10 Costs First-Time Homebuyers Often Forget

10 Costs First-Time Homebuyers Often Forget

Don’t Forget to Budget for These Hidden Costs of Buying a Home

There’s nothing quite like being handed the keys to your first home and knowing that it’s all yours. After all, buying your first home is a huge milestone that signifies a fresh start and an exciting new chapter in your life.
Albeit exciting, it can quickly feel like costs and fees are appearing out of nowhere once you begin the closing process. We’re here to shed light on some of the hidden costs of buying a home, so you can feel prepared and confident as a first-time buyer.

1. Initial Down Payment

Your down payment will be the largest payment you make when buying a home. There are mixed reviews on what the “ideal” initial down payment should be, but it is typically 3% to 20% of your home’s purchase price.
You might be tempted to choose the lowest rate possible, but there are benefits to making a larger down payment. Paying more upfront can help you avoid private mortgage insurance, secure a lower interest rate, qualify for a home loan with a lower credit score, and lower your monthly mortgage payments. While a larger down payment can be beneficial down the road, the amount you pay is ultimately up to you and your mortgage lender.

2. Closing Costs

In addition to your down payment, closing costs are various fees and expenses that are paid when you close on your house. Typically, these costs range anywhere from 2% to 4% of your home’s purchase price. While that may not sound like a lot, the hidden costs of buying a home can quickly add up — especially if you weren’t expecting them!
But don’t worry, you aren’t being asked to pay these extra fees for no reason. Your closing costs will cover the following expenses:
  • Loan origination fees
  • Home and pest inspection fees
  • Appraisal and survey fees
  • Prepaid property taxes and mortgage insurance
  • Title insurance
  • Homeowners Insurance
  • Closing or escrow fees
  • Underwriting fees

3. Maintenance Fees

Unlike renting, you are now fully responsible for your home — which means you are also responsible for its upkeep. In addition to the annual maintenance and repairs that are necessary to maintain the appearance of your home, you may need to perform some repairs upfront. Generally speaking, you can expect to spend anywhere between 1% and 4% of your home’s value on maintenance fees each year. Be proactive and budget enough money for unexpected maintenance to prevent being blindsided.

4. Moving Costs

Simply moving out of your current living space has plenty of costs on its own! For example, you may consider hiring a moving company or renting a moving truck. These costs can quickly add up — especially once you factor in the boxes, tape, bubble wrap, moving pads, and more that are also needed to move into your new home. To cut back on moving day costs, try finding places where you can get moving boxes for free. It might not seem like much, but it’s one less hidden cost of buying a home you’ll have to worry about!
Related: Prepare to Move: Must-Dos During the Final Six Weeks 

5. New Furniture and Appliances

While you might get lucky and move into a home that comes with brand-new appliances, this isn’t always the case. In many cases, you’ll need to purchase various large appliances such as a refrigerator, washer, dryer, or stove. Plus, you might also need furniture for your new home, which can quickly become a pricey endeavor. To reduce your furniture expenses, try to reuse any old pieces from your previous living space. And if you enjoy DIY projects, you can always find thrifted furniture at a great price — these items just need some TLC to look brand new!

6. Homeowners Insurance

Homeowners insurance isn’t a luxury — it’s a necessity. After all, buying a home is one of the biggest investments you’ll ever make, so it is crucial to protect this investment at all costs. Homeowners insurance will protect your home and possessions in the event of a fire, burglary, or any other potentially damaging event. To give you an idea of what this entails, the average monthly cost of homeowners insurance in North Carolina is $140, while the average annual cost is $1,680. No one wants to think that one of these events could happen to them — but if it does, you will be grateful your assets were protected with homeowners insurance.
Here at The Redbud Group, we have preferred partners we work with to provide you with the best service. Contact us to be connected!

7. Property Taxes

Although you don’t pay property taxes when you’re renting a home or apartment, these fees are non-negotiable once you become a homeowner. Your local government uses property taxes to fund services like education, transportation, emergency, parks, and recreation. These taxes are determined by the value of your property and are usually around 1% to 2% of your home’s listing value. Property taxes can be paid in one annual fee or in monthly payments incorporated into your mortgage. The choice is up to you! 

8. Due Diligence

The due diligence fee represents a buyer’s good faith to buy a home and has become a staple in this market. A seller accepts this fee to take their home off the market while the buyer inspects the home and conducts necessary due diligence. These deposits typically range from 1% to 10% of the home’s price, depending on how competitive the market is at the time. If the buyer’s offer is accepted, this money will be applied towards the purchase price. However, if the buyer decides not to move forward with their purchase, the due diligence fee will not be refunded. 

9. Utility Charges

To start utility services at your new home, you’ll need to pay an upfront installation fee. While this fee is usually small and added to your first month’s utility bill, it is still an extra cost to prepare for when buying your first home. It may not seem like a hefty expense in regards to the others — but smaller fees like this are often the easiest to forget! In addition to the upfront installation fee, it’s important to also remember that heating, cooling, and lighting a home will require more energy than a smaller apartment. Be prepared for higher utility bills and budget accordingly.

10. Unexpected Expenses

Unfortunately, there’s no tell-all list when it comes to first-time home-buying expenses. The harsh reality is that unexpected expenses can come up at any time, and some might cost more than you budgeted for. Although there’s no way to predict the future, the bottom line is that you need to be ready for these hidden costs of buying a home. Make sure you have wiggle room in your budget to ensure you’re as prepared as possible for any unexpected expenses that may arise.

Buying Your First Home With The Redbud Group

Having a real estate agent who understands your wants and needs is invaluable when buying your first home. In addition to helping you navigate the hidden costs of buying a home, a real estate agent will help you start your home search, submit your offer, negotiate with the seller, close the deal — and everything in between.
Buying your first home is a huge step and we want to make it as simple and straightforward as possible. Click below to contact one of our Redbud Group REALTORS® and get one step closer to finding your dream home.
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At Redbud Group, we understand that the home buying & selling process can be stressful. You want to make sure you are making the right move and getting the best price for your home. As always, we are here to help you take those first steps to buying or selling a home! Check out our home buying & selling tips and resources for in-depth information about the home buying & selling process.

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