfying your debt. Although it would negatively impact your credit history, it would be less damaging than a foreclosure.

Mortgage Release or Deed-in-Lieu of Foreclosure

In this option, you would negotiate with your lender to voluntarily hand over the deed to the property in exchange for a release from your mortgage loan and payments. You might choose this if you are behind on your payments, have a long-term hardship, owe more than the home is worth and cannot sell the home or refinance or modify your loan. 

You may be able to negotiate getting a relocation payment, staying in your home for up to three months rent-free or leasing your home back for up to a year at market rates. While you would lose the home and any equity, it would be less damaging to your credit than a foreclosure.

Home Expenses and Management

After purchasing your home (but before you move in), you will need to set up your local utilities. Some utilities will require new customers to make a deposit depending on your credit history. Utilities that are cooperatives are not-for-profit and generally provide services at reduced rates but may require membership and application fees. Municipal utilities only serve individual cities.

Electric and Gas Energy

Electric

To power your home, you need to have a source of electricity. Most homeowners start service with a local electric utility company, although a growing number generate their own energy from renewable sources, and are considered to be “off the grid.” The grid is the network of electric power provided by the utility company.

Utility companies generate electricity in a variety of ways including diesel, coal, hydroelectric power from dams, wind power and solar farms. The trend in many parts of the country is for utility companies to use renewable sources to generate increasing amounts of the electricity they sell to customers.

You can find out if your local utility generates renewable energy by searching here https://www.green-e.org/certified-resources and selecting Residential Renewable Energy and specifying your state.

Although you as a customer have no say in how your utility company’s power is generated, you as a homeowner can generate your own renewable energy to power all or part of your home’s needs. To find out how to do this, see the “Solar and Renewable Energy” section.

Setting Up Your Electric Utility Service

1. Find your company. 

First, determine which company provides electric utility service at your address. Check the location-specific list below or consult your local city or county government website. Some cities and towns provide electric utility and other utilities directly to homes, while other areas use a for-profit or cooperative company for power.

2. Cancel your old service. 

If you are moving from outside the service area, you will need to cancel service with your old electric company. If you are moving from within the utility’s service area, you will need to switch your account to the new address.

3. Set up new service with the electric company that services your new location.

Most utility companies let you sign up for new service on their websites, but some require you to come to their office in person. You will need identification like a driver’s license or Social Security card, your home’s address and the date you would like to start service. Some utilities might ask for additional information such as a copy of your deed.

4. Make any required initial payments 
   1. If your utility is a cooperative, you will need to apply for a membership and pay any necessary membership fees. 
   2. Some utility companies require new customers to give them a deposit to reduce the company’s risk in the event of non-payment. Usually, companies waive deposit requirements for homeowners with good credit scores.

5. On moving day or that day you ask the utility to start service, check to make sure that your electricity is working correctly.

Generators

Generators are another source of electricity for homes. Generators are machines that are installed permanently or temporarily outside your home. They require natural gas or propane as fuel and are commonly used as a back-up power source in case of a power outage. 

Home generators have limited capacity and usually only are able to power some critical electric needs. A 5,000-7,500 watt generator can run an average-sized home’s critical household equipment including a well pump, refrigerator and freezer, and lighting circuits. Generators can be purchased from big box stores as well as specialty retailers and they typically cost between $650 and $5,000.

Gas

Gas energy uses natural gas to power home mechanical systems like HVAC units for heating and cooling, cooktops, ovens and stoves, fireplaces, water heaters and clothes dryers. Gas is not considered renewable energy because it relies on natural gas, which is a limited petrochemical resource.

However, natural gas is a cleaner energy source and produces fewer emissions than coal or oil, sources that power the majority of electric utility companies. Using gas appliances for heating and cooling is less expensive than using comparable electric appliances and HVAC systems. If all of your applicable appliances use gas, you can save an average of up to 30% each month compared to all electric.

In order for gas appliances and HVAC systems to work, there needs to be a supply of natural gas, both inside the home and to the home. Inside the home, you will need to have gas lines to each of the devices you want to power with gas. If the home already has gas appliances, there will be existing gas lines.

Gas HVAC and appliances also tend to cost more than comparable electric units. For example, electric stoves can cost between $650 and $2,800, while gas stoves can run between $800 and $3,300.

Setting Up Your Gas Utility Service

1. Determine if your new home has existing gas lines. 

This should be listed on the MLS listing for the property. If you are not sure, contact your real estate agent or the seller of the property.

2. Find your gas company. 

First, determine which company provides gas service at your address. Check the location-specific list below or consult your local city or county government website. Some cities and towns provide gas and other utilities directly to homes, while other areas use for-profit or cooperative companies.

3. Cancel your old service.

If you are moving from outside the service area and you had gas at the old address, you will need to cancel service with your old gas company. If you are moving from within the utility’s service area and you previously had gas, you will need to switch your account to the new address. 

4. Set up new service with the gas company that services your new location.

Most utility companies let you sign up for new service on their websites, but some require you to come to their office in person. You will need identification like a driver’s license or Social Security card, your home’s address and the date you would like to start service. 

5. Make any required initial payments 
   • Some utility companies require new customers to give them a deposit to reduce the company’s risk in the event of non-payment. Usually, companies waive deposit requirements for homeowners with good credit scores.

2. If the gas company has previously provided service to your address, they should be able to connect your service remotely. 

Otherwise, set an appointment for a technician to come out to install service.

3. On moving day or the day you ask the utility to start service, check to make sure that your gas is working correctly. 

If you smell gas, turn off all gas powered appliances and call your gas provider immediately. Do not light any flames.

Telephone

Landlines

A landline is phone service installed in a home to which you can plug in a phone unit that will only work in and directly outside the home. In a landline phone, calls are routed using a combination of fiber-optic cables, copper wire and switches.

There are several benefits of landlines. If you use a basic phone unit that is not wireless (only for walking around in and very near the house), no electricity is needed to power the phone. That means that your phone will still work in the event of a power outage. The other advantage is that if there is an emergency and you use a landline to call 911, the dispatcher will automatically know where you are so help is likely to arrive quicker.

