Homeownership is a big investment. From repairs and maintenance to renovations and building equity, this guide will help you confidently pay for and enjoy your home.
Foreclosure is the process that lenders use to take possession of property from borrowers who can't pay their mortgages. Once in possession of the home, the lender can sell the property to recover the amount of the loan.
A loan modification is a change to your current home loan, whether that’s changing the length of repayment, interest rate, or other terms.
Home insurance provides financial protection to you as a homeowner against sudden and accidental damage to your home and everything inside it, as well as any additional structures on your property.
A reverse mortgage allows you to receive payments based on your home’s equity. You must be age 62 or older and must live in the house. The loan must be repaid when you move out, sell the house, die, or at the term’s end.
Home equity is the value of a homeowner's interest in a home. It can increase over time if the property value increases or as you pay down the mortgage loan balance.
Property insurance includes the insurance types purchased to protect dwellings and belongings inside and outside the home.
Property tax is a tax that an owner of the property—which can include a home, vehicle, or vacant land—pays to the local government based on the property's assessed value.
A mortgage forbearance agreement is a contract between a mortgage lender and a borrower wherein the lender agrees not to foreclose on the home and the borrower agrees to a plan that eventually gets them caught up on their monthly payments.
A home warranty is a service contract that pays to repair or replace major home systems such as electrical components, kitchen appliances, and plumbing. Home warranties come in different forms and the components they cover varies.
A lessee is an individual or company that rents property from another person or company, signing an agreement known as a lease to make it official.
If you have borrowed money for your home, loan principal is the original amount of money you borrowed from the lender and must repay. In addition to the principal, you may also have to pay interest charges and other fees until you have reduced the principal to $0.
There are many costs that go into the monthly expense of owning a home, such as your monthly mortgage payment (principal and interest), home insurance, mortgage insurance, real estate tax, and maintenance and improvement costs. The average monthly cost of owning a home is $1,558, based on The Balance’s calculations. Homeownership costs vary greatly depending on where you live, too. For example, the regional average for major cities in California is upwards of $3,300—or $4,556 if you live in San Francisco. By comparison, homeowners in cities such as Detroit or St. Louis may pay below-average homeownership costs.
Property taxes are calculated based on a local assessment of your home’s market value, which is typically determined based on nearby sales value comparisons, or a cost or income method. Assessments may be done every year or even once every five years, depending on state and local laws. Once your property is assessed, the value will be multiplied by the local tax rate, also called the “mill rate,” to determine what you owe. Since location impacts property taxes, your property tax bill may be higher or lower than a similar home in another county.
Upgrading the exterior of your home like replacing a garage door, siding, or windows, or adding a deck are some of the most valuable home improvements you can make in terms of recouping spent costs. Minor kitchen remodels may also be a worthwhile investment. Adding a pool, home theater, or over-the-top luxurious items compared to other homes in your market are examples of upgrades that may bring you joy, but may not offer the highest return on investment.
Pre-foreclosure is the first stage of the foreclosure process when a homeowner has fallen at least three months behind on mortgage payments. During this stage, the lender will issue a written, legal notice of default, which officially begins the foreclosure process. During this time, homeowners can take action to retain their home and explore forbearance, loan modification, refinance, or short sale.
After your loan is 120 days past due, it may be too late to stop foreclosure, but the sooner you communicate with your lender about your financial situation and learn what your options may be, the better. The only time it’s too late to stop a foreclosure is when the property is sold at an auction and the deed is officially transferred.
The first step of getting your home ready to sell is making a plan for how to clean, repair, and present your home to potential buyers. To help buyers envision themselves living in your home, start by cleaning clutter and making visible, minor repairs like burned out lightbulbs, holes in the wall, and leaky faucets. Doing so will make a good first impression on interested buyers.
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