Beyond the Down Payment: Hidden Costs of Buying a Home

Buying a home is one of the most exciting—and expensive—milestones you’ll experience. While many buyers focus on the down payment, the truth is, purchasing a home comes with a wide range of expenses, some of which may catch you off guard if you're not prepared.

In this post, we’ll break down the key costs you should expect before, during, and after your home purchase, so you can budget wisely and avoid surprises.

The down payment, of course, is a payment we’re already aware of. While many assume you need 20%, some loans allow for much less:

• Conventional loan: 5–20%

• FHA loan: As low as 3.5%

• VA/USDA loans: May require no down payment at all

The more you put down, the less you borrow—which can lead to lower monthly payments and avoid private mortgage insurance (PMI).

Closing Costs

Closing costs usually range from 2% to 5% of the home’s purchase price. These fees cover:

• Loan origination

• Title search and insurance

• Appraisal and home inspection

• Recording fees and taxes

• Attorney or escrow fees

  
  

Make sure to ask your lender for a Loan Estimate early on, which will give you a clearer picture of these costs.

Home Inspection and Appraisal

These are essential steps in the home-buying process:

• Home inspection: ~$300–$600, depending on the property size and location. It uncovers potential issues with the home.

• Appraisal: ~$300–$500, required by lenders to confirm the home’s value.

  
  

While these may seem optional, they can save you thousands by identifying problems before you commit.

Property Taxes

Property taxes vary by location, but they’re often a significant ongoing cost. Many lenders roll them into your monthly mortgage payment via an escrow account.

Pro tip: Check local tax rates before buying, especially if you're considering homes in different cities or counties.

Homeowners Insurance

Lenders require proof of insurance before you close. The average cost is around $1,200 per year, but it can vary based on:

• Home value

• Location (e.g., flood zones)

• Coverage level

  
  

Optional but recommended: Flood or earthquake insurance in high-risk areas.

Private Mortgage Insurance (PMI)

If your down payment is less than 20% on a conventional loan, you’ll likely pay PMI—an extra monthly fee to protect the lender. This can cost 0.5% to 1% of the loan amount annually.

Once your equity hits 20%, you can usually request to cancel it.

Moving Costs

Don’t forget the cost of moving, which can include:

• Professional movers

• Truck rental

• Packing supplies

• Temporary storage

  
  

These can range from a few hundred to several thousand dollars, depending on distance and complexity.

Immediate Repairs or Renovations

Even if your home is move-in ready, you may want or need to:

• Replace old appliances

• Paint walls

• Update flooring

• Fix safety issues

  
  

Setting aside a few thousand dollars for post-move-in tweaks is a smart idea.

Utilities and Ongoing Maintenance

Once you own the home, you're responsible for all utilities and maintenance. This includes:

• Electricity, water, gas, internet

• Lawn care, pest control

• Repairs and routine maintenance

  
  

Experts recommend setting aside 1–3% of your home’s value annually for maintenance costs.

Final Thoughts

Buying a home is about more than just affording the price tag—it’s about being financially prepared for everything that comes with it. By understanding and budgeting for these costs, you can approach your purchase with confidence and peace of mind.