Hidden Costs of Buying a Home

Real Estate
on August 3, 2012

Many home buyers make their best effort at managing their finances well when buying a new house. If you are like many other home buyers, you diligently saved up money for your down payment and made the decision to purchase a house that was within your financial means. You may have contacted a mortgage company or lender months ago to discuss down payment requirements so that you could establish a realistic savings goal to reach.

Once you reached that goal, you were thrilled to finally have enough money to make a down payment on a house. However, before you rush off to find your dream home and get it under contract, consider that there are a few hidden costs associated with buying a house that you may not have considered.

Closing Costs

As a ballpark figure, you can estimate that closing costs on your home purchase will range from about three to five percent of your total sales price. These costs may include title fees, the appraisal, the property inspection, lender fees and more. It is important to note that closing costs can equate to several thousand dollars or more for most buyers. However, in a buyer’s market, you may be able to reasonably negotiate your sales contract so that the seller pays for a portion of your closing costs. You can discuss this possibility with your real estate agent at the time you are structuring an offer.


While the closing costs figure generally includes fees for the appraisal and property inspection, it does not include costs for other inspections that may be required on the property. In some cases, for example, a property inspection may indicate the need for a thorough roof inspection, a termite inspection, a structural engineering inspection, a mold inspection and more. A property inspector is skilled at determining if there is a need for further testing by an expert in these areas, but he is not an expert himself in structural engineering, for example. You do not want to buy a home that may be infested with termites or mold, that may have foundation issues and more, so paying for additional reports as recommended is critical.

Insurance and Taxes

Unless you are paying for your home outright with cash, escrows for property taxes and insurance will need to be established with your mortgage lender. The amount of property taxes and insurance that will need to be paid to fund the account initially will vary in large part by the time of year it ease. Most lenders want to maintain a minimum balance in an escrow account, so you can expect to pay a minimum of about three months worth of property taxes and insurance to fund the initial account.

You can talk to your mortgage company directly for more detailed information regarding what their requirements may be. Keep in mind that the seller is responsible for paying property taxes for the days of the year he owned the property. Because of this, when reviewing your closing statement, ensure that there is a credit to you from the seller for property taxes he owes on the property.

Moving Costs

Whether you are moving your personal effects on your own or hiring movers, there is cost associated with moving. Renting a truck, hiring moving services, paying connection fees for utilities and cable and more all will result in additional expenses for you. You can save money by moving your items on your own, but you will still need to rent a moving truck, lease a dolly, buy boxes and more for your move.

Furniture and Home Decor

In many cases, those who are purchasing a new home will be upgrading in some way. For example, you may be moving from a small, two-bedroom apartment to a four-bedroom home with a second living area and a second dining area. You may not have furniture to place in each of these rooms, but you may not want to live in an empty house for months on end either. Even if you are relocating into a home of equal size, the functional space in the home for furnishings may be different.

For example, your current home may have a built-in nook for home entertainment equipment, but you may need to buy a freestanding entertainment console for your new home. In addition to the need to buy furnishings for your new home, you may also need to buy curtains, artwork, area rugs and other home decorative pieces. The need to buy these items is not urgent, but most home buyers opt to purchase these items within a few months of moving in.

Buying a new home can be expensive, but many home buyers focus entirely on saving up for the down payment. Before you make a move to put a home under contract, consider saving up extra money to pay for these often-overlooked expenses.

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