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25 Hidden Costs of Buying a Home: Unexpected Expenses You Need To Know

Jul 10, 2024

Buying a home is an exciting adventure filled with visions of cozy nights, backyard BBQs, and the pride of ownership.

But let’s be real – it’s also a financial rollercoaster that can leave even the most prepared buyers feeling a little green.

As someone who’s been through this rodeo more than once, I can tell you that the price of that cute colonial is just the tip of the iceberg.

Hand holding a toy miniature house
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We’ve all heard horror stories of first-time homebuyers getting blindsided by surprise expenses, right?

Well, I’m here to pull back the curtain on those sneaky costs that don’t make it into the real estate brochures.

In this article, we’ll cover 25 hidden costs of buying a home you need to know about before you sign on the dotted line.

So, grab a cup of coffee (or maybe something stronger), and let’s get into the meat of what it really costs to buy a home. Your future self (and your wallet) will thank you for this inside info.

Hidden Costs of Buying a Home – How much does it really cost?

Down Payment

Let’s start with the elephant in the room – the down payment. This is usually the biggest upfront cost you’ll face and can vary widely depending on the type of loan you’re getting.

Sticky notes with hand written down payment and doodles with house and money signs

For conventional loans, you’re looking at 20% of the purchase price.

So if you’re eyeing a $300,000 home you’d need to come up with $60,000. Ouch, right? But don’t freak out just yet!

There are other options:

  • FHA loans may only require a 3.5% down
  • VA loans for eligible veterans can offer 0% down
  • Some conventional loans now offer 3% down

Pro tip: While a smaller down payment may seem attractive, remember that often means higher monthly payments and additional costs like Private Mortgage Insurance (PMI) (more on that later).

Closing Costs

Just when you think you’ve jumped over all the financial hurdles, here come the closing costs.

Hand pulling wood block - Closing cost and $ marked on wooden jenga blocks

The closing cost can range from 2% to 5% of the purchase price. So on that $300,000 home, you could be looking at an additional $6,000 to $15,000.

I know, I know – it’s enough to make you want to crawl back into your rental, right?

Closing costs typically include:

  • Loan origination fees
  • Underwriting fees
  • Title insurance
  • Deed recording fees
  • Attorney fees

Pro tip: Some of these fees are negotiable and in some cases, you can convince the seller to pay part of the closing costs. It never hurts to ask!

Home Appraisal

Before your lender hands over a big chunk of change, they want to make sure the home is worth what you’re paying. Enter the home appraisal.

hand holding clipboard with real estate appraisal form

This can cost between $300 and $500 but can go up to $800 for larger or more unique properties.

Think of the home appraisal as a safety net – it protects you from overpaying and the lender from over-lending.

Plus it may give you some negotiating power if the appraisal comes in lower than the asking price.

Home Inspection

If the home appraisal is like a general health check-up, the home inspection is like a full-body MRI.

man inspecting plumbing pipes under sink

your chance to find out any potential issues before they become your problems.

A typical home inspection costs between $300 and $500.

But wait, there’s more!

Depending on the home’s age, location, and your personal concerns you may want to tack on additional specialized inspections:

  • Termite inspection
  • Mold inspection
  • Asbestos inspection
  • Radon testing

These can add a few hundred dollars each but trust me it’s better to know about that termite infestation or toxic mold before you move in.

Property Taxes

Ah, property taxes – the gift that keeps on giving – the ongoing expense that makes you wonder why you ever wanted to be a grown-up in the first place.

mason jar filled with coins labeled property tax and growing graph with arrow showing the growth

These vary wildly depending on where you live from as low as 0.4% in Alabama to 2.2% in New Jersey.

Let’s say you buy that $300,000 home in a state with a 1% property tax rate. That’s $3,000 a year or $250 a month that you need to factor into your budget.

And here’s the kicker – property taxes go up over time not down.

Pro tip: Research property tax rates in different neighborhoods. A slightly higher home price in an area with lower property taxes might actually save you money in the long run.

Homeowners Insurance

Your lender isn’t being paranoid – they require homeowners insurance because, well, life happens.

hand holding umbrella over a toy miniature house

Storms, fires, that tree in your yard that’s been eyeing your roof suspiciously – homeowners insurance protects your (and the lender’s) investment.

In 2024 the average homeowner’s insurance cost is about $1,915 per year for a $300,000 home.