On the negative side, landline phones are not portable, so others can only reach you on that phone number when you are at home. Because most people in the U.S. have a mobile phone with them no matter where they are, it is more convenient for others to use that number to reach them. Many people with a landline find that they receive the bulk of their calls on their mobile device, so they have little need for a landline.

Landlines cost, on average, between $10 and $50 per month. Landlines charge additional per minute charges for long distance calls with even higher per-minute rates for international calls (per-minute charge varies by plan). Additional features, such as call waiting, voicemail and three-way calling, usually also incur an upcharge. There are additional charges for installation and if you need a technician to come to your home to add a phone jack. 

Setting Up Your Landline Telephone Service

1. Find your company. 

First, determine which company provides landline telephone service at your address. Check the location-specific list below. 

2. Cancel your old service.

If you are moving from outside the service area, you will need to cancel service with your old phone company. If you are moving from within the phone company’s service area, you will need to switch your account to the new address. You may be able to keep your phone number but only if you are moving from within the same area.

3. Set up new service with the phone company that services your new location.

Most phone companies let you sign up for new service on their websites, but some require you to come to their office in person. You will need identification like a driver’s license or Social Security card, your home’s address and the date you would like to start service. 

When setting up phone service, ask about programs for low-income and disabled individuals. If you meet requirements for these programs, you may be able to get free or reduced-cost phone service. 

4. Make any required initial payments. 
   • If your utility is a cooperative, you will need to apply for a membership and pay any necessary membership fees. 
   • Some phone companies require new customers to give them a deposit to reduce the company’s risk in the event of non-payment. Usually, companies waive deposit requirements for homeowners with good credit scores.

5. On moving day or that day you ask the phone company to start service, plug in a phone and make sure that you have a dial tone and can make and receive calls.

Wireless

Wireless, also called cellular or mobile, operates from towers in communities and connects mobile phones to service to call, text and access the Internet. In the U.S., 94% of adults own a mobile phone, with 81% owning a smartphone. A smartphone is a phone that allows users to access the Internet in addition to calling and texting.

Today, more and more people are opting to only have mobile phones and not have a landline. At the end of 2022, roughly 73% of people lived in a home without a landline.

As with other types of electronics, phone manufacturers periodically release new models with more advanced features as well as new software updates. Mobile phone service providers will sometimes do deals with manufacturers to offer new models exclusively for some time to get more customers.

The big three mobile phone service providers are AT&T, Verizon and T-Mobile. These mobile phone service providers are national companies, and phone service covers the U.S., although one company may have a stronger signal in a particular area because they have more nearby mobile towers. Geographic features such as mountains can also interfere with mobile signals. All of the major providers have brick and mortar stores where you can explore new phones and plans.

Setting Up Your Wireless Service

1. Call your chosen provider or go on its website to set up an account.
2. If you already have a mobile phone or other mobile device with data like a tablet or smart watch that you want to keep, switch the phone number to the new provider. Otherwise, ask the provider for a new phone number.
3. Choose the features that you want on your plan, including data plan, international calling, device insurance and security. Make sure you know how much each feature will cost every month.
4. If you want a new phone or mobile device to go with your new service, you can purchase it in the service provider’s retail stores, on the phone from the provider or from a third party retailer like Costco, Best Buy or Walmart.
   
   Ask your wireless provider about any current promotions. Oftentimes, wireless providers have promotions where they give new customers a device for free or at a discount when they commit to a service plan of a certain length. Some promotions also give new customers discounts on monthly service or additional lines.

Prepaid Phones

In addition to its monthly plans, the big wireless companies and a host of smaller companies including Cricket and Boost offer prepaid wireless plans. Money is deposited in an account with the company toward usage, and service is cut off when the money runs out and is not replenished. 

Although these plans may be less expensive with low usage, higher usage incurs hefty per-minute charges that can be unexpected. Prepaid phones may be purchased from a major wireless provider or at retailers such as Walmart, Target, Amazon or Best Buy.

Solar and Renewable Energy

When deciding to generate renewable energy for your home, there are several factors to consider. Renewable energy is non-polluting, does not cause climate change and requires no fuel purchase, except possibly for biomass. 

Renewable energy that you generate is free, and may offset or even eliminate your electric utility cost. However, homeowners generally need to make a heavy upfront investment in the equipment needed to generate renewable energy, usually between $10,000 and $35,000. 

As a result, it may take years for them to recoup their investment in energy savings. In many cases, renewable produced electricity can be more expensive than getting it directly from your electric company because of the initial costs of buying and installing the system. 

Steps for Implementing Renewable Energy for Your Home

1.Research renewable contractors in your area.

Integrating With the Grid

Homeowners who use renewable and gas energy usually connect to an electric company to supplement their energy needs and provide energy when renewable energy production lags (like during the night for solar energy or periods of lower water flow for hydropower). Where net metering and other types of compensation for excess energy are available, connecting to the grid lets you send power back to the utility company to lower your bill.

In order to connect your renewable power system to the grid, contact your utility company. You will need to buy additional equipment, meet certain output and safety requirements and sign a contract that includes metering and rates.

Incentives and Tax Credits

Because governments and utility companies want to encourage homeowners to generate renewable energy, they may offer incentives and tax credits to reduce the initial investment.

The federal government has a Residential Renewable Energy Tax Credit that gives homeowners a federal tax credit for 30% of the costs of installing a renewable system from 2022 through 2032. The credit percentage rate phases down to 26 percent in 2033 and 22 percent in 2034.

Some states offer additional incentives to homeowners to install renewable capability such as credits on state income tax or property tax. Some utility companies also offer rebates and other incentives for homeowners to reduce the cost of installing renewable energy generators. Rebates and tax credits can offset some but not all of these costs. Homeowners may choose to finance the costs of installing a PV system through a mortgage or home equity loan since it is a long- term investment.

Energy Storage and Excess Production

Net Metering

Homeowners may generate excess power over and above their needs. Some electric utility companies have net metering programs. This is a special two-way meter so if your system generates excess power, the extra power goes into the electrical grid and you are credited for those kilowatt hours at the same rate as you normally pay for them. 

In states where net metering is not required, utility companies may give you partial credit for excess energy that your system produces, compensate you in other ways or have no program to accept this energy. The details will be explained in a net metering agreement with the utility company.

