8 Hidden Costs When Buying a Home
Besides the closing costs, moving expenses, utilities, furniture and decor, and insurance policies are hidden costs when buying a home.
If you’re looking to become a homeowner soon, you need to know that there are hidden costs when buying a home.
It might seem like purchasing a property means paying for the price tag on the listing, but in reality, there are many fees and costs that come along with it.
Learning about all of the hidden costs when buying a home can help you create a realistic budget so you’re ready to cover all of the expenses that you’ll be responsible for when you kick off your transaction.
6 Hidden Costs When Buying a Home
To help you prepare for homeownership — and mitigate any potential issues that could arise from last-minute surprise expenses — here’s a list of the hidden costs when buying a home that are often overlooked.
#1. Closing Costs and Fees
The most basic hidden costs when buying a home are the fees charged at closing.
Closing fees include all of the expenses incurred during your transaction’s escrow process. That means you have to pay all of the service providers who assisted you along the way, as well as the costs for any of the tasks they performed for your transaction.
Closing costs for buyers include:
- Loan origination fee — 1% of loan principal amount
- Property appraisal fee — between $500 to $1,000
- Title search fee — between $100 and $250
- Title insurance — between $500 and $3,500
- Discount points purchasing fee — 1% of loan principal amount
- Escrow fees — between 1% and 2% of loan principal amount
In total, buyers can expect to pay between 2% and 5% of their home’s purchasing price in closing costs.
#2. Insurance Policies
Once you become a homeowner, there are many insurance policies you’ll either be required to maintain or should purchase due to your specific circumstances.
The most basic type of insurance policy is homeowners insurance. If you took out a mortgage to purchase your home, your lender will likely require that you have an active policy.
Buyers who put less than 20% down on their purchases will also probably be required to take out mortgage insurance to protect the lender in case they default on their loan.
Other insurance policies that may arise for you are:
- Contents insurance
- Flood insurance
- Fire insurance
Homeowners should be prepared to cover the expenses associated with taking out new insurance policies as they take the steps to purchase their new homes. Typically, these costs will be due partially or in full at the closing meeting.
#3. Moving and Travel Expenses
Whether you're moving down the block or across the country, there are always expenses related to travel and transporting your belongings.
Gas, flight tickets, moving services, delivery fees, temporary storage, and hotel fees are some of the basics that you might need to pay for when you move into your new home.
#4. Furniture and Decor
One of the most exciting parts of moving into a new home is selecting your furniture and decorating your interiors. However, this is also one of the hidden costs when buying a home.
How much you spend will depend on the size of your home, where you source your new items, and your product selections. Budgeting experts say that furnishing a home can cost between 10% and 50% of the home’s cost, depending on your choices.
#5. Hooking Up Your Utilities
Once you finally get into your new home, you’ll need to set up your basic utilities to ensure you have a fully-functional property.
Water and electricity are the baseline necessities, as well as gas if applicable to your home. However, you’ll also need to get these other lifestyle essentials set up to give you the comforts you’d expect from your new home, such as:
- Wi-Fi and internet
- Trash pick-up services
- Home security systems
Prices for setting up these utilities vary by region and the package options you select, so make sure that you call your local providers in advance to get an idea of how much you’ll be paying once you turn the key.
#6. Purchasing New Appliances
Your new home may not come with all of the appliances you need to live comfortably. Whether they were never on the property in the first place or the seller took them with them, appliances are one of the most often forgotten hidden costs when buying a home.
While the exact price tag on each item will depend on what you choose to purchase, here are baseline costs for some of the most essential home appliances.
- Washing machine — between $250 and $1,600
- Dryer — between $200 and $1,750
- Refrigerator — between $500 and $12,000
- Dishwasher — between $250 to $3,500
- Oven — between $300 and $3,500
Remember, you’ll also need to pay for the installation and set-up fees for these appliances, as well as the delivery fee if ordering the product to your home. Make sure to budget extra to cover these hidden costs when buying a home.
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