Mortgage 101
June 21, 2022

Unveiling the Hidden Expenses Every First-Time Homebuyer Should Know

Estimated reading time: 4 minutes

Buying a home comes with numerous expenses. While many first-time homebuyers may consider the down payment to be the largest cost, there are several others that may take you by surprise. To ensure you’re fully financially prepared, we’ve outlined a variety of costs you may face during your first year of homeownership so you can feel confident before signing on the dotted line.

Earnest Money

Also known as a “good faith deposit,” earnest money is the amount you pay immediately after the seller accepts your offer and you sign the contract. It’s typically between 1% to 3% of the listing price and is used to show the seller that you’re serious about purchasing the home.

Closing Costs

The average amount buyers spend on closing costs adds up to be between 2% and 5% of the purchase price of the home. While not all closing costs are the same, most include origination fees, appraisal fees, and title insurance.

A few other examples of closing costs are:

Inspection and Appraisal

Your appraisal is used to determine the objective market value of the property. It protects your lender from providing more money than they might be able to recover if you default on your mortgage.

Also, while inspections are optional, they provide important information regarding potential risks and problems related to your property. An inspector will let you know if there’s risks in your foundation, plumbing, or electrical.


Insurance is about protections. For instance, home insurance protects the home itself, your belongings, and your liability. While not required legally, most mortgage lenders require home insurance to protect their liability.

Mortgage insurance protects lenders against losses due to the default of a loan. By providing protection to lenders, it lowers the risk they take on and allows you to qualify for a loan you may not have been able to qualify for without it.


Now that you’re a homeowner, you’ll have to be aware of taxes as well. Property taxes and school taxes collected by the local district will also begin to affect your payments. Taxes vary based on state, city, county, or neighborhood. Before you move in, you can look up your tax information to better prepare your finances.

Homeowner’s Association Fees

Homeowner’s associations (HOAs) exist to maintain a neighborhood’s attractiveness and appeal. While not a neighborhood requirement, preparing your finances to cover them is a must if your community uses an HOA. HOA fees cover common area maintenance and upkeep. If there’s a pool, playground, outdoor fitness area, or anything else provided for residents, it will have an associated HOA fee.

Moving Costs

Whether you’ve purchased a home across town or in a different state, you’ll want to set aside money to cover the expenses. To help you prepare, consider how much you need to move and how far you’ll be moving. If you’re hiring a professional team, call several companies to find the best rates.


Regular upkeep and repairs can total at least 1% of your home’s value every year. Prices can vary depending on your city or neighborhood prices so you may want to chat with your Real Estate Agent and inspector to help you figure out what routine jobs will cost in your area.

Operational Costs, and Utilities

You may be used to paying utilities if you’ve rented but owning a home can sometimes bring more. For example