But if you live in an area prone to natural disasters you may need additional coverage:

  • Flood Insurance
  • Earthquake insurance
  • Hurricane insurance

These can add hundreds or thousands to your annual insurance costs.

Private Mortgage Insurance (PMI)

Remember when we talked about those low-down payment options?

Well here’s the catch – if you put down less than 20% you’ll likely be required to pay Private Mortgage Insurance.

yellow pen and black pencil with drawing of cloud and a house

PMI typically costs between 0.22% to 2.25% of your loan amount annually.

On a $240,000 loan (assuming you put 20% down on that $300,000 home) PMI could cost you anywhere from $528 to $5,400 a year. That’s $44 to $450 a month on top of your mortgage payment.

The good news? Once you build up 20% equity in your home you can usually cancel PMI.

The bad news? That can take years depending on your loan terms and home value appreciation.

Earnest Money Deposit

When you make an offer on a home you’ll typically need to provide an earnest money deposit.

person holding iPad with both hand - doodles floating over iPad labeled money time

This shows the seller you’re serious and can be 1% to 3% of the offer price.

For a $300,000 home that’s $3,000 – $9,000 you need to have ready to go when you make an offer.

The good news is this money usually goes towards your down payment or closing costs if the sale goes through.

Escrow Fees

Escrow is like a neutral third party that holds onto important documents and money during your real estate transaction.

Hand holding 2 wooden blocks together labeled with escrow symbols

It’s a necessary part of the process but it doesn’t come free.

Escrow fees typically run about 1% to 2% of the home’s price.

On our $300,000 home that’s another $3,000 to $6,000 to add to your growing list of expenses.

Title Insurance

Title insurance protects you and your lender against any defects in the property’s title – like undisclosed heirs, forged documents, or liens against the property.

title insurance document

It typically costs between 0.5% and 1% of the loan amount.

For a $240,000 loan, you’re looking at $1,200 to $2,400.

It’s a one-time fee but not exactly pocket change.

Transfer Taxes

Just when you thought you were done paying fees here come transfer taxes.

These vary by state and even by city but they’re essentially a tax on transferring ownership of the property.

Some states charge a percentage of the sale price, others have a flat fee.

In some areas, the seller pays this tax but it’s always up for negotiation.

Moving Costs

Unless you have a bunch of super strong friends who work for pizza and beer you’re probably going to need to budget for moving costs.

two workers carrying boxes

According to recent data, the average cost for a local move is $1,624 while a long-distance move is $6,060.

Of course, these costs can vary widely based on:

  • Distance of the move
  • Amount of stuff you’re moving
  • Whether you hire professionals or rent a truck and do it yourself
  • Time of year (peak moving season is typically more expensive)

Pro tip: Get quotes from multiple moving companies and consider whether the convenience of professional movers is worth the extra cost for your situation.

Utility Setup Fees

When you move into a new home you’ll need to set up utilities like electricity, gas, water, sewage, and internet.

Many of these services charge setup fees which can add up fast.

Don’t forget to budget for ongoing monthly costs too.

The average monthly utility bills for a U.S. household are:

  • Electricity: $117
  • Natural gas: $63
  • Water: $70
  • Internet: $60

Homeowners Association (HOA) Fees

If you’re buying in a planned community or condominium you might be on the hook for HOA fees.

HoA spelled out on wooden block near toy plastic little homes

These typically range from $200 to $500 per month but can be much higher in luxury communities.

HOA fees often cover:

  • Maintenance of common areas
  • Trash removal
  • Snow removal
  • Community amenities like pools or gyms

Pro tip: Always factor in HOA fees when calculating your monthly housing costs. A home with high HOA fees might end up being more expensive than a pricier home without them.

Maintenance and Repairs

Gone are the days of calling the landlord when something breaks.

hand holding several construction tools near a home

As a homeowner, every leaky faucet, creaky floorboard, and temperamental appliance is your responsibility.

A good rule of thumb is to budget 1% to 2% of your home’s value annually for maintenance and repairs. For our $300,000 home that’s $3,000 to $6,000 per year.

Common maintenance costs include:

  • HVAC tune-ups
  • Gutter cleaning
  • Chimney sweeping
  • Appliance maintenance

Furnishings and Appliances

Unless you’re moving from a similarly sized home you’ll likely need to budget for new furniture and appliances.

