How to buy a home - what to know
Buying your first home is an exciting milestone, but it's easy to get swept up in the thrill of house hunting and overlook the myriad of hidden costs that come with homeownership. As a recent first-time homebuyer, I learned the hard way that the purchase price is just the beginning. Our homebuyer education course is ideal for first time home buyer program.
Here are 20 hidden costs of buying a house that can catch new homeowners off guard.
1. Down payment:
A significant upfront cost, the down payment typically ranges from 3-20% of the purchase price. The more you put down, the lower your monthly mortgage payments will be.
2. Closing costs:
Fees associated with finalizing your mortgage, including loan origination fees, appraisal fees, title insurance, and attorney fees. Expect to pay 2-5% of the house purchase price.
3. Property taxes:
Annual taxes based on your home's assessed value, which can vary widely by location. These can increase over time, so budget accordingly.
4. Homeowners insurance:
Protects your home and belongings from damage or theft. Premiums depend on home value, location, and coverage levels.
5. Private mortgage insurance (PMI):
Required if your down payment is less than 20%. It protects the lender in case of default but adds to your monthly expenses.
6. Maintenance and repairs:
From leaky faucets to HVAC tune-ups, home maintenance costs can add up quickly. Budget 1-2% of your home's value annually.
7. Utility bills:
Expect to pay more for electricity, gas, water, and sewer than you did as a renter. Costs vary based on home size and usage.
8. HOA or condo fees:
If your home is part of a homeowners association or condo complex, you'll owe monthly or annual dues for shared amenities and maintenance.
9. Landscaping and yard maintenance:
Lawn care, tree trimming, and gardening supplies can take a chunk out of your budget, especially if you have a large yard.
10. Pest control:
Depending on your location, you may need regular treatments to keep termites, ants, or other pests at bay.
11. Furniture and decor:
Furnishing a new home adds up quickly, especially if you're upgrading from a smaller space. Prioritize essential pieces and budget for the rest over time.
12. Appliances:
If your home doesn't come with major appliances like a refrigerator or washer/dryer, you'll need to factor in the cost of purchasing them.
13. Window treatments:
Blinds, curtains, and shades can be surprisingly expensive, especially for larger windows or custom sizes.
14. Home security system:
Installing a security system can provide peace of mind, but it comes with upfront costs and monthly monitoring fees.
15. Property insurance:
In addition to homeowners insurance, you may need additional coverage for valuable items like jewelry or art.
16. Flood or earthquake insurance:
Depending on your location, you may need separate policies to protect against natural disasters.
17. Capital gains tax:
If you sell your home for a profit in the future, you may owe capital gains tax on the proceeds.
18. Opportunity cost:
Tying up funds in a home means you may miss out on potential returns from investing that money elsewhere.
19. Moving expenses:
Don't forget the cost of hiring movers, renting a truck, or buying packing supplies.
20. Time and stress:
While not a direct cost, the time and energy spent on home maintenance and repairs can be a significant drain on your resources.
Becoming a homeowner is a big financial commitment, but by being aware of these hidden costs and budgeting accordingly, you can avoid unwelcome surprises and enjoy your new home with confidence.
