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Setting aside money for future home improvements and repairs is important for all homebuyers. (Getty Images)

You’ve reconciled your income with how much of a mortgage you can afford, set aside enough money for a down payment you feel comfortable with and calculated everything you’ll need to pay for closing costs and movers. You’re ready to buy a home at last.

But before you do, consider adding even more to that mountain of money you’ll need before closing. All homebuyers should have additional savings set aside for home maintenance and repair emergencies, and they should continuously contribute to the fund, says Tamara Lee, communications manager and educator for OnTrack WNC, a nonprofit financial education and counseling organization based in Asheville, North Carolina.

“Set aside 1 percent of the value of the home on an annual basis,” Lee advises. “That’s something we stress pretty heavily, and then we also have them practice budgeting that in.”

At the end of January, the median price of homes listed in the U.S. was $256,000, according to real estate information company Zillow. If your home is similarly valued and you follow the 1 percent rule, you’ll want to save just over $2,500 every year.

Buying a home that is significantly more or less will affect the amount you need to save. For example, buying a $1 million house means you should save an extra $10,000 per year to ensure you won’t be financially strapped in the event of a major system failure at home.

Depending on the type and condition of the home, you may need to have an even larger percentage of the price of your home on hand. A house that’s older or has more deferred maintenance will likely require more savings to account for the greater possibility that the furnace, roof or plumbing will need work – possibly at the same time.

[Read: How to Get Along With Your Contractor.]

Knowing you need to keep an extra stack of cash in the bank and having it are, of course, two different things. Here are three tips to help you build that additional savings before you buy your home, and how to use the money wisely after the purchase is complete.

Practice saving more. First-time homebuyer boot camps and housing counselors often instruct clients to adjust their monthly finances like they've already purchased a house to get a feel for the difference between rent and combination of bills, mortgage and potential savings to avoid a financial shock.

“What’s it like to save an additional $150 a month? Going forward, is that something that’s doable, workable?” Lee says.

If your rent is less than the total amount you’ll be paying for your mortgage, utilities and maintenance savings, start putting that additional amount away now. “Let’s see if you can practice paying that difference on a monthly basis, in addition to that set-aside amount we discussed for the next six months and see how that feels to your budget,” Lee says.

Lee adds that clients often discuss specific homeownership and savings scenarios with a housing counselor at OnTrack WNC. Individual counseling options are available at housing counseling agencies approved by the U.S. Department of Housing and Urban Development, which includes OnTrack WNC. You can find the nearest counseling agency by visiting HUD’s website.

[Read: How to Overcome Challenges as a Second-Time Homebuyer.]

Know what you’re walking into. If you pay close enough attention, you shouldn’t come across too many maintenance surprises in your first year of homeownership.

The home inspection during the due diligence period of your home purchase should be able to tell you what systems are likely to fail first. While the inspection may note that the roof is currently in OK condition, for example, the report may also note that at 28 years old, it will likely need replacement in the next two years.

With this information, you know you’ll need more than a rainy-day fund of $2,500. A new roof installation costs $7,271 on average in the U.S., according to HomeAdvisor.



Lee says OnTrack WNC’s homebuyer classes bring in a home inspector to walk prospective buyers through an inspection report, explaining what to keep an eye out for and what questions you should ask the inspector to know more about the home you’re about to buy.

When you’re able to plan for what systems will need replacement and when, you also have the opportunity to research materials, contractors and make a decision that works for your budget in the long run.

More often than not, a furnace will break down on a particularly cold weekend, and an unprepared buyer will resort to hiring the company that can come out the fastest and install the cheapest heating replacement in the shortest amount of time, says Kyle Murray, director of marketing at Bosch Thermotechnology.

“They’ll put in a cheap furnace that the contractor recommended and not think about getting a high-efficiency furnace,” he says, noting the cheapest option can increase your bills and need to be replaced sooner.

[See: Don't Call the Handyman: 9 Quick Fixes You Can Do Yourself.]

Have a game plan. There’s almost always something that could be repaired, improved or updated in a home, and it’s good to operate with a to-do list rather than rushing for emergency repairs when everything fails.

Then when a real emergency happens that you couldn’t have prevented, like a burst pipe during a deep freeze, you know you can delay that dishwasher replacement to ensure you have extra funds to cover the deductible on your homeowners insurance claim to make the repairs.

To reduce the number of annual surprises, Murray says regular maintenance on major systems is necessary, particularly for your heating and cooling system. “It’s the maintenance, the changing of the parts that need it and doing a yearly tuneup,” he says.

As the homeowner, you can also reduce the number of emergencies by doing seasonal maintenance around the interior and exterior of a house, like cleaning out the gutters, clearing the dryer vents and changing furnace filters. With regular maintenance, that home maintenance emergency fund will be able to grow organically, and you won’t feel the same impact on your savings when a disaster occurs.


8 Potential Headaches to Be Aware of Before Becoming a Homeowner

Be ready for things to go wrong.

The facia board is rotted and the gutters a re falling away from the house.  Look for other images in this series.

(Getty Images)

No one loves shelling out money for unexpected expenses, but sometimes that seems like a rite of passage in homeownership. “Most of the time, the unhappy surprises are simply due to people being unaware of the things that can crop up,” says Brad Hunter, chief economist for HomeAdvisor. First-time homebuyers in particular may not know what to expect after closing on a home, and there’s nothing worse than developing buyer’s remorse about one of the largest investments you’ll ever make. Here are eight headaches to prepare for if you’re looking to purchase a house.