Currently, only three states do not require net metering or compensation for excess energy:

• Alabama
• South Dakota
• Tennessee

Idaho and Texas have no net metering requirements, but utilities companies may elect to offer it to their customers.

Energy Storage

If your system is likely to produce excess energy above your needs, even if just in certain seasons or parts of the day, you may want to include batteries in your renewable energy system. 

Batteries can store excess energy for use later when your system produces less energy. If your utility does not offer net metering, battery storage can help you utilize that extra energy for your home.

Solar Energy

Homeowners opt for solar energy mostly to be eco- conscious, reduce use of fossil fuels and to reduce pollution. Solar power is renewable, silent and clean. It requires little expense once the system is installed and never runs out of fuel. If you plan on living in your home for a long time, having a solar system can save you money on energy.

Solar electrical systems are also called photovoltaic or PV systems. They are a reliable, renewable and a pollution-free source of energy. The efficiency of a solar energy system depends on how much direct sunlight is available, the amount of shade on or near the home and the orientation of the home.

Homeowners who want to use solar power need to have a PV system installed on their properties, usually on the home’s roof, but sometimes on a freestanding structure. A south-facing roof is optimal, but east- or west-facing roofs can work too. Once your PV system is installed and operational, energy generated by the sun can be used to provide all or some of the electric power you need for your home. 

A PV system consists of multiple solar cells that are connected and sold as a PV module. A home will need at least one PV module, an inverter that converts the system’s DC electricity into AC electricity that your home can use and sometimes batteries can store energy in case of a power interruption.

Net metering and batteries can preserve excess energy produced during the day for use when it is dark or cloudy. Whether you have net metering or not, you will need to sign an interconnection agreement with your utility company which will outline all of the terms and rates.

Buying vs. Leasing

In some states, homeowners have another option if they want solar power: solar leasing and power purchase agreements (PPA). Check under your state below to see if these options are available.

With solar leasing and PPA, there are usually no upfront costs for installing the system, but you do not own the system. Since you do not own the system, you would not get the Federal Renewable Energy Tax Credit. 

You typically pay a flat monthly fee, which is less than your previous electric bill to use the system and you would get to use the energy generated. With PPA, it is more like dealing with an electric utility because you pay for each kilowatt that your system produces.  

Both solar leases and PPA involve long-term contracts: for PPA, 20-25 years, and leasing, 10-25 years. If you sell your home before the contract is over and the new owner does not want to continue the service, you may have to pay a penalty to break the contract. Both leases and PPAs have price escalators, so your price will increase each year, between 3%-5%. 

However, solar leasing enables net metering for those utility companies that support it, so they may end up being less expensive if your solar system produces a lot of excess power.

Popular Solar Leasing and PPA companies

Company	Contact Info	States & Territories Served
Sunnova Energy https://www.sunnova.com/	866-786-6682 20 Greenway Plaza #540, Houston, TX 77046 customerservice@sunnova.com	All but AL, IA, MS and WY
SunPower Corporation https://us.sunpower.com/	800-786-7693 https://us.sunpower.com/support/contact-page	All 50 states
SunRun https://www.sunrun.com/	833-324-5886 info@sunrun.com	CA, CO, CT, DC, FL, HI, IL, MA, MD, NV, NH, NJ, NM, NY, PA, PR, RI, SC, TX, VT

If your home does not already have a solar system installed, you will need to find a solar contractor who will sell and install them. Different contractors use PV modules from various manufacturers. Some PV modules produce more electricity than others.

When comparing bids, make sure that each bid states the maximum generating capacity of the system in AC watts and an estimate of the annual amount of energy the system will produce in kilowatt-hours. 

It’s important that the bid you accept includes a warranty of at least two years, which is required by some solar rebate programs. Your solar contractor should also have the experience to know how to pull the applicable permits to install a PV system in your area, which usually include a building permit, an electrical permit or both. Homeowners associations may also require prior approval. Reference your location below to find a list of solar contractors.

Wind Power

Live in a windy area? It is possible to use the power of the wind to create electricity for your home with residential wind turbines. The average height of a residential wind turbine is 80 feet and it needs to be at least 30 feet above trees and nearby structures, so they are most commonly found in rural areas. Many counties, cities and towns limit or prohibit wind turbines in zoning laws and other regulations, so check with your local government before taking further steps.

Wind turbines perform best where average wind speeds are at least 12 mph and there is an unobstructed access to the wind. Wind systems cost between $10,000 and $70,000 depending on height, size and installation costs, but average $30,000 to provide the energy needs for the average home.

Geothermal Power

Geothermal power taps into the constant temperature under the earth’s surface. Despite the name, geothermal heat pumps are used for both heating and cooling. Hot or cold air is channeled underground through water which is cooled (in summer) or heated (in winter) by the temperature underground.

This process is done with a device called a geothermal heat pump (GHP). Unlike solar and wind power, which have the ability to provide electricity to the whole home, GHPs replace conventional HVAC (air conditioning and heating) units. Some GHPs also have a desuperheater device, which can heat the home’s water. Units with a desuperheater provide free hot water during summer months and reduce the cost of heating water in the winter by half.

GHPs cost more than conventional HVAC systems, but are more efficient, using 25% to 50% electricity. On average, with incentives, homeowners recoup their investment within 2-10 years.

Shallow ground temperatures are relatively constant throughout the United States, so GHPs can be used in most states. The GHP contractor will evaluate the geological, hydrological, and spatial characteristics of your land to determine the best type of ground loop for your site. GHPs have few moving parts and are very reliable, lasting on average 20 years.

Microhydropower

If you have water flowing through your property, you may be able to install a small hydropower system to power your home. Typical microhydropower systems for individual homes generate up to 100 kilowatts which is more than enough electricity. A large home only requires 10 kilowatts.

Microhydropower systems include:

• A waterwheel, turbine or pump to harness the water’s power
• Water conveyance (pipeline or channel) to transport the water
• Alternator or generator to transform the rotation into electricity
• Regulator to control the generator
• Wiring to transport the electricity
• Inverter to transform the DC electricity into AC electricity that your home can use
• Batteries to store excess power (optional)

Microhydropower systems can be stand-alone or connected to the grid. Contact your electric utility company to see if you can connect to the grid and if they offer net metering.

