Most buyers plan for the down payment. Many are surprised by everything else. Knowing these costs ahead of time helps you set a realistic budget.
1. Closing costs
These cover lender fees, appraisal, title and escrow services, recording fees and prepaid items. They are often about 2% to 5% of the purchase price. On a $500,000 home, that would be roughly $10,000 to $25,000. Your Loan Estimate shows the actual figures.
2. Inspections and appraisal
A home inspection is paid for by the buyer, usually up front. Your lender will also order an appraisal and will usually ask you to pay for it. Specialty inspections, such as for termites or sewer lines, may cost extra.
3. Property taxes
Taxes vary by location, and your lender may collect them monthly through an escrow account. Ask what the annual amount is, and whether it can change after you buy.
4. Homeowners insurance
Lenders require it, and you usually pay the first year in advance. Costs vary a lot by location and coverage. In areas with fire, flood or earthquake risk, extra coverage may be needed and can cost more.
5. Mortgage insurance
If you put less than 20% down on a conventional loan, you will usually pay private mortgage insurance (PMI). FHA loans have their own mortgage insurance premiums. Ask how long you will pay it and how it can be removed.
6. HOA dues
Condos and many planned communities charge monthly or annual dues, and sometimes special assessments. Ask for the budget and recent assessments before you commit.
7. Moving and setup
Moving, utility deposits, internet setup, new locks and basic furnishings all add up in the first few weeks.
8. Repairs and maintenance
A common rule of thumb is to set aside 1% to 3% of the home value each year for upkeep. Older homes may need more, and some repairs cannot wait.
How to prepare
- Save beyond the down payment, including an emergency fund
- Ask for written estimates of closing costs early
- Get quotes for insurance before you make an offer
- Ask your lender and agent to explain every cost you do not recognize
Every borrower is different. If you would like to talk through your own situation, the MonaLending team is happy to help.
