Homeowners's Checklist

While buying a new home is riddled with excitement and anxiety, owning a home brings with it an entirely new set of joys as well as challenges. Whether you are a first-time homeowner or not, use this checklist to make sure you are covering all your bases.

1. Use your home as a tax shelter.
If the cost of your mortgage, real estate taxes, and homeowners insurance has you feeling financially strapped, the good news is that the IRS allows several tax deductions associated with home ownership. The following items are usually reported on Form 1098, the annual statement you receive from the financial institution holding your mortgage.

Real estate taxes: You may deduct real estate taxes in the year paid. You can also deduct any pre-paid real estate tax collected from you at the closing of your home (as noted on your HUD1 Settlement Statement).

Mortgage interest: The amount of mortgage interest you paid on your residence (or second home) is typically deductible, as are "points" on home mortgages. In addition, any prepaid mortgage interest collected at your closing is tax deductible (also on your HUD1 Settlement Statement).

Local taxes: Local taxes are deductible if they went toward repairs or maintenance (not upgrading) for your existing property.

2. Understand how real estate tax is assessed.
The method used for assessing real estate tax differs depending on your state and/or municipality, but the tax you pay will almost certainly be based, in part, on the assessed value of your home. As a rule of thumb, you can expect to pay the equivalent of 1% to 3% of the market value of your home in annual property taxes. That means if your home is valued at $100,000, you will likely pay between $1,000 and $3,000 a year in real estate taxes. Remember that housing market values are generally adjusted on an annual basis. Use Domania's Home Values to get an estimate of your home's worth.

3. Question a rapid tax increase.
A rapid increase in the assessed value of your home could indicate a rise in the market values in your neighborhood, but it could also be a mistake. According to the National Taxpayers Union, approximately 60% of all homeowners are over-assessed. Of those, only 2% appeal their tax rate. But of that 2%, anywhere from 50% to 80% receive some reduction in their property taxes. If you feel your assessment is too high, contact your local tax assessor's office to file an appeal.

4. Manage insurance costs.
While homeowners insurance is mandated in most places, the extent of coverage you carry is typically up to you. Experts say that "adequate" coverage insures you for at least 80% of the replacement value of your home and personal property. To help manage insurance costs, pay off your premium in one yearly payment instead of periodic installments, choose a policy with a higher deductible, and consider installing security devices, which may make you eligible for a premium discount.

5. Make extra payments to mortgage principal.
Increasing your mortgage principal payments, either a little each month or a full "13th payment" once a year, will take years off the life of your mortgage, expedite the equity you are building in your home, and strengthen your overall financial picture. Consult with your mortgage lender to ensure they accept additional payments to principal.

6. Scrutinize home improvement projects.
Can you afford that new deck or family room you've been wanting to build? Before obtaining estimates from contractors, calculate up front what you can and should spend on improving your home. Ask yourself how long you intend to stay in your home. You don't want to invest thousands of dollars that you can't recoup if you sell in two to three years. Also look at your current monthly cash flow to determine if you can take on the additional expense.

7. Find a contractor.
When you go ahead with your home improvement project, find a reputable contractor. Take your time and conduct a thorough search. Also ask friends, neighbors, as well as mortgage lenders, real estate agents, and architects in your area for referrals.

8. Conduct seasonal maintenance.
To keep your home in sound working, order keep a checklist of standard seasonal maintenance tasks. For example:

Winter: check caulking around doors and windows, check gutters and downspouts, place insulation around pipes and water heaters.

Spring: inspect paint, asphalt, masonry, and roofing. Examine the attic and basement for signs of dampness or leaks.

Summer: attend to lawn and garden areas. Clear broken tree limbs, branches, and debris. Inspect for wood-destroying insects and other destructive pests.

Fall: change batteries in smoke detectors, have boiler and heating systems cleaned and inspected.

9. Secure your home.
Since so many home burglaries happen as a result of unlocked doors and windows, a few simple precautions can give you greater peace of mind. Use deadbolt locks on all external doors. Place a dowel or metal rod on the inside track of sliding glass doors. Install outside lights and keep them on at night. Trim shrubs or bushes that visually obstruct doors or windows. Ask your local police about a free home security survey.

10. Is refinancing a viable option?
Refinancing your home can save you significant money over the long term, but review your current situation and the market climate before you act. What interest rate are you currently paying? What is the current average interest rate for the type of mortgage you need (fixed rate or variable, 30-year or 15-year)? How long do you intend to own your home? Is the value of your home increasing, decreasing, or remaining steady? Do you have the cash needed to pay closing costs? Check out our Mortgage Tools for more information.

11. Organize important documents.
Keep your property deed and title, mortgage and financing documents, tax records, home improvement records, insurance policies, and warranties on all systems and appliances in one secure place. Consider making a duplicate set and storing it in a secure place outside your home, such as a safety deposit box.