Jul 13, 2016

8 Hidden Costs of Buying a Home


As you look over your finances to see how much home you can afford, remember to take into consideration those costs that, while not really “hidden”, are easy to overlook and can make a substantial difference in what you can afford.   

The mortgage payment and mortgage interest are easy to remember but some other costs to take into consideration are as follows:

1.Home inspection

The purpose of the home inspection is to make sure you know the flaws of the property prior to closing.  This allows you the options of renegotiating the price, backing out entirely or budgeting money to take care of the problem. 

This inspection is generally required by the lender, costs $3-400 and is at the buyer’s expense, even if the findings cause you to withdraw your offer.

2.Appraisal fees

Another cost the lender will require is an appraisal of the property.  This is a protection to make sure you’re not paying too much.  The appraisal generally runs $4-500 and is paid by the buyer, normally as part of the closing costs.

3.Closing costs

The closing costs are a big one, generally coming in at around 3% of the loan amount.  For example, on a $200,000 loan, 1% is $6,000.

Closing costs are due at the time of closing and could include the following:

  • Title or attorney fees
  • Lender fees
  • Processing, underwriting, recording, survey, title insurance fees.
  • Escrow fees: might have to pay some property tax and insurance into an escrow account upfront.
  • Interest fees: prorated from the date of your closing to the first of the next month.
  • Possible transfer tax

There are websites with closing cost calculators you can plug numbers into and get a general idea of what your closing costs will be, but as a rule of thumb, plan on bringing 3% of the loan amount to the closing table. But, always check with your lender and/or closing agent for accurate closing cost amount.  Closing costs are a negotiable cost and a concession can be negotiated with the seller.

4.Property taxes

Usually the property taxes are part of the escrow you pay into each month.  This amount can vary a great deal but can run several thousand dollars each year.

5.Home repairs/ renovations

You will likely want to do some renovation when you move in.  Whether it’s as small as repainting some rooms or as large as re-carpeting the entire home, this is money that should be earmarked before you close. 

While renovations and maintenance can be predictable, budgeted and planned for, home repairs can catch you unaware.  Unexpected repairs are the costliest part of owning a home.

Fixing an air conditioner that’s stopped working, removing trees pushed over by wind, repairing the roof, fixing a jammed disposal or leaky faucet- there are lots of things that can stop working or break when it comes to your home so you’ll need to have some extra money put away for these times. 

If you can negotiate into the transaction a $500 one-year home warranty, covered by the seller, you limit your risk and may save money on repairs the first year.


If you’re moving out of an apartment or small house into a large home, you may be surprised how empty the rooms look after you’ve moved all your things in.  Most buyers moving into a larger home will need to go out and buy at least some new furniture. 

Obviously it doesn’t need to be done right away, but this is a commonly overlooked cost of moving into a new home and will need to be considered.


Similar to the furniture problem in upgrading the size of your home, the costs for electricity, gas and water could be higher after you move.

Although this can vary depending on consumption, it’s a good idea to talk to the sellers and get a monthly utility estimate before you close on the property.

8.Home insurance

The lender will likely require you have home insurance and this can be expensive, depending on a few factors like location, construction materials and location.  This payment is generally taken out as part of your monthly mortgage payment.

If you are buying in a flood or earthquake zone, consider a supplemental insurance, which should only raise your payment by $20-30 per month. 

Lender will require home insurance.


Going out and actively looking for your new home can be a stresser but is also very exciting.  Keep the excitement going through the closing table and beyond by taking the time to remember all the miscellaneous costs that go along with buying your new home and making sure you can afford it.


Good luck!   

Subscribe to Blog Feed


Leave a Comment