These Are the Hidden Costs of Buying a Home.

The housing market looks like hell for the foreseeable future. Your home is probably the most expensive thing you’ll ever own, and those expenses go beyond the final price. For most of us, this will be the largest purchase we’ll ever make and the biggest debt we’ll ever take on—and that’s before factoring in all the hidden, unexpected costs you might not see right away.

There’s the cost of the home, but there are other ongoing and upfront costs that may take you by surprise. Some of these costs aren’t exactly “hidden,” but they tend to be overlooked. Especially if you’re a first-time buyer, it helps to know what you’re getting into. Let’s look at them in detail.

Home Inspections

You placed an offer on a house and it was accepted. Hooray! From now on, inspections will be your first major expense. Yes, there may be several checks.

Before you officially close on your home, you’ll want to schedule a thorough inspection. In fact, your lender will probably even require it. At a minimum, you’ll want to order a general home inspection and a wood-destroying insect (also called termite) inspection if that’s not part of the general inspection. A general inspection will cost you a few hundred dollars, and termite inspection will probably cost around a hundred. Depending on the age and condition of the home, you may also want to schedule a sewer inspection, which could cost another couple hundred dollars.

The whole thing may cost over a thousand dollars, but it’s a small price to pay to make sure you don’t end up with a lemon. If the home requires significant maintenance, you may want to renegotiate with the seller, walk away from the deal entirely, or simply budget for the additional expense.

In some states, if the previous buyer declined but had the home inspected, the seller is required to disclose that inspection. In this case, unless your mortgage lender requires you to do a self-inspection, there is nothing stopping you from skipping the inspection altogether. After all, you already have a report. However, in any case, it is always a good idea to do your own check. This is a large purchase, so it’s best to err on the side of caution. Additionally, you want to be present during the inspection so you can see everything for yourself.

In some cases, lenders also require survey costs. It may cost a few hundred dollars more, but you’ll get a professional survey of your property so you know exactly where your boundaries are.

Closing expenses

Once your offer is accepted, your lender will crunch some numbers and prepare some paperwork. At this point, they should provide you with a detailed list of your closing costs. The general consensus is that lost costs will net you an extra 2-5% of the cost of purchasing a home. So, if you buy a $200,000 home, expect to spend between $4,000 and $10,000. Here’s what these costs typically include:

• Lender fees: These include everything from administrative costs to wire transfer fees to fees for obtaining your credit report.
• Appraisal : A home appraisal can cost several hundred dollars. The lender wants to make sure the home is valued at its sales price.
• Title or Attorney Fees : Government filing fees, escrow fees, notary fees, and any other costs associated with getting the document to you.
• Escrow fees: You may be required to deposit some property taxes and insurance into an escrow account upfront.
• Interest : You will pay interest prorated from the closing date to the first of the following month.

You can always plug some numbers into a closing cost calculator to get a more specific idea of ​​how much you’ll pay, but in general, expect to spend several thousand dollars above your down payment when closing on a home.

Budget for current taxes and insurance

Monthly mortgage calculators tell you what your monthly mortgage payment will be, including interest. Of course, your taxes will vary depending on the value of your home and where you live, but WalletHub reports that the average homeowner in the US pays about $2,690 per year in property taxes.

We explain what the current 7% mortgage rate means for your monthly payments here . You can find out how much the current rate will affect your monthly payments by using an online mortgage calculator .

Depending on the terms of your loan, you may be able to pay this amount monthly into an escrow account (also known as an impound account). In this case, you make those payments to your lender, and they will pay the taxes and insurance on your behalf. If you don’t have an escrow account, you’ll simply pay them yourself when the payment is due.

However, whatever you pay, be sure to budget for these ongoing, recurring expenses. There’s good news, though: You can deduct property taxes and mortgage interest from your taxable income, so you’ll pay less in taxes every year.

Keep maintenance and repair funds on hand

When your air conditioner breaks down while you’re renting, it’s frustrating, but all you have to do is call your landlord and hope for the best. If you’re a homeowner, this will cause even more pain because you’ll have to pay for the repairs yourself.

Most people know that owning a home means spending money on its upkeep, but you may underestimate how much these projects will net you. Clogged drains, leaky faucets and cracked exterior paint are just a few renovation projects that take most first-time homeowners by surprise.

Every home is different, so there’s no one-size-fits-all answer to how much you’re going to pay for maintenance each year. It’s generally a good idea to assume that the cost of maintaining your home will be about 1-4 percent of its value per year , or somewhere around $150-$500 (or more) per month, depending on where you live and what you have a house. For a $200,000 home, four percent is $8,000. It seems like a lot, but even if you don’t spend the money, consider it an emergency fund for your home.

Prepare for higher utility bills

Let’s say you’ve moved from your cramped apartment to a beautiful three-bedroom house. Elbow room is great, but it also means your bills will be a little higher.

Depending on how much you’re used to paying, your gas, electric and water bills won’t necessarily be higher when you buy a home, but they will often be higher. In addition, your landlord may pay for some expenses (such as trash removal or water) that you will have to pay when you take ownership. To get an idea of ​​what your situation will look like, consider asking the seller if you can look at their past accounts. This may be unlikely, but it’s probably the easiest way to find out how much you’ll pay.

Bottom line

Traditionally, buying a home is considered a smarter financial decision than renting. The argument is that when you rent, you’re throwing money away, but when you buy, you end up owning your home. Of course, if you compare the cost of rent to the underlying cost of your mortgage, this may be true. However, all these additional costs add up. And, like your rent, these expenses won’t cost you anything: they’re just the price you pay to own.

However, even with these costs, in many areas buying is a better long-term financial decision than renting. You want to crunch the numbers yourself, taking into account all these unexpected costs. (The New York Times Rent-Purchase Calculator is probably the best tool we’ve seen for crunching these numbers.)

Either way, once you decide to buy a home, be prepared for the price you’ll actually have to pay. Consider these costs and you’ll be on the right track. And make sure you avoid these common financial mistakes when buying a home.