How to Avoid Unexpected Costs When Buying a Home

With property prices and interest rates down, jumping into home ownership may seem more tempting than ever.  Before you make the leap, however, you need to consider the hidden costs of buying and owning a home.

Know These Often Unexpected Expenses When You Buy A Home

Sure, there are online calculators that help you figure out what your mortgage payment will be based on the purchase price of a home.  But there are other fees that will be coming out of your pocket either before or at closing.

  • Appraisal and Inspection Fees – Before you purchase, you will most likely have to pay for an appraisal of the home and occasionally, if property lines are in dispute, a home survey.  To prevent nasty surprises such as major structural damage, you will also want to get a home inspection, and in some areas you will need termite and radon inspections.
  • Closing costs – while you may be able to negotiate for the seller to pay a portion of these fees, you will have to be prepared to pay between 2 and 4% of the purchase price in closing costs.
  • Home Warranty – If the home is an older home and has elderly appliances and HVAC systems, you may want to add a warranty, which can cost from $250-$600.
  • Other one-time costs – There are a dizzying array of one-time costs that you will incur when you buy a home: title insurance, notary, wire fees, courier, attorney fees, endorsements, recording, state, county or city transfer fees, and lender fees.  You won’t be able to get out of paying most of these fees, but it is good to be prepared for them so you don’t get a shock at closing.

Did You Know About These Expenses After You Buy A Home?

  • Property Taxes – determined by the township or county you live in, not the bank.  This may be paid annually, or may be paid each month into escrow.
  • Homeowner’s Insurance – Lenders will require you to carry homeowner’s insurance, and even if you own a home outright, you should still purchase a policy.
  • PMI – This is extra insurance that lenders require from most homebuyers who obtain loans that are more than 80 percent of their new home’s value.  Buyers with less than a 20 percent down payment are normally required to pay PMI.
  • Homeowner’s Association Fees – Some housing developments have legal entities called Homeowner’s Associations that have been formed to maintain common areas in the neighborhood.  These annual fees generally range between $250 and $700 a year.
  • Maintenance Costs – These are the “normal” costs associated with maintaining a home, including annual heating and air conditioning inspections, roof and gutter upkeep, and lawn care.
  • Utility Bills – If you’ve been living in an apartment, utility costs for a house can come as a surprise.  Aside from things like water and electric, you may have to pay for waste water, sewer, garbage, gas, and recycling.  And don’t forget about telephone, cable and internet.
  • Unexpected Repairs – no matter how carefully you maintain your home, there will always be unexpected expenses that may not qualify to be claimed on your homeowner’s policy.  These include minor storm damage, tree removal, and appliance replacement.
  • Time – Even if you do most of the maintenance and landscaping around your home, there’s a time investment involved.  Homeowners may find themselves doing some type of maintenance at least a few days a month.

While homeownership is still a valid goal for many people, it does pay to be prepared before you purchase rather than be unpleasantly surprised after the fact.  Careful budgeting is needed to cushion you, and your wallet, from buyer’s remorse.

For more information:


Closing Costs

11 Hidden Costs of Owning a Home

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Lila Quintiliani

About Lila Quintiliani

Lila Quintiliani is the Assistant Coordinator at Military Saves, a social marketing campaign to persuade, motivate, and encourage military families to save money every month. She is an Accredited Financial Counselor (AFC) and a FINRA Military Spouse Fellowship recipient. She previously worked at the Airman & Family Readiness Center at Langley Air Force Base, providing one on one counseling and financial readiness education. In addition to managing communications and social media for Military Saves, she also helps run the Peninsula Saves campaign. Ms. Quintiliani has volunteered at Cooperative Extension programs in both Florida and Virginia, providing financial education and training. A graduate of UCLA with a Masters in History, Ms. Quintiliani also holds a Bachelor’s degree in East Asian Studies from Columbia University and an Associate’s Degree in Computer Programming. She currently resides in Yorktown, Virginia with her husband and two daughters.