Falling water is optimal for these types of systems, so hilly or mountainous areas are better. You will need to know your local permit requirements and water rights. If you are not planning to sell electricity back to the grid and your system has minimal environmental impact, the permitting process will be easier.

You may also need to get in touch with the Federal Energy Regulatory Commission and the U.S. Army Corps of Engineers. Microhydropower systems cost between $1,000 and $20,000, depending on electricity requirements and location..

Biomass

Biomass energy is generated by burning organic material, mostly wood. In the US, 10% of households burn wood in fireplaces and wood burning stoves for heat. Less than 3% of households use wood as their primary heating fuel. Since burning only produces heat, biomass cannot be used for other home energy needs.

Utilities by State and Territory

Moving

Whether moving across the country or just across town, from the moment you decide to relocate, you have a lot of decisions to make. Here are the questions you will need to consider:

Should you use a moving company?

Deciding to hire a moving company depends on your personal circumstances. If the company you work for is paying for your move, or money is otherwise not an issue, hiring professional movers could be the quickest and easiest way to move. However, if your budget is tight, but you have people available to assist you, a DIY move could be a viable option.

Costs

For most people, cost is the primary consideration when deciding how to relocate from one home to another. Moving companies can be expensive when you start comparing quotes. However, once you list all the costs involved in a DIY move, moving companies’ rates may begin to sound more reasonable.

Another consideration to take into account is the benefit of having your items insured by the company’s insurance policy, which will cover the cost of any damaged or lost belongings. If you injure yourself trying to move a heavy sofa, your medical bills could end up negating any savings gained from a DIY move.

Moving company fees are typically based on the amount of furniture and boxes you have and how far your belongings must be moved. These costs can increase if you add extra services, like packing, packaging materials and furniture pads.

Other expenses can include gas as well as renting moving equipment, such as a dolly and furniture pads. Note that moving trucks average 10 to 12 miles per gallon, regardless of size.

Moving trucks range in length from 10 to 26 feet. A 10 to 12-foot truck is usually sufficient for a one- bedroom apartment, while a three-bedroom house will require a 24 to 26-foot truck.

Moving truck rental fees vary by size and the length of time for which you are renting the truck. Some companies charge a per-day fee, while others calculate fees based on a 50-mile trip. Expect to pay around $150 per day for a 12 to 16-foot truck and around $200 per day for a 26-foot truck.

Cost Saving Tips When Hiring a Moving Company

• Declutter thoroughly before you start packing, to avoid paying to move items you no longer need or want.
• Get cost estimates (quotes) from various companies. Then compare and negotiate the quotes you receive. Moving companies and rental truck companies are often willing to match a competitor’s price.
• If your moving dates are flexible, move mid- week for the lowest rates. Most people will want to move on weekends, which can drive up the price.
• Find out if your homeowner’s insurance or renter’s insurance covers your possessions during a move. If so, you could save hundreds by not purchasing the moving company’s insurance coverage to replace lost or damaged items. Carefully check your policy to find out exactly what is covered, and under what circumstances.

Pros and Cons of Moving Companies & DIY Moves

Creating your own list of pros and cons can help you finalize your moving method decision. Follow this guideline for deciding which option best suits you and your family.

Pros for Hiring a Moving Company

• Professional movers are trained professionals that can work with efficiency.
• Packers have the materials and skills to properly pack fragile items.
• You can avoid the physical strain of moving heavy boxes and furniture.

Cons of Hiring a Moving Company

• It is the more expensive moving option.
• You could lose money if you must make unexpected changes to your moving plan.
• Contracts can make it difficult to determine if you are only paying for what you need.

Pros for a DIY Move

• It is affordable for even the tightest moving budgets.
• You have more flexibility for last-minute changes.
• Unloading the truck yourself means that boxes go right where you want them.

Cons of a DIY Move

• A DIY move can be more time-consuming and physically difficult than you anticipate.
• Your belongings can be damaged if you pack them improperly.

Hybrid Moving Options

Moving does not always require you to choose between hiring professional movers or doing it yourself. There are various hybrid options that combine professional services with your own efforts and minimize your moving costs.

If you prefer to pack your own possessions but cannot manage heavy lifting or driving a large truck, hire furniture movers. After you pack up your house, the movers will load the truck and transport your belongings to your new home.

If you want to self-pack and you have the stamina and help to load your items yourself, but you prefer not to drive a moving van, rent a moving container. The company will bring you a container and pick it up again after you fill it. Then they will transport it to your new residence for you to unload it, or they will place it in a storage unit.

Some examples of nationally available moving container options are:

• SmartBox: https://www.smartboxmovingand-storage.com/
• PODS: https://www.pods.com/
• U-Haul U-Box: https://www.uhaul.com/UBox/

Each offers local and long distance rates and an online quote system that allows you to compare costs.

If you would prefer not to pack up your household but want to transport your belongings yourself, hire professional packers. Professional packers know which materials to use to best protect your valuable belongings and will carefully number and inventory each box. 

They are more efficient than untrained packers, which is helpful if you are on a tight timeline. You will still be responsible for loading the moving truck, driving your possessions from point A to point B, and unloading them. But your belongings will be packed professionally with care.

Finding a Mover

Start your search for the best moving company online. It is easy to compare the services each company offers, and whether they cover local or interstate moves (moves across state lines). Most national moving companies and moving truck rental companies provide an online estimate calculator.

Some examples of moving truck rental companies that are available nationwide are:

• Budget: https://www.budgettruck.com
• Penske: https://www.pensketruckrental.com
• U-Haul: https://www.uhaul.com

After researching moving companies that serve your area, check their ratings on the Better Business Bureau’s website at https://www.bbb.org. Not only can you verify that you are dealing with a legitimate company, you will see any complaints or legal actions filed against them.

For interstate moves, use the U.S. Department of Transportation’s Mover Registration Search feature at https://ai.fmcsa.dot.gov/hhg/search.asp to discover if the company is properly registered with the DOT. If you find that the company you are considering is not registered, use an alternative option.

Before signing a contract for moving services, carefully review each section and research any unfamiliar terms. The Federal Motor Carrier Safety Administration (FMCSA) has created a helpful glossary of commonly used moving terms. Find it at https://www.fmcsa.dot.gov/protect-your-move/glossary.

