Buying your first home is exciting, but it comes with more costs than most people expect. Many home buyers focus on the down payment and monthly mortgage, assuming that’s the bulk of the expense. It’s not. There are unexpected expenses when buying a home that can catch you off guard, turning your dream home into a financial stressor. Here’s what you need to know.
1. Closing Costs: More Than Just a Line Item
You might have heard of closing costs, but do you know how much they can add up? Typically, they range from 2% to 5% of the home’s purchase price. On a $400,000 home, that’s anywhere from $8,000 to $20,000. These costs include:
- Lender fees (loan origination, underwriting)
- Title insurance (protects against ownership disputes)
- Escrow fees (payment processing for taxes and insurance)
- Prepaid property taxes and homeowners insurance
Before making an offer, ask your lender for a Loan Estimate to see a breakdown of these costs.
2. The Cost of a Thorough Home Inspection
Home inspections aren’t optional. They’re a necessity. A standard home inspection typically costs between $400 and $800, depending on the home’s size and location. But specialized inspections—like foundation, sewer scope, or radon testing—can push that number even higher.
Skipping an inspection to save a few hundred dollars could cost you tens of thousands in unexpected repairs later. Always budget for a comprehensive inspection.
3. Immediate Repairs and Upgrades
Even if your new home isn’t a fixer-upper, there will be things you need (or want) to fix right away. That could be anything from replacing old carpet to upgrading an outdated electrical panel.
Here’s what many buyers often overlook:
- New locks and security system ($200-$1,000)
- Appliance upgrades ($500-$5,000)
- Paint and minor cosmetic updates ($1,000+)
- HVAC servicing or repairs ($150-$2,000+)
Have an emergency fund set aside. Even if your home seems “move-in ready,” surprises happen.
4. Property Taxes: Not Always What You Expect
Many buyers budget based on the seller’s current property taxes. That’s a mistake. Your tax bill may be reassessed after purchase, especially if the home’s value has increased. You certainly want to get your homestead exemption into the county as soon as possible so that you can secure those savings on your property taxes.
If you’re buying a home in a rapidly appreciating market, expect a higher tax bill than the previous owner paid. Check with the local tax assessor’s office to get an estimate of future tax obligations.
5. Homeowners Association (HOA) Fees
Buying a condo or a home in a planned community? Expect HOA fees, which can range from $50 to $500+ per month, depending on the amenities and maintenance included.
Some HOAs also require special assessments for major repairs—like a new roof for a condo complex. Ask for the HOA’s financial statements to see if they have reserves or if special assessments are likely.
6. Utility Deposits and Higher Bills
Setting up utilities often comes with deposit fees—especially for homeowners moving into the area with no payment history with the area providers. Plus, your utility bills may be higher than what you’re used to in an apartment. Expect increases in:
- Electricity and gas (larger space = more heating/cooling costs)
- Water and sewer (especially if you now have a lawn to water)
- Trash collection (not always included in property taxes)
Call local utility companies before closing to get cost estimates.
7. Home Maintenance: A Constant Expense
Remember, owning a home means you’re responsible for everything—roof leaks, plumbing issues, HVAC maintenance, landscaping. A general rule of thumb is to budget 1% to 3% of your home’s value annually for maintenance.
For a $400,000 home, that’s $4,000 to $12,000 per year. Some years will be cheaper, others will hit you with big-ticket repairs. Planning ahead prevents financial strain.
8. Furniture and Décor: The Unexpected Money Drain
Your new home might have more space than your previous one, which means you’ll need more furniture. The cost of filling up empty rooms adds up quickly:
- Sofa ($1,000+)
- Dining set ($800-$3,000)
- Bedroom set ($1,500+ per room)
- Window coverings ($500-$2,000+)
Before splurging, prioritize essentials. Buying quality pieces over time saves money in the long run. And certainly do not make any expenditures before closing. Wait until after you purchase the home to make any large purchases before the closing of your loan.
Be Prepared, Not Surprised
Buying a home is a huge milestone, but unexpected expenses when buying a home can turn excitement into stress. The key? Plan for more than just the mortgage.
Create a budget that includes these unexpected costs, and build a financial cushion to handle them. When you’re prepared, homeownership feels a lot less overwhelming—and a lot more rewarding!
