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Houses are expensive! According to Fool, the median home price in the United States is nearly $400,000! (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 ten 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 lot, so I just used a small pod to move everything I didn’t want to throw away. The small pod cost me nearly three thousand dollars! I moved to the opposite side of the country, which gets a bit pricey, but even moving across town will cost you.
Furniture & Decor
Are you going to buy new furniture to go with your new home? Do you have enough to fill the new house if you move your furniture? You generally have more space to fill up when you go from an apartment or condo to a single-family home.
And it’s not just furniture!
You will need shower curtains (I learned that the hard way!), area rugs, lamps, décor, and other items that make a house a home. After buying a new house, my first trip to Bed, Bath, and Beyond cost me upwards of a thousand dollars! I hardly took anything with me when I moved, but it is still something to be aware of and budget for.
Closing costs aren’t precisely hidden costs, but they are expensive, and it’s 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.
Closing costs include attorney fees, the first home inspection, escrow fees, and many other miscellaneous things that all the companies involved in closing charge you for. You need to budget for this massive 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 look into purchasing a home warranty at closing. In my area, a 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 peace of mind.
I’m glad I got the warranty with my house because I had a pretty severe leak about three months after purchasing it. I called the warranty company 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 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 buy 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 buy your absolute dream house, you may not have to worry about renovations. But most homes 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 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 essential 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 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. 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! That neighborhood had terrific amenities, but I wasn’t looking to pay that much. The HOA fee in my current community is only forty bucks a month, which is way more reasonable.
HOA fees aren’t always bad. Having an HOA helps to maintain property values. Many of them also offer a clubhouse house or a pool. However, 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 need to be paid, but the cost can be a surprise. Make sure that you speak to your lender about estimated property taxes before agreeing 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 statement of two or three hundred dollars more than they expected.
Owning a home is a lot of work. And there are many things that you need to consider once you have one. Do you live in the South? Yeah, you’re going to need an exterminator. Do you live anywhere near a city? You’re probably going to need a security system.
You will also 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 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.