The Update

The Hidden Costs of Buying a Home

Buying a home is a big milestone, but there are many hidden costs that can quickly add up, catching many first-time homebuyers by surprise. Here are some of the hidden costs of buying a home.

Home Inspection

Cost: $300-$500

A home inspection isn’t always a required part of the homebuying process, but having your future home inspected by a professional can save you thousands of dollars in future repair costs by identifying problems before you close.

Appraisal Fees

Cost: $300-$600

Most lenders require an appraisal to confirm that the home is worth the purchase price. If the appraisal comes in lower than the agreed purchase price, you may need to renegotiate the price or cover the difference out of pocket.

Closing Costs

Cost: 2-5% of the home’s purchase price

Closing costs might be the most substantial hidden expense in the homebuying process. They include various fees, such as:

• Loan origination fees. Lenders charge this fee to cover the administrative work that’s involved in processing your loan.
• Title insurance and title search. Title insurance protects both you and the lender from potential ownership disputes. The title search is conducted to ensure there are no existing claims on the property.
• Recording fees. Local governments charge these fees to make your ownership official in public records.
• Escrow fees. An escrow company manages the transfer of funds and important documents between buyer and seller.

Property Taxes

Cost: varies

Property taxes are an ongoing expense that can vary significantly depending on where you live. While most people understand they’ll pay property taxes, it’s easy to dismiss how much they can cost each year.

Private Mortgage Insurance (PMI)

Cost: 0.3-1.5% of the loan (annually)

If your down payment is less than 20% of the home’s purchase price, most lenders will require you to pay for private mortgage insurance (PMI). PMI protects the lender if you default on the loan, and it typically costs between 0.3% and 1.5% of the loan amount annually.

Homeowners Insurance

Cost: $800-$1500 (annually)

Homeowners insurance is a necessary expense that protects you in the event of natural disasters, theft, or accidents. Many lenders require buyers to pay for the first year’s premium upfront at the time of closing.

Professional Cleaning

Cost: $120-$325

Most sellers will deep-clean their home before putting it on the market, but they may not be as detailed when they actually move out. Real estate contracts generally require the home to be “broom-clean” before the seller moves, but this only means a very basic cleanup, with floors swept and trash removed. You may choose to have your home professionally cleaned and sanitized before you move in for a real, fresh start. Be sure to budget for this cost.

Immediate Repairs

Cost: Varies

Unless you’re buying a new construction home, your new house will likely need some repairs. From a fresh coat of paint, to new window treatments and light fixtures, to replacing carpets and appliances, this can cost just a few hundred dollars to several thousand or more.

Moving

Cost: $500-$3000

The cost of moving itself is often overlooked, but can add up quickly, especially for long-distance moves or if you need professional movers. Moving expenses include packing supplies, rental trucks or a moving company. The cost of this can run anywhere from a few hundred to several thousands of dollars.

Save Now for Your Large Purchase

Of course, the best way to for large purchases is by saving up for it. We understand that it can be difficult to wait, but Rio Grande Credit Union has multiple savings options to help! Stop by one of our branches to learn which savings option may be best for your large purchase.