Packing

When preparing to pack up your house, first determine what items you no longer need. Giving these away can not only save you money on labor and packing materials, it can also help you save time during the move. Sell what you can and donate the rest.

If you have hired professional packers, all you need to do is prepare a bag with the everyday essentials you will need during the move and you can leave the rest to the professionals.

However, if you are packing up your household yourself, consider following these helpful guidelines:

• Keep clothing on hangers and in drawers whenever possible. This eliminates extra steps when unpacking at your new home.
• Use clothing, towels and linens to cushion glasses, dinnerware, lamps, vases and other fragile items. Wrap dishtowels around sharp knives and kitchen tools. This will help to limit extra packing tools while keeping your belongings safe.
• Fill pots and pans with small kitchen utensils, spice bottles and flatware.
• Use plastic wrap to seal open bottles of shampoo, body wash and other products that might spill.
• Use colored stickers to color-code each room’s boxes (i.e., pink stickers for the bathroom, yellow for the kitchen, etc.). Pack each room completely before moving on to the next room.
• Take a picture of each box’s contents. This is quicker than writing down a list of what’s in every box.
• Use your suitcases as packing containers. Their wheels make them easy to move, which makes them ideal for books or other heavy items.
• Finish packing the night before the moving truck arrives. Trying to pack and load simultaneously can extend the time it takes to complete the move.
• Limit grocery shopping a week or two prior to your move, buying only minimal amounts of perishable foods. If possible, use up whatever opened foods you have on hand. The same is true for cleaning chemicals and other hazardous items that movers cannot pack.

Items Movers May Not Move

There are certain items that a moving company will not pack or move for you. The moving company should provide you with their specific list of prohibited items. If you do not receive a list, request one before signing your moving contract to ensure you understand and agree with the items you will not be assisted with.

Items that most movers will not handle are:

• Aerosol cans
• Potentially harmful cleaning chemicals or solvents
• Firearms and ammunition • Fire extinguishers
• Fireworks
• Matches
• Pool chemicals
• Propane tanks
• Oxygen tanks/scuba tanks
• Pesticides, fertilizer and weed killing products • Live plants
• 235
• Items showing proof of mold or pest infestation
• Perishable foods or open containers of food

Last Steps Before Leaving Your Current Home

Whether you own your home or live in a rental unit, there are certain tasks you must perform when you move out. You will need to forward your mail to your new address and notify your homeowner’s or renter’s insurance company of your move. Also, if you are closing on a house you owned, you should ask your real estate agent for advice on preparing your home for its new owner.

How to Wrap Up With Your Landlord

If you are renting your home or apartment, review your lease for specific instructions on how to end the rental agreement. Most leases require tenants to submit a written move-out notice at least 30 days in advance. The document should also detail what steps you must follow to get your deposit back.

Make plans to perform repairs or any other maintenance tasks you are responsible for. Clean each room thoroughly, including vacuuming and mopping floors. It will be easier to clean well after all of your belongings have been moved out.

Contact your landlord a week or so before your move- out date, and set up an appointment for a walk-through inspection. Have all cleaning and repairs finished by the inspection date to prevent the landlord from taking any deductions from your security deposit. Set a goal of leaving the home in as good a condition as when you moved in. Finally, return your keys to the landlord on the inspection day.

How to Wrap Up With Your Utilities Companies

Call your utility companies as soon as you know your moving date. They will talk you through the service cancellation process and tell you how to get back any deposits you made. If applicable, give each utility company your new address so they can forward your final bill and refund your deposit.

If you are moving locally, simply provide your new address and service start date. For interstate moves, look up your new utility companies and arrange for service to begin a day or two before you arrive. To avoid the inconvenience of not having a vital service turned on promptly, make a checklist of all new providers. Include electric, gas, water, phone lines and more.

For more information on how to set up utility services in your area, refer to the Home Expenses and Management section of this guide.

Home Services

Once you have purchased your home and set up your utilities, you will need to keep your home maintained, in good repair, safe and comfortable. To help you with this, you may engage some of the following types of home services providers.

Alarm Systems

Alarm systems alert you, sound an alarm and notify police when an unauthorized person comes into your home when the system is armed. The alarm will typically activate when a door or window is opened or a motion sensor is activated. You will get a code to disarm the system while you are at home, and you can give this code to trusted friends and family who need to access your house when you are away.

Most well-known home security companies operate nationwide. Most of the top companies offer systems that are compatible with smart home devices like Google Home and Amazon Alexa. Most even have outdoor cameras included.

The cost for your home’s security system depends on a few factors, like how many doors and windows you have and how many motion sensors you need. Some companies require you to sign a contract committing to use their service for a certain period of time.

Popular National Home Security Companies

Company	Monthly fees	Installation fees	Activation fees	Equipment prices
ADT	$25 – $75	$99 – $299	$99	$199 – $599
Brinks Home	$40 – $55	$199 – $299	$99	$399 – $799
CPI Home Security	$20 – $40	$99 – $199	$79	$249 – $599
Ring	$4 – $20	$0	$0	$99 – $699
SimpliSafe Security	$10 – $30	$0 – $50	$0	$189 – $469
Wyze	$10 – $22	$0	$0	$129 – $539

Cable TV & Streaming Services

Cable television is a service where you pay for access to live television shows as well as on-demand shows, which may cost extra. On demand means that they are available to watch at any time. 

Cable television services also give customers the option of recording live TV shows so they can watch them later, but if you did not choose to record the show, you will miss it. With on demand, it is there to watch without having to record it first. 

Cable TV is delivered to your home through coaxial or fiber optic cables. Satellite TV is similar, but is delivered through a satellite dish on your roof.

There are different levels of cable TV service. Basic cable includes a variety of channels and may include local TV stations as well. You also have the option of adding premium channels like HBO, Showtime and Cinemax at an additional cost.

There are a number of large companies that provide cable television service in multiple states in the U.S. They are:

• AT&T (https://www.att.com/),
• Earthlink (https://www.earthlink.net/),
• Spectrum (https://www.spectrum.com/),
• Centurylink (https://www.centurylink.com/home/),
• Cox Communications (https://www.cox.com/residential/home.html) and
• Xfinity (https://www.xfinity.com/).