This is especially true if you’re moving from an apartment to a house – suddenly you have a lot more space to fill!

Costs can vary widely based on your taste and budget but here are some average costs for basic appliances:

  • Refrigerator: $430 to $10,600
  • Washer and Dryer: $720 to $2,150
  • Dishwasher: $330 to $2,000

And don’t forget the furniture for all those new rooms!

Landscaping and Yard Maintenance: Your New Weekend Hobby

If your new home has a yard, congrats! You now have a new weekend hobby.

person pushing lawnmower cutting grass

Whether you’re a DIY enthusiast or prefer to hire professionals yard maintenance costs can add up fast.

Professional lawn care services average about $130 per month but costs can be higher for larger yards or if you want additional services like fertilization or weed control.

Don’t forget to budget for equipment if you’re going the DIY route:

  • Lawnmower: $150 to $500
  • Weed trimmer: $30 to $200
  • Gardening tools: $50 to $200

Pest Control: Evicting Unwanted Tenants

Nobody wants to share their new home with uninvited guests.

a person wearing pest control gear squatting down looking a bugs

Regular pest control can prevent infestations and protect your home from damage.

Professional pest control services typically cost between $30 and $50 per month or $100 to $300 for quarterly treatments.

Security System

Many homeowners choose to install a security system for added peace of mind.

Costs can vary widely based on the system you choose:

  • DIY systems: $200 to $800 upfront
  • Professionally installed systems: $600 to $1,600 upfront

Don’t forget about monitoring fees which can range from $10 to $50 per month.

Window Treatments

Unless you enjoy giving your neighbors a free show you’ll need to budget for window treatments.

Costs can vary widely based on the size of your windows and the type of treatments you choose:

  • Basic blinds: $20 to $100 per window
  • Custom drapes: $100 to $1,000 per window

Painting and Decorating: Adding Your Personal Touch

Even if you like the current paint colors you’ll likely want to add your own personal touch to your new home.

woman painting wall dark blue

Professional interior painting averages $2 to $6 per square foot.

If you’re handy you can save money by painting yourself but don’t forget to budget for supplies:

  • Paint: $30 to $60 per gallon
  • Brushes, rollers and other supplies: $100 to $200

Legal Fees

While not always necessary some homebuyers choose to hire a real estate attorney to review contracts and closing documents.

This can cost anywhere from $500 to $1,500 based on the complexity of your transaction.

Storage Fees

If there’s a gap between moving out of your old place and into your new home you might need to budget for temporary storage.

Monthly storage unit rentals typically range from $60 to $180 based on size and location.

Commuting Costs

several people standing at train station near train

If your new home is farther from work than your previous residence don’t forget to factor in increased commuting costs. This could include:

  • Additional fuel costs
  • Increased vehicle maintenance
  • Toll road fees
  • Public transportation costs

Unexpected Repairs

No matter how thorough your home inspection surprises can always pop up.

It’s wise to have an emergency sinking fund for unexpected repairs. Some big-ticket items:

  • New roof: $5,000 to $10,000
  • HVAC replacement: $4,000 to $7,000
  • Major plumbing repairs: $500 to $4,000

Final Thoughts On The True Cost of Homeownership

That’s a lot to take in, isn’t it?

The truth is the real cost of buying a home goes far beyond the listing price.

While these hidden costs might seem overwhelming being aware of them is the first step in preparing for homeownership.

Buying a home is not just a transaction – it’s a journey. It’s about creating a space that’s truly yours, where memories are made and dreams take root.

Yes, it comes with responsibilities and costs but for many the joys of homeownership far outweigh the challenges.

As you start your home buying journey keep this guide handy. Plan wisely, budget carefully, and don’t be afraid to ask questions along the way.

After all, knowledge is power – and in this case, it’s also money in your pocket.

The Budget Academy
Fab Kellum author of the Girl, Get Out of Debt! blog

Hey you! Welcome to The Budget Academy. I am Fab, a mom, and an entrepreneur at heart. Like many, I have overcome financial struggles, and now I get to share with you how I became debt-free and what I learned on my own personal journey.  I have a Finance and Real Estate background and am passionate about helping others succeed and achieve financial freedom.  So, please don’t be shy, let’s connect and start this journey together! Learn more about me here.