What Every Buyer Should Know:

Buying a home is an exciting milestone, but it comes with more costs than just the purchase price. Many buyers focus on the down payment and mortgage but overlook the hidden expenses that can catch them off guard. If you’re planning to buy a home, understanding these hidden costs can help you budget more effectively and avoid financial surprises.

1. Closing Costs

Closing costs are a collection of fees associated with finalizing a real estate transaction. They typically range from 2% to 5% of the home's purchase price and include:

• Loan origination fees

• Appraisal fees

• Title insurance

• Attorney fees

• Home inspection costs

• Prepaid property taxes and homeowners insurance

Many buyers underestimate these costs, so it’s crucial to get an estimate from your lender and factor them into your budget.

2. Home Inspection Fees

Before purchasing a home, it’s essential to have a professional inspection. This helps identify any structural, plumbing, electrical, or roofing issues. Depending on the size and location of the home, an inspection can cost between $300 and $600. If additional specialized inspections (such as for mold, radon, or pests) are needed, costs can rise even higher.

3. Property Taxes

Many homebuyers forget to account for property taxes, which can be a significant ongoing expense. The rate varies based on location but can be thousands of dollars annually. Some lenders require an escrow account for taxes, meaning you’ll need to prepay several months’ worth at closing.

4. Homeowners Insurance

Lenders require homeowners insurance, which protects your home against damage or loss. Costs vary based on location, home value, and coverage levels, but they can range from $800 to $3,000 per year. Additional insurance, such as flood or earthquake coverage, may be required in certain areas, adding to the expense.

5. Private Mortgage Insurance (PMI)

If your down payment is less than 20%, you may have to pay Private Mortgage Insurance (PMI). PMI typically costs 0.5% to 1% of the loan amount annually. For a $300,000 mortgage, that could mean an extra $1,500 to $3,000 per year. PMI is usually required until you reach 20% equity in your home.

6. Homeowners Association (HOA) Fees

If you’re purchasing a home in a community with an HOA, you’ll likely have monthly or annual dues. HOA fees cover amenities, landscaping, security, and maintenance of shared spaces. Fees can range from $50 to $500 per month, depending on the neighborhood and amenities.

7. Moving Expenses

The cost of moving can add up quickly. Hiring professional movers, renting a truck, or purchasing packing supplies can cost anywhere from a few hundred to several thousand dollars. If you're moving long-distance, expenses like travel, temporary lodging, and utility deposits can further increase costs.

8. Utility Set-Up and Deposits

New homeowners often have to pay deposits to set up utilities like electricity, water, gas, and internet. Deposits can range from $100 to $500 per service, depending on your location and provider. Additionally, monthly bills might be higher than expected if you're moving to a larger home.

9. Maintenance and Repairs

Even if a home inspection doesn’t reveal major issues, maintenance and repairs are inevitable. Common expenses include:

• HVAC servicing

• Plumbing or electrical repairs

• Roof maintenance

• Appliance replacement

Experts recommend budgeting 1% to 3% of your home’s value annually for maintenance and unexpected repairs. For a $300,000 home, that’s $3,000 to $9,000 per year.

10. Furnishings and Upgrades

Once you move in, you may need to buy new furniture, appliances, or decor. Even if you bring existing furniture, you might want to update paint colors, lighting fixtures, or landscaping. These costs can add up quickly, especially if you need major upgrades like new flooring or a kitchen remodel.

Final Thoughts

Buying a home is a significant financial commitment, and being aware of these hidden costs can help you plan better and avoid surprises. By budgeting for these expenses, you can ensure a smoother homebuying experience and enjoy your new home without unnecessary financial stress.

Before making a purchase, it’s always a good idea to consult with a real estate agent (like us!), but the second phone call you should make is to a financial advisor to get a clear picture of all the costs involved. From there, you’re going to want to make sure you’re able to be approved for a home loan. A well-prepared buyer is a confident and successful homeowner!