Streaming Services

In addition to cable TV, there are TV streaming services which deliver entertainment to you via an Internet connection. Some people have opted to “cut the cord,” which means to cancel cable TV and only get their television content via streaming services. Each service has its own content, and many customers choose to subscribe to more than one.

Streaming services require a device such as Apple TV, Roku or Amazon Fire TV or alternatively can be used with a smart TV or gaming console (such as PlayStation 4 or Xbox One) that incorporates one of these technologies.

Company	Monthly Cost
Netflix (https://www.netflix.com/)	$6.99 – $22.99
Hulu (https://www.hulu.com/welcome)	$7.99 – $89.99
Disney + (https://www.disneyplus.com/)	$7.99 – $13.99
Peacock (https://www.peacocktv.com/)	$5.99 – $11.99
Sling (https://www.sling.com/)	$40 – $50
Amazon Prime (https://www.amazon.com/Prime-TV-Shows/b?ie=UTF8&node=7613705011)	Free with Prime membership

Pest Control

Nobody wants to share their home with pests like cockroaches, termites, rodents, ants and fleas. To eliminate existing infestations and prevent future ones, you can hire a pest control company or you can do it yourself. Pest control companies will spray insecticide and may leave baited traps to get rid of crawling insects including cockroaches, ants, spiders, centipedes, and silverfish.

Most pest control companies are small and locally owned, but there are some national companies. Do an Internet search to find some in your area and compare their service, price and customer reviews. Ask if the company uses products that are safe for pets and small children if that is a concern. You can sign up for a one-time service or a monthly recurring service which may include the outside area around your house.

Removing Beehives

Specialized pest removal companies can exterminate bees and remove beehives in and around your home. Alternatively, you may be able to remove the hive and bees for free by contacting a local beekeeper. Since bee populations are on the decline, it is better to relocate bees rather than killing them, if possible. 

Sometimes, bees are Affricanized, which means that they are very aggressive and will resist relocation. Removing a beehive costs between $100 and $1,000 depending on the size of the hive.

Mosquito Control

Mosquitos cause itchy bites and carry diseases such as Zika virus and malaria. Some big pest control companies provide mosquito control where they treat your outside area with a chemical fogger or spray. There are also companies that specialize just in mosquito control. Mosquito control costs on average between $350 and $500 per season for up to a half-acre property.

National Mosquito Control Companies

Company	Contact Info
Mosquito Joe	(855) 275-2563 https://mosquitojoe.com/
Mosquito Squad	(877) 332-2239 https://www.mosquitosquad.com/
Terminix	(877) 837-6464 https://www.terminix.com/pest-control/mosquitoes/
TruGreen	(800) 474-3218 https://www.trugreen.com/products-and-services/ mosquito-control
Orkin	(877) 592-6874 https://www.orkin.com/other-services/mosquito-control

Animal Control and Removal

ome pest control companies can exterminate rats and mice and trap pests like squirrels and racoons that have made a home in your attic or crawl space. If you have rats or mice, call a professional right away. They reproduce quickly, producing 5 to 6 litters of 10 offspring every year so the problem will only get worse if left alone.

Rodents can create damage to your home’s structure, eat and ruin your food and carry disease. Rodent removal costs on average between $200 to $1,200, depending on the size of the infestation. Once you have exterminated the rats or mice from your home, check your home’s exterior and plug anywhere that others can enter. A professional rodent exterminator can help identify these areas and even fix them.

Racoons can also cause damage to your home and should be dealt with swiftly. Trapping and removing them costs $350-$500, but repairing the damage they cause to drywall, electrical wires, plumbing and roofing could cost an additional $1,000-$2,500. If damage is extensive, your homeowner’s insurance may cover it.

Wood-Eating Insects

There are two types of wood-eating insects: termites and carpenter ants. These insects can cause significant and dangerous damage to your home’s structure, so it is important to eliminate them as soon as you find out that they are present. A professional company that specializes in these insects is recommended, rather than trying to deal with it yourself.

You can tell if you have an infestation of these insects when you see tiny holes and piles of sawdust on the floor or insects that look like large ants with wings. If you see an insect in your house that looks like this, put it in a plastic bag and show it to a pest control specialist for identification.

Carpenter ants and termites are attracted to wet and moldy wood, so you can often find them around air conditioning units, sinks, washers and bathtubs. Fixing leaks quickly will reduce your chance of an infestation.

If you have termites, the most common treatment is to tent the house. This means that you and your family and animals will need to leave for a few days and the pest control company will put a plastic covering over your entire home while they pump in powerful pesticide. An alternative termite treatment is called heat extermination. It works like the regular chemical process with a tent, but no chemicals are used. 

Instead, hot air is forced into the home until the temperature reaches 150 degrees Fahrenheit, which kills the termites. All companies offering termite services must be licensed in your state, so ask to see the company’s license before you hire them. 

Tenting a house costs between $1,200 and $2,500 for an average size house. Companies may charge a flat rate or charge by size, ranging from $5 to $20 per linear foot.

National Pest Control Companies

Company	Contact info	Termite Treatment?
Terminix	(844) 251-2164 https://www.terminix.com/	Yes
Ehrlich	(866) 844-9033 https://www.jcehrlich.com/	Yes
Western Exterminator	(866) 853-0766 https://www.westernexterminator.com/	Yes
Bulwark Exterminating	(888) 590-3502 https://www.bulwarkpestcontrol.com/	No
Orkin	(855) 590-9854 https://www.orkin.com/	Yes

Saving Money on Pest Control

You can save money by buying pesticide products in a grocery, home store or discount store and spraying them in and around your house. You can also use non-toxic methods such as combining sugar with boric acid to kill roaches and ants or citronella to repel mosquitos.

One of the best ways to save money on pest control is by reducing the number of pests that are attracted to your home. Here are some tips:

• Trim trees and bushes around your home – Insects and rodents use branches as bridges to get from the outside onto your roof where they find or make an opening. When branches are well away from the house, it is harder for them to do so.
• Seal up cracks and holes on the outside of your home – This keeps pests out, including rodents, which can get through surprisingly small openings.
• Replace wet and rotting wood – Termites, carpenter ants and rodents use the softwood to tunnel inside.
• Cut off their water supply – Insects like flies and mosquitoes are attracted to and even breed in still water that is not chlorinated. Empty and refresh birdbaths, and keep pools and ponds clean. If you have water bowls outside for animals, empty and replace the water daily.
• Keep food secure – All food in your home should be in airtight containers or in the refrigerator or freezer. Wipe the counter of crumbs and spills as needed. Take the garbage out regularly and use a closed composter.

