Home > Mortgages > The Hidden Costs of Buying a Home

Comments 1 Comment

Most of us have a basic understanding of what goes into buying a home. After saving enough for a down payment and getting pre-approved for a mortgage you can start your home search and make an offer once you’re ready. But before you ever set foot in that new house of yours, there are going to be quite a few costs that come up, many that you may not be expecting.

In order to prepare yourself, you should be fully aware of all the costs that go into buying a home. That way, you won’t be surprised at any point during the process.

Earnest Deposit

Although the earnest deposit is part of your down payment, it has to be made right away. This deposit is required in order to show that you the buyer are indeed serious about the property. It’s generally in the amount of 1% of the value of the property’s sale price or $1,000.

It is just a deposit though, so you can get that money back up until the point when you remove your contingencies.

Home Inspection

Although the home inspection is generally considered part of closing costs, it’s another fee that you have to pay upfront. Home inspections are essential to the buying process since they could uncover any potential structural flaws in the property. Home inspections generally range from $300 to $500.

If you end up walking away from the property due to something you found in the home inspection you’ll be out at least $300.

Renovation and Improvements

If your home isn’t in the best of shape, you may want to consider renovating it before you move in. It’s a lot easier to put new floors in or paint the walls before you have all your furniture moved in. Most homebuyers tend to forget about the initial renovation costs, so be sure to factor that into your calculations.

A good rule of thumb is to assume that renovations and improvements will total about 1% of your purchase price. Of course, this can increase drastically depending on the condition of the house.

Move-In Costs

Any time you’re moving into a new home there are lots of major expenses to consider. Everything from buying boxes to hiring an actual moving company will add up. And the further you move geographically, the higher your costs will be.

Keep in mind that if you’re moving into a community with a homeowners association, you will likely have to pay an initiation fee. Make sure that you get the details ahead of time since you don’t want to be fined by your HOA in your first week at your new property.

New Appliances and Utilities

Some houses come with a refrigerator, washer and dryer, but if yours doesn’t, be sure to factor that into your calculations. You will also have to contact utility companies and cable TV/Internet companies in order to get your new service hooked up — there may be small fees for this as well.

Real-Estate Agents’ Fees

This is probably one of the biggest hidden costs when it comes to buying a house because they won’t ever show up on any piece of paper. Generally, the sellers pay real-estate agents’ fees for both the buyer’s and seller’s agents (3% each) but those costs often will be reflected in a higher sale price.

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

  • Charlie

    The discussion about agent fees costing the buyer more $ will never be solved, but the reason sellers do FSBO is so THEY can pocket more $, which is not necessarily true.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team