A suddenly less-than-desirable location

A suddenly less-than-desirable location

Aerial View of school buildings and a track Central Texas near Austin

(Getty Images)

Buying a house across the street from a high school didn’t seem like such a bad idea when you saw how nicely renovated it was. But when you don’t have kids and Friday night football games are keeping you up later than you would like, you realize you should have made a pros-and-cons list regarding the location. Don’t let a charming interior override a location you dislike or a lot that will give you flooding problems. “If you don’t like your lot, don’t buy the house, because you cannot change that,” says Kim Wirtz, a Realtor for Century 21 Affiliated in Lockport, Illinois.

A high monthly mortgage payment

A high monthly mortgage payment

House keys over the hundred dollar banknotes against wooden background

(Getty Images)

One of the most crippling headaches to deal with is a monthly mortgage payment you find you can’t quite afford. Lysette Portales, a real estate agent with Century 21 Jim White & Associates in Treasure Island, Florida, says she stresses to clients that they should shop around for a mortgage with multiple lenders and inquire with each about different program options. “A lot of them might be able to do 100 percent [financing],” she says, noting that many homebuyers typically only know about a couple mortgage programs and settle for one without considering what would be most affordable option both now and down the line.

Items that are on their last legs

Items that are on their last legs

A man uses a flashlight to help him see the hot water heater in a dark closet

(Getty Images)

Whether it's the roof, water heater or furnace, aging home systems will need replacement. And that may end up being sooner than you’d like, especially if you didn’t pay close attention to the age and condition of the roof, plumbing, electric and heating and cooling systems when your inspector pointed them out. HomeAdvisor’s 2015 New Homeowner Survey found that 75 percent of homeowners face an unexpected emergency within a year of purchase. To expect the unexpected, Hunter points to the survey’s recommendation that homeowners plan to spend 1 percent of the home’s purchase price on unplanned repairs. Maintaining at least that much in your emergency fund will help keep you from dipping into other savings from year to year.

Old systems

Old systems

An old air conditioner unit, in need of updating, sitting in tall weeds

(Getty Images)

It’s important to pay attention to a home's aging big-ticket items before you even make an offer. “A lot of homebuyers are distracted by how cute a home can be,” Portales says, adding that she makes it her job to point out the age of the roof, air conditioning unit, water heater and more to buyers. Then when it comes time to calculate an offer, you should factor in the cost of those pieces that will need immediate replacement when determining how much you think the home is worth.

An air conditioner that's not the same

An air conditioner that's not the same

During hot summer night with air conditioning system breakdown trying to find a way to sleep in the refrigerator. Very dark atmosphere. Picture fades to black on left.

(Getty Images)

Wirtz says one of the things in a home that seems to always break or have issues within the first year of its purchase is the air conditioner. But it’s not always because it breaks down – she says it simply might not be as effective as the new homeowner wants it to be. “It may not be cooling like they’re used to,” Wirtz says. You can either learn to deal with a little less cooling, bring in an HVAC pro to inspect and fix any problems or research any DIY fixes that might get it cooling better – like air conditioner cleaning spray.

Unseen leaks

Unseen leaks

An old pipe breaks in freezing weather in Baku, Azerbaijan

(Getty Images)

Home inspectors aren’t able to see through walls, so the discovery of a pipe leak isn’t uncommon after you’ve moved into the home. But this is one repair you want to make as quickly as possible. “When there’s water that is not stopped, it can create mold – and mold remediation is extremely expensive and extremely difficult,” Hunter says. Mold growth in your home can cause serious health problems, so it’s imperative to address any moisture issues as quickly as possible to avoid it becoming any more dangerous, let alone more expensive.

Surprise renovation expenses

Surprise renovation expenses

Contractor discussing renovations

(Getty Images)

Fixer-uppers are all the rage these days, as many homebuyers are willing to take on renovation projects in exchange for a slightly lower price tag. But when budgeting for your renovations, leave plenty of room for the discovery of existing problems once your contractor looks behind the walls. The HomeAdvisor survey found 51 percent of homeowners spent more time on home projects than they expected. “Even if you have a fully vetted, well-reviewed contractor … they still might uncover issues that maybe a previous contractor left incomplete,” Hunter says. He recommends leaving around 10 percent extra space in your budget for surprise problems of any kind.

Problems that pile up

Problems that pile up

Mold grows on a wall next to a damp stained wood door.

(Getty Images)

All too often it feels like the problems in a home have a snowballing effect, but you don’t have to go broke tackling them all at once. “Day one, [homeowners] won’t have to tackle all those projects,” Hunter says. “They can use the list of items found by the home inspector as a checklist and prioritize the items on that list and create a budget.” You should immediately address those problems that create a health or safety issue, such as a broken step or leak in your roof that could lead to mold. But replacing an older dishwasher can wait until next year, when you have more room in your home repair budget.

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Tags: real estate, housing, home prices, new home sales, existing home sales, pending home sales, home improvements, home insurance


Devon Thorsby is the Real Estate editor at U.S. News & World Report, where she writes consumer-focused articles about the homebuying and selling process, home improvement, tenant rights and the state of the housing market.

She has appeared in media interviews across the U.S. including National Public Radio, WTOP (Washington, D.C.) and KOH (Reno, Nevada) and various print publications, as well as having served on panels discussing real estate development, city planning policy and homebuilding.

Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at dthorsby@usnews.com.

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