Hidden Expenses for First-Time Homebuyers

If you’re purchasing a house for the first time, it’s important to know that the down payment and monthly mortgage payments are just the beginning of what you’ll need to spend. Hidden costs abound throughout the entire homebuying and homeowning process, and you’ll want to be aware of these so you can incorporate them into your budget and avoid surprises you can’t afford.

Inspection and appraisal

Before you complete the purchase of your home, it’s important to know exactly what you’re getting and what shape it’s in. A home inspection will help you uncover any hidden issues — and give you the basis for negotiating repairs or a lower purchase price with the current owners. Although the inspection may end up saving you money in the long run, Andrea Browne Taylor writes in an article for Kiplinger that you’ll likely need to pay between $200 and $600 for it. You should also keep in mind that your mortgage lender will need to appraise the home to confirm that it’s worth what you’re paying. According to Taylor, you’ll probably end up paying a fee of several hundred dollars to cover this service.

Closing costs

“Closing costs” are a large grab bag of expenses you’ll have to pay as you wrap up your home purchase. Writing for The Balance, Jean Chatzky notes that these frequently include title insurance and all sorts of fees — for legal costs, originating the loan, recording the deed, and more. Taylor adds that you may also be required to make an initial deposit into an escrow account, which many lenders use to cover your mortgage payments, property taxes, homeowners insurance premiums, and other costs. Altogether, closing costs could equal up to 5 percent of your home’s purchase price.

Taxes and insurance

Property taxes and homeowners insurance premiums may be part of your closing costs, but they certainly don’t end there. Your mortgage lender will almost certainly require you to carry insurance on your home so it will be covered in the event of a fire or a natural disaster — and it’s a good idea to keep this policy even after you’ve paid off the house. Meanwhile, property taxes will be a fact of life almost anywhere you live, whether they’re assessed at the state, county, or city level. Rates can vary quite a bit from place to place, so be sure to research these as part of your house-hunting and budgeting process.

Utilities, maintenance, and repairs

As a first-time homebuyer, this may be your first time paying for all the utilities you use — electricity, gas, water, sewer, internet, trash collection, and others. These will likely cost you thousands of dollars every year. You’ll also be responsible for covering all your maintenance costs, including everything from lawn care to appliance upkeep. Repair and remodeling costs will come out of your pocket as well—so before you buy, consider what you might need to spend in the future to replace the roof, buy new appliances, apply new paint, or service the HVAC system.

Buying your first home is a huge step, and you can make the experience much less stressful by planning ahead and budgeting for the major costs you’re sure to encounter along the way.

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