The cost of homeownership can catch first-time home buyers by surprise. Many forget about expenses beyond their mortgage payment. 

Unlike renters, homeowners must pay property taxes and homeowner's insurance. They also have to set aside money for routine maintenance. Experts recommend saving 2% of the property's value each year. You may be wondering, “Do home warranties cover roofs?” Having homeowner’s insurance is beneficial because some allow you to replace your roof under insurance. Home warranties cover things like kitchen appliances and water heaters.

1. Set a Budget 

Homeownership brings new expenses that may not be present when you rent. Your mortgage payment is one of the main ones, but you also have to consider property taxes and homeowners insurance. These additional costs can quickly add up and make a home that seemed affordable on paper suddenly seem out of reach. 

To start, create a budget by listing all your required monthly expenses. This includes necessities like food, transportation and housing, as well as variable expenses such as entertainment, credit card payments and household services like lawn care or house cleaning. You can use a spreadsheet, a budgeting app or even just a regular old notebook to do this. 

Once you have a list, categorize each expense into a need and a want. This will help you identify areas where you could cut back and save more. It’s important to remember that a budget is an ongoing process; you can revisit it each month as your needs and expenses change. 

2. Look for ways to save 

It's important to know what costs come with owning a home—there are some new expenses that you might not be aware of, and others that may have increased since you were renting. For instance, homeowners often find themselves paying more in utility bills, homeowner’s insurance and property taxes. 

If you are a new homeowner, look at all of your monthly expenses and try to figure out how you can save money. This can include looking at recurring services like online streaming and subscriptions or even cutting out unnecessary expenses. 

For example, you might be able to save hundreds of dollars a year by stopping eating out or ordering food delivery. This could help you funnel extra money into your home budget or into a savings account for unexpected repairs. You could also use the extra cash to pay down debt or increase your contributions to retirement accounts. You can do all of this by setting a budget and tracking your spending with digital tools. 

3. Set a budget for repairs 

Homeownership is a big financial commitment. And, just like any major purchase, it can come with unexpected expenses.

Repairs and maintenance can add up quickly, and it’s important to have a savings plan in place. One popular rule of thumb is to save 1% of the initial purchase price of your home each year for maintenance costs. But, there are other factors to consider, such as the age of your home and its location. A home in an area with harsh weather, for example, might have more maintenance needs than a newer home. 

Also, be sure to factor in other unexpected expenses, such as homeowner association fees, trash pickup and a possible homeowners’ insurance policy. Another way to help set aside money for repairs is to cut back on other unnecessary spending, such as buying coffee every day or frequenting fast food restaurants. Then, transfer the savings to a home maintenance fund. This will help ease the burden of unplanned expenses and allow you to budget for larger costs, such as a new water heater, down the road. 

Signing up for a warranty plan to avoid having to budget for repairs. Many people who buy a warranty avoid the hassle of having to budget and plan for things that break down. This is because their plan can cover repairs or replacement costs. 

4. Set a budget for emergencies 

Now that you're a homeowner, it's important to revisit your budget and expenses on a regular basis. This helps you stay on top of new expenses and costs, like property taxes and homeowners insurance, which can fluctuate over time. 

Also, it's a good idea to set aside an emergency fund. This is money that you'll use to cover unexpected expenses, such as a car repair or an illness. An emergency fund can help you avoid high-interest credit card debt and stress in a financial crisis. 

Saving money for an emergency fund may feel difficult, but it's important to try to do it as often as possible. If you keep detailed line-item bookkeeping and accounting records, it's easy to turn those into a budget, allowing you to save more consistently over time. Ideally, you'll have enough savings to cover several months of living expenses in an emergency fund. However, if that's not feasible, it's still important to save at least a few hundred dollars.