Breaking Down the True Costs of Buying a Home for First-Time Buyers

For first-time home buyers, the purchase price is just the start when it comes to budgeting for a new home. There are a variety of upfront and ongoing costs that can really add up. To ensure you go into your first home purchase with eyes wide open, let’s take a closer look at what expenses to expect.

 

Upfront Costs

These are the major fees and payments due at closing when you finalize your home purchase:

 

Down Payment – This is usually the largest upfront cost, typically 3-20% of the purchase price. While 20% down avoids private mortgage insurance (PMI), there are loan options like FHA that allow much less down.

 

Earnest Money Deposit – This good-faith deposit, usually 1-2% of the purchase price, goes toward your down payment at closing. Be sure to have contingencies in place to protect this money.

 

Closing Costs – Various fees for services like the home appraisal, title search, lender charges and more typically add up to 2-6% of the loan amount.

 

Moving Expenses – Don’t overlook the cost of actually moving into your new home, which can run $1,700 locally or up to $10,000 for a long-distance move.

 

Ongoing Homeownership Expenses

In addition to your monthly mortgage payment, be prepared for these recurring costs:

 

Property Taxes – Annual taxes assessed by your local government, often paid monthly into an escrow account.

 

Homeowners Insurance – Protects your property investment in case of fire, storms, etc. May be paid monthly or annually.

 

HOA Fees – If applicable, ranging from a few hundred to thousands annually to maintain common areas and amenities.  

 

Utilities – ​​Plan for monthly costs like electricity, gas, water/sewer that you likely didn’t pay in full as a renter.

 

Maintenance/Repairs – Experts suggest budgeting 1-3% of your home’s value annually for routine upkeep and inevitable repairs like a new roof, appliances, etc.

 

Personalization Costs

Finally, you may want to customize your new home with renovations, decorating, new appliances and furniture to make it your own.

 

Conclusion

The costs of buying and owning a home go far beyond just the purchase price. Prospective buyers should carefully evaluate their budget for all potential expenses. Reach out to one of our mortgage professionals today for personalized advice to ensure you don’t get caught by any surprise costs on your journey to homeownership.