The Top 10 Hidden Costs of Buying a Home You Need to Know About

Buying a home is an exciting milestone, but it’s essential to be aware of the hidden costs that can arise during the process. Beyond the purchase price, there are several additional costs when buying a house that homebuyers need to consider to ensure a smooth financial transition. Preparing to buy a home of your own in the near future? Then read on. In this article, we will review 10 extra costs when buying a house that you need to be aware of. By understanding and budgeting for these expenses upfront, you can make informed decisions and avoid any unexpected financial burdens in an already stressful period.

Hidden Fees When Buying a House: 10 Expenses to Watch Out For

1. Closing Costs

Closing costs are fees associated with the finalization of your home purchase. They typically include appraisal fees, attorney fees, title search fees, and lender fees. They may also include home warranty closing costs if the seller is transferring a policy to the buyer. It’s crucial to budget for these costs, as they can range from 2% to 5% of the purchase price of the home. That means closing costs can quickly accumulate into thousands or even tens of thousands of dollars.

2. Home Inspection

A home inspection is an important step in the home buying process to identify any potential issues or necessary repairs. While the cost of a home inspection varies depending on the location and size of the property, budgeting for this expense is essential for your peace of mind and to avoid unexpected repair costs down the line.

3. Property Appraisal

Before approving a mortgage, lenders often require a property appraisal to determine its value. This is another hidden cost of buying a house. The cost of the appraisal is typically paid by the buyer and can range from a few hundred to more than a thousand dollars. Including this expense in your budget ensures you are prepared for the upfront costs of obtaining a mortgage.

4. Earnest Money Deposit

When making an offer on a home, it is customary to provide an earnest money deposit as a show of good faith. This deposit is typically a percentage of the purchase price and is held in escrow until the sale is finalized. Budgeting for the earnest money deposit is essential as it demonstrates your commitment to the transaction. This money goes toward the overall cost of the home sale, but beware that there are circumstances in which the seller can keep the earnest money deposit even if the deal falls through. If the buyer backs out or can’t follow through with the purchase, the seller may be entitled to retain the deposit.

For frame of reference, a typical earnest money deposit is around 1%–3% of the home’s value.

5. Homeowner’s Insurance

Securing homeowner’s insurance is essential to protecting your investment. It’s also usually required by mortgage lenders. The cost of homeowner’s insurance varies depending on factors such as the location, size, and condition of the home. It’s crucial to obtain insurance quotes and include the premiums in your budget to ensure continuous coverage.

6. Property Taxes

As a homeowner, you are responsible for paying property taxes. The amount can vary depending on the assessed value of the property and local tax rates. Researching property tax rates in the area and considering this ongoing expense is important for long-term financial planning. Bear in mind, too, that buyers may be responsible for reimbursing sellers for prorated taxes that the seller has already paid.

7. HOA Fees

If the property you are purchasing is part of a homeowner’s association (HOA),you may be subject to HOA fees. These fees are earmarked for the maintenance and management of common amenities and physical spaces. Understanding the HOA fee structure and factoring it into your budget is essential for accurate financial planning. Some reasonably expensive dues could be required upon closing, for example.

8. Moving Costs

Moving into your new home involves expenses such as hiring movers, renting a moving truck, or purchasing packing supplies. It’s important to budget for these costs to ensure a smooth transition and avoid any last-minute financial stress.

9. Home Repairs and Maintenance

Once you move into your new home, there may be repairs or maintenance tasks that need attention. Budgeting for ongoing maintenance, such as landscaping, HVAC servicing, and minor repairs, ensures that you can properly care for your new home and avoid unexpected expenses.

10. Furnishing and Home Improvements

Lastly, consider the cost of furnishing your new home and any desired home improvements or renovations. If you’re moving from a small apartment to a larger home, for example, you may have to spend a significant amount of money to purchase the furniture and décor to fill up this new space. These expenses can add up quickly, so including them in your budget allows you to plan accordingly and make your new space comfortable and personalized.

How to Save Money When Settling Into a New Home

Being aware of the hidden costs of purchasing a home is crucial for a successful and stress-free experience. By budgeting for closing costs, inspections, and other expenses, you can prepare yourself financially for the complete picture of homeownership. Understanding these hidden costs upfront allows you to make informed decisions, avoid financial surprises, and ensure a smooth transition into your new home.

The prospect of spending so much money out of pocket is no doubt anxiety-inducing. So what can buyers do to save some money? One option is to take advantage of a home warranty. Sellers or real estate agents may include a warranty with the sale of a home, but buyers can also purchase a policy on their own. It can ensure that any mishaps involving home appliances and systems, from refrigerators and water heaters to HVAC and plumbing, are swiftly resolved at an affordable price.

Peruse Liberty Home Guard’s blog to learn more about home warranties and their potential benefits. When you want to investigate a policy for your home, you can use our website for a free quote or call our team at (866)-432-1283.