Houses are expensive! The median home price in the United States is about $200,000 (Median is a better number to use than average, because it takes away the crazy expensive outliers). That’s a lot of money! But unfortunately, that’s only the upfront cost of buying a home. Make sure you factor these 10 hidden costs of buying a house into your budget!
Hidden Costs of Buying a House
Do you remember when everything you owned fit into your small two door sedan? I remember that too. I don’t know how I acquired so much stuff, but it most definitely did not fit in a sedan (or an SUV for that matter!). I did downsize a whole lot, so I just used a small pod to move everything that I didn’t want to throw away. The small pod cost me nearly three thousand dollars! Granted, I did move to the opposite side of the country, so that gets a bit pricey, but even moving across town will cost you.
Are you going to buy new furniture to go with your new home? If you are moving your furniture, do you have enough to fill the new house? When you go from an apartment or condo to a single-family home, you generally have a lot more space to fill up. And it’s not just furniture! You will need shower curtains (I learned that the hard way!), area rugs, lamps, décor, and all the other items that make a house a home. My first trips to Bed, Bath, and Beyond after buying a new house cost me upwards of a thousand dollars! Granted, I hardly took anything with me when I moved, but it is still something to be aware of and to budget for.
Closing costs aren’t exactly hidden costs, but they are expensive and it’s definitely not something that everyone considers when buying a home. Closing can cost up to 10% of the price of your home! I paid about ten thousand dollars to close on my house. This includes attorney fees, the first home inspection, escrow fees, and bunch of other miscellaneous things that all the companies involved in closing charge you for. You need to budget for this huge expense at closing so you aren’t caught off guard.
Unless you are buying a brand-new home (which usually comes with a warranty) you should definitely look into purchasing a home warranty at closing. In my area, the top- level warranty costs about five hundred dollars. It covers plumbing, electrical, appliances, and anything that goes wrong with the house for the first year. It offers piece of mind.
I’m really glad I got the warranty with my house, because about 3 months after purchasing it, I had a pretty serious leak. I called the warranty company who hooked me up with a plumber; and I was able to fix the problem without having it affect my insurance.
Speaking of insurance…homeowner’s insurance is a must have when financing a home. Usually, your lender will discuss the approximate costs of this with you well before you sign the final paperwork. But homeowner’s insurance might not be the only insurance that you need.
Did you know that homeowner’s insurance doesn’t cover floods or earthquakes? If you are purchasing a home in a flood zone, you will be required to purchase the FEMA flood insurance. Even if you aren’t in a flood zone, with all the crazy weather we’ve been having these past few years, flood insurance might not be a bad idea. You never know when that freak storm will dump 40 inches of rain on you. If you live in an area prone to earthquakes, you may also want to consider earthquake insurance.
If you are buying your absolute dream house, you may not have to worry about renovations. But most houses have at least some minor cosmetic issues that you will want to improve upon. The house I bought had hideous carpet and paint. These were super easy fixes, but they were definitely something that I needed to include in my budget.
I already mentioned the house inspection when I was talking about closing costs, but did you know that there are numerous other inspections you can get that aren’t included in your closing? One of the most important additional inspections you should look into getting is a termite inspection. Nobody wants to buy a house only to learn that it’s been eaten away by these voracious pests. It’s much easier to prevent termites than it is to get rid of them when they are established.
Are you going to live in a community with an HOA? Sometimes, there is no way around it. Pretty much all of the homes I looked at in Savannah had some sort of HOA. Some of the fees are outrageous! I looked at one house where the HOA fees were almost 300 bucks a month! To be fair, that neighborhood had amazing amenities, but I wasn’t looking to pay that much. The HOA fee in my current neighborhood is only forty bucks a month, which is way more reasonable.
HOA fees aren’t always bad. Having an HOA helps to maintain the property values. Many of them also offer a club house or a pool. However, be sure to think about the monthly fee before committing to a mortgage payment.
Ah taxes. One of the few certainties in life. We all know that property taxes are a thing that need to be paid; but the cost can be a surprise. Make sure that you speak to your lender about estimated property taxes before you agree on a purchase. Most lenders will include them in your total monthly bill, but some will only show you the total for the principle and interest. These customers are then shocked when they receive a monthly bill that’s two or three hundred dollars more than they expected.
Owning a home is a lot of work. And there are a lot of things that you need to consider once you have one. Do you live in the South? Yeah, you’re gonna need an exterminator. Do you live anywhere near a city? You’re probably gonna need a security system. You are also going to need to set up your trash, water, sewer, and utility services. And some cities don’t even include fire protection as part of the property taxes, you have to pay for it separately (WTF Savannah??). These are all things you will need to consider and budget for when purchasing a new home.
Miscellaneous expenses – because stuff always comes up. Always! Make sure you have an extra one to two thousand dollars set aside for that one thing that no one warned you about. Because it will come up, eventually.
Melanie launched Partners in Fire in 2017 to document her quest for financial independence with a mix of finance, fun, and solving the world’s problems. She’s self educated in personal finance and passionate about fighting systematic problems that prevent others from achieving their own financial goals. She also loves travel, anthropology, gaming and her cats.