Landscaping

Landscaping consists of the plants and structures on your property outside of your home, including your lawn, trees and other plants and fixed structures in your yard. Attractive and well maintained landscaping can greatly improve your quality of life as well as the value of your home.

A good rule of thumb is to spend up to 10% of your home’s value on landscaping. Landscaping companies usually provide two types of services: landscaping installations and maintenance.

Landscaping installations include planting new trees, shrubs and groundcover, creating plant beds and adding mulch and decorative rocks around plants. Some landscapers can also install pavers and garden structures like ponds, arbors, trellises, pergolas and walls as well as outside lighting and sprinkler systems.

Landscapers are usually experts in the plants that thrive in your local area and their ideal amount of sunlight, fertilizer and growing seasons so they can advise you about what to plant and how to arrange the plantings.

The average homeowner spends $3,000 to $15,950 for new landscaping installations. This may be a one-time project or broken up into smaller projects over time.

Saving Money on Landscaping

There are many ways you can save money on landscaping installation and maintenance:

• Do it yourself – You can do most kinds of gardening yourself, buying and planting plants and other materials and buying a lawnmower, weed whacker, a chain saw and other tools.
  • Home stores often let you rent power tools, which is a good option if you only have an occasional need for them.
  • If you want to fertilize and control weeds on your lawn, you can order products to DIY it online or at home stores.
• Use native plants – They will be more likely to thrive and may need less water and maintenance.
• Use mulch – Mulch is wood chips, straw or sawdust that you spread in garden beds. It holds in the moisture and blocks weeds so you need less water, weeding and herbicides.
• Make your own compost – Combine kitchen scraps with dead leaves to create a rich, natural fertilizer for your plants.
• Shop at the end of the season – Many garden centers will have sales in fall and spring, both of which are good seasons to plant.
• Buy smaller plants – Smaller plants are less expensive and will eventually grow to full size.
• Start your lawn from seed – Although it takes longer to look nice, starting a lawn from seed is much cheaper than laying sod.
• Don’t overplant – Keep in mind the full size that plants will grow to (this is listed on each plant’s tag) and leave room. Otherwise, you will need to remove plants later.
• Collaborate with neighbors – Talk to your neighbors and go in on purchases like bulk mulch, which can be much less expensive than buying it by the bag. You can also get together and hire the same maintenance company, using the size of your group and the proximity of your properties to negotiate lower monthly costs for everyone.

Home Repairs and Improvements

Sometimes things will break down in your home and you may need to repair them. In order to protect themselves from costly repairs, some homeowners take out a service contract, or home warranty service. Warranties typically charge a monthly fee for maintenance; when repairs or replacements are needed, the warranty company contracts a service company to fix the issue at low or no cost. 

Service contracts typically cover home appliances like dishwashers, washers, dryers, refrigerators, stoves and ovens and may also cover plumbing, electrical and HVAC. If you have a home with older appliances and systems, it may be a good idea to get a home warranty service.

Popular National Home Warranty Companies

Company	Contact info
Select Home Warranty	(888) 808-1528 https://selecthomewarranty.com/
Choice Home Warranty	(800) 814-5235 https://chwprice.com/
Amazon Home Warranty	(844) 425-6102 https://ahwp.com/
Landmark Home Warranty	(866) 306-2999 https://www.landmarkhw.com/
America’s First Choice Home Club	(855) 972-7736 https://afchomeclub.com/
First American Home Warranty	(888) 875-0533 https://homewarranty.firstam.com

Below are some of the most common parts of the home that need repair and how to get it done.

Roof

The roof is one of the, if not the, most important part of your home. It is what gives you shelter and protects you from the elements. As soon as you notice a problem with your roof, contact a roofing company. When water penetrates the outer layer of the roof, the wood can begin to rot, weakening the structure and creating an ideal environment for growing mold and attracting rodents, termites and other pests.

Even if you do not see any roof problems but you know that your roof is old, you may want to get it inspected by a roofer. Not all roof issues are visible from the outside.

Repairs or Replacement

Your roof must usually be replaced every 15 to 30 years or when it is badly damaged by weather or falling trees. If your roof is more than 20 years old and you notice a leak, it may be time to replace your roof. On the other hand, if your roof is relatively new and in good condition, and you notice a leak or missing shingles, a repair is usually sufficient. 

Cost

The cost to replace a roof ranges between $5,700 to $110,150, depending on a few factors.  Your total cost depends on the following:

• The size of the home
• The location of the home
• Type of shingle
• Pitch
• Structural features like chimneys and skylights

A new roof is quoted in squares, which means 100 square feet. The average size roof is 17 squares, which is the size of a 2,200 square foot, 2-story house.

Roof Types

When replacing a roof, the type of roofing material makes a huge difference in the cost. Here are the most common types of roofing material and their cost.

Type of material	Average price per square foot
3-tab asphalt shingles	$4.25 – $8.25
Steel	$10 – $20
Aluminum	$6 – $16
Concrete	$11 – $19.80
Copper	$12 – $20
Clay/Ceramic	$12 – $24.95

In most cases, DIY roof repair is not recommended. However, most roof repair and some roof replacement (when caused by weather or impact) should be covered under your homeowner’s policy, so look into making a claim.

Water Heater

The water heater is the device in your home that heats the water for bathing and washing clothes and dishes. Water heaters typically last between 8 and 12 years. In order to extend the life of your water heater, you need to do regular maintenance, which entails flushing it twice a year to eliminate build-up of sediment and testing the pressure relief valve to make sure it is working.

Some water heaters, like other appliances, are Energy Star rated. This means that they are more energy efficient. Some states and utilities offer rebates when you replace an old, inefficient appliance with one with an Energy Star rating. 

