About to buy? Plan and save for maintenance costs

On the road to homeownership, Scott Leibfried has learned one thing: Expect the unexpected.

He and his wife had an offer accepted on a house, only to find out that foreclosure proceedings were about to begin on it. That was after they had considered another house that was pleasing but had major issues that came to light on closer inspection.

In the meantime, they're trying to estimate the money they will need for closing costs and any future expenses, hoping that they won't eat too deeply into their financial cushion.

"There are always going to be things that come up," Leibfried said.

Which could describe homeownership in general.

"The biggest mistake buyers make is underestimating the costs" of buying a house and maintaining it over time, said Allan Glass, a Los Angeles-based real-estate agent who worked with the couple.

Homeowners should have 1 percent of the purchase price of their home in savings for improvements and surprise expenses, Glass said. "That is the absolute minimum. It's better to have 2 percent to 3 percent socked away somewhere."

That cushion often isn't easy to come by for first-time home buyers - especially after they've scrimped and saved for their down payments. And there are many first-time buyers in the market now, because of more-affordable prices, low interest rates, and the federal tax credit.

"Some people walk away from closing with a nickel and a stick of gum, and that's probably not going to be a good idea," said Dale Robyn Siegel, president of Circle Mortgage Group in Harrison, N.Y.

She recommends having at least six months of mortgage payments in the bank after closing on a house, "especially now, with such an iffy job market."

To get a better handle on things, buyers should attend home inspections and ask questions, said Bill Richardson, president of the American Society of Home Inspectors. That way, they can get tips and recommendations from inspectors as they work.

Buyers should keep inspection reports handy for reference after the closing.

With a previously owned home, the inspector will estimate the age of major components, giving the buyer a sense of when they will need replacing. A furnace, for example, often lasts 12 to 15 years; a water heater, 10 to 12 years, Richardson says.

Approximate life expectancies of such components are listed at LivingWithMyHome.com, sponsored the by home-inspection firm Pillar to Post. Click on the "Repair & Remodel Estimates" tab.

Once you know what you're dealing with - and perhaps what the seller will repair or pay for before the sale is final - look five years out and make a list of big-ticket home issues that you'll need to address, said Kelly Rogers, director of education for Consumer Credit Counseling Service of Orange County, based in Santa Ana, Calif.

Make a timeline for those expenses. And don't count on borrowing the money you need for repairs.

"The banks have really tightened up, so it's harder and harder to get a home-equity line of credit," Richardson said. "If you don't budget for repairs, you will never get the repairs done when you need them."

When small problems pop up, it's important to address them before they become large-scale projects. Consider the tile in the bathroom: As soon as there's deterioration or cracking, take care of it, Richardson said.

"If the toilet is loose to the floor . . . it doesn't seem like a big deal, but it can leak and rot the floor," he said. "What could be a $15 repair [might end up being] a $700 repair or more."

For most starter homes, Richardson suggests planning for an annual general-maintenance budget of $500 to $1,000, to cover projects ranging from painting a room to caulking the bathtub.

"Buying a home is one of the largest investments you're going to make," he said, "If it's done wisely and with lots of thought, it can be a huge asset. If it's not well thought out, it can become a huge burden to you."