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The home-buying process can be filled with uncertainty and frustration. Many home buyers work hard to ensure they find a home within a price range they can afford. However, even though the mortgage may be within a buyer’s budget, many home buyers do not plan for the additional costs associated with buying a home. These additional costs can often leave home buyers with little or no extra money to help in case of an emergency.
The Cost of Buying a Home
There can be a lot of unexpected costs associated with buying a home. However, there is one cost that can save home buyers significantly, especially during their first year of homeownership. A home warranty protects against unexpected breakdowns in the new home when many people are short on cash.
Before a home buyer signs a contract to buy a home, they must first ensure that the home is sound. An inspection is an important part of the home-buying process. A home inspection allows the potential buyer the chance to have a professional inspector check out many aspects of the home. The inspection provides buyers with a detailed description of any problems or potential problems a home may have.
Once the contract to buy the home is established, many home buyers must pay earnest money out of pocket as a guarantee to buy the home. In general, the earnest money is approximately one to two percent of the home price. Home buyers will also need to come up with the cost of homeowner’s insurance before the home can close.
At the closing, there are even more costs to consider. The fees for the transfer of the deed, the lawyer processing the sale, and various other fees tacked on by the locality or lending institution. Home buyers are also required to pay their down payment at closing.
Once all the costs are settled for the purchase of the home, the new homeowners must now pay to move into their new home. Moving costs, utility fees, and any other necessities needed to make the home livable will need to be purchased. These costs can be difficult to manage and often leave new home buyers with little money left over. If an emergency arises, it may be impossible to manage it.
Maintaining a Home
In addition to the various costs associated with buying a home, homeowners must also take on the responsibility of maintaining their homes. Unlike renting, when something breaks down, the homeowner is responsible for the repairs. Unfortunately, buying a new home does not come with a guarantee that everything will work as new.
Far too often, new homeowners will have a breakdown of an appliance or system within the first year. With all the expenses of purchasing the home, many homeowners may not have been able to build up their savings enough to cover such an expense. A warranty on these things can help minimize the costs of these types of repairs.
What is a Home Warranty?
A home warranty is a service contract. Homeowners can purchase this warranty to protect various aspects of their homes. If the covered system or appliance breaks down due to normal wear and tear, the warranty will provide coverage for the repair or replacement of that item.
This coverage can save homeowners hundreds or even thousands of dollars if they have a major appliance or home system breakdown. For new homeowners living on a very tight budget, this coverage can mean the difference between repairing the furnace or spending the winter with no heat.
How Does a Home Warranty Differ from Homeowner’s Insurance?
When a person buys a home, they generally purchase homeowner’s insurance. For those mortgaging their new home, homeowner’s insurance is required. Homeowner’s insurance protects from the unexpected. If there is a fire, storm, or other incident that cause damage to the home or property, the homeowner’s insurance will pay for the repairs.
Homeowner’s insurance differs from a warranty in that it protects damages no one planned on. A home warranty protects the expected. Every appliance and system in the home will eventually break down with use. Although a homeowner may not know when it will happen, inevitably, a refrigerator or furnace will need repair or replacement due to normal use.
What are the Home’s Systems?
The home’s systems are the various aspects of the home that are required to keep a home functional. There are four main systems in a home. These systems include electrical, heating, air, and plumbing. When there is a major problem within one of these systems, it can bring the home to a grinding stop and make it difficult to live there safely and comfortably.
The electrical system includes the wiring, breaker box, and various components throughout the home. Heating includes the home’s furnace and its parts. Air is the home’s air conditioning and its parts. The home’s plumbing includes the pipes that bring the water into the home, the pipes that take the water out of the home, and the various fixtures and appliances, such as the water heater, needed to keep the water flowing.
System Repair and Replacement
With a home systems warranty, homeowners are protected from the various problems that can affect the home’s major systems. If there is a problem with the furnace, a technician can be dispatched to the home to identify the cause of the problem for a small fee. Any repairs needed are then covered by that fee.
If the furnace is beyond repair, the technician can recommend replacing the furnace. At no additional cost to the warranty holder, the unit will be replaced up to the limits of the contract agreement. Whether it is the home’s furnace, electrical system, or any other system in the home, with a systems warranty, homeowners can save a lot of money when it is time for repairs.
Home Appliances
Another aspect of the home that may not be as important as the home systems but can put a stop to the daily activities in the home is the home’s appliances. Without the home’s refrigerator or stove, homeowners cannot prepare meals properly. Without a dishwasher or washing machine, it can become quite difficult to maintain a clean and healthy home.
When homeowners get a warranty to cover their home’s appliances, they can be sure that, if there is a problem, repairs are simply a click or phone call away. If the unit is beyond repair, a replacement appliance will be provided. Homeowners never have to worry about being unable to keep their homes functioning safely and properly.
What Does a Home Warranty Cover?
A warranty for the home covers a variety of elements in the home, depending on the plan chosen by the homeowner. A systems contract covers the basic systems of the home, such as the furnace, air conditioning, plumbing, and electrical system. A basic appliances contract covers the refrigerator, stove, dishwasher, and built-in microwave. Additional coverages are also available to meet the needs of the homeowner.
The warranty will provide the repair or replacement of covered items that break down due to normal wear and tear. However, if the covered item breaks down due to an unexpected incident, such as a flood or fire, it will not be covered. In addition, the warranty will not cover items that were damaged due to improper usage or because proper maintenance was not performed.
Can a Home Warranty be Customized?
Yes, a warranty can be customized to fit the needs of the homeowner. Additional coverage can be added for other appliances and systems in the home. There are even options to cover the various aspects of a home pool or spa.
What is the Downside of a Home Warranty?
As with everything, there are some downsides to having a home warranty. For example, if the system or appliance was not properly maintained or received regular tune-ups as recommended by the manufacturer, the warranty may not cover the repairs. Proper maintenance and tune-ups help to prolong the life of these various systems and appliances. Homeowners will only benefit by providing this care.
Another issue some users find bothersome is that they do not get to choose the technician or what options the technicians choose. The warranty company works with specific contractors in the area to make repairs. It is also up to the contractor whether the unit should be repaired or replaced. Sometimes, this may require repeated service calls before the unit is replaced.
Is a Home Warranty Only for Home Buyers?
Home warranties are strongly recommended for new home buyers to keep their homes in good repair year after year. For this reason, many Realtors offer a warranty during the sale of the home to help new buyers during the first year of ownership. However, it is not a program restricted to new buyers.
Anyone who owns a home can purchase a home warranty. In many cases, homeowners may have to wait a specific time period before they can use the services. In addition, some systems and appliances may need to be inspected to ensure they are in good repair before coverage can begin.
There are even warranty contracts for home builders and home sellers. These contracts are a little different and provide specific coverages to protect these entities. Companies that provide these warranties can offer more information about these types of contracts.
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