Types of Water Heaters

There are various types of water heaters that you may choose from:

• Conventional – This is the least expensive and most common type of water heater. It holds between 30 and 80 gallons. The more people living in the house, the bigger the water heater you should buy.
• Tankless – These are roughly twice the price of conventional water heaters, but usually last 20 years or more. They heat water quickly, but can only serve one use at a time; if someone is running the dishwasher, the shower will not have sufficient hot water.
• Electric heat pump – Similar to geothermal heat pumps, electric heat pumps draw their heat from the air, and thus work best in hot climates.
• Solar – This water heater pairs with a small roof-mounted solar collector. They have an average lifespan of 15-20 years but require more maintenance because they have multiple parts including pipes, ducts, the collector and the mounting hardware.

HVAC (Air Conditioning and Heating)

The HVAC system is what cools and heats the interior of your home and controls humidity. The unit is controlled with thermostats that you set at a comfortable temperature. Some thermostats are part of a smart home system, and can be changed with your phone or computer. Since the HVAC system requires a significant amount of your home’s electricity, it pays to look for one that is Energy Star rated. They also may qualify for rebates in your area.

Zoned Systems

If you have a bigger home, you may want to consider a zoned system. This is where you install separate smaller units in different parts of your home. For example, you might have one unit for the bedroom area and another one for the kitchen, living room and dining room area. This allows you to save electricity and money by increasing or lowering the temperature in the zone that is not being used during the day and then doing the opposite in the evening, rather than heating or cooling the entire house all the time.

Cooling

If you live in a warm climate, you likely have a central cooling system. Those who love in cooler climates are more likely to have portable window units. 

Air conditioning (AC) units are rated for efficiency under Seasonal Energy Efficiency Rating (SEER). SEER 13 is the minimum efficiency you should consider, but higher efficiencies are likely to save you money in the long run. 

Another efficiency measure is Energy Efficiency Rating (EER), which shows how well the system will operate during peak conditions. Replacing a unit with an EER rating of 5 with one with an EER of 10 can cut your energy costs in half.

AC units require regular maintenance, including changing filters at least every 3 months, flushing drain lines quarterly and cleaning the unit’s coils every 3-5 years. They last on average between 15 and 20 years.

Heating

There are multiple types of heating systems, including furnaces which push heated air through ductwork, boilers that heat water for radiators, electric heat and heat pumps. Some systems use a boiler or heat pump with radiant floors where heated water is piped under flooring. Furnaces usually use natural gas or propane and boilers use gas or oil.

Electric furnaces typically last 20 years, and gas furnaces and boilers generally last between 15-30 years. Heat pumps only last around 15 years before they need to be replaced. Heating systems are generally less expensive to repair than cooling systems.

Plumbing

Plumbing is the network of pipes that provide you with running water in sinks, showers, toilets, dishwashers and washing machines and remove waste water. It also incorporates the connected faucets, shower nozzles and toilets. Professional plumbers fix plumbing problems in your home, although if you have a minor problem like a clogged sink or tub drain, you can usually fix it yourself with drain cleaner or a plumbing tool called a snake.

Sometimes these pipes get clogged with debris or spring leaks. Other plumbing repairs include fixing water heaters, sewage lines and septic systems. You would engage a plumber when you want to update a bathroom with a new sink, faucet, tub or shower or when you are replacing a kitchen sink or faucet. They can also install water filtration systems in your home.

Septic Systems

There are two ways of dealing with wastewater from toilets and washing: sewer and septic systems. If your home has sewer service, it is connected to a local government run system that disposes of your wastewater and the cost of that is included in your water bill. Sewers are more common in urban areas.

With a septic, wastewater goes into a septic tank that is buried in the ground, where natural bacteria break it down. Then, water flows out underground into an area filled with sand and rock called a drain field where it is further filtered before going back into the water table. 

If you have a septic system, the tank needs to be pumped out every 3-5 years to get rid of leftover solid material. If you neglect to do this, you may experience slow water drainage, slow flushes in toilets and even backed up sewage water in your house.

Electrical System

The electrical system in your home runs all or most of your home’s power including lights, appliances, computers and HVAC systems. The electricity in your home comes into a breaker panel which has switches for different areas of your house and for large appliances like your oven and HVAC system. You can open the cover of the breaker panel and turn off the electricity to an area or appliance by flipping the switch.

You can do some minor electrical repairs such as fixing a short circuit by resetting the breaker and replacing broken outlet plugs and light switches. Always turn off the electricity to that part of the house at the breaker box before making any electrical repairs.

Other electrical problems are more serious. Signs of this include flickering or dimming lights, frequently burned out lightbulbs, dead outlets, warm outlets or switches, frequently tripping breakers or smelling a burn or seeing scorch marks near an appliance. Electricians also install new electrical items like ceiling fans, lighting, wires and outlets. Unless you are extremely knowledgeable, it is best to hire a professional electrician to do repairs since a mistake is potentially deadly.

Appliances

Appliances include your dishwasher, stove/cooktop, oven, refrigerator, clothes washer and dryer as well as smaller appliances like a garbage disposal, microwave and toaster oven. As with any machine, appliances sometimes break down and require repair or replacement. Hire an appliance repair company in your area to fix them.

Additions/Renovations

If you discover that your home is too small for your needs but you do not want to move, you can build an addition. Or, if you want to update the look of your home, you can do a home renovation, which keeps the existing exterior structure and most of the interior walls. Because home additions and major renovations are expensive, some homeowners finance them with a home equity line of credit (see the Home Equity Loans section of this guide for more information on HELOCs).

Additions

You need to have enough land to accommodate the addition, have an architectural blueprint, get permits from your local government and secure approval from your homeowners association if you have one.

Building an addition is a major project since you will need to knock down existing walls, extend your roof and foundation and add electrical wiring, ductwork and sometimes plumbing. Because of the complexity and laws, you will need to hire a professional general contractor to build an addition.

Renovations

While all home renovations should improve the quality of your life while you live in the home, some renovation projects contribute more to the value of your home.

Common Renovations to Increase Resale Value

• Increase light and space – Add windows and skylights, raise ceilings and knock down walls to create a feeling of lighter, brighter space.
• Update kitchen – Replace outdated or damaged countertops and cabinets, and install new appliances.
• Update bath – Add new features and modern touches like glass shower enclosures and large bathtubs.
• Add a deck – A deck will increase your enjoyment of your backyard and is valued by potential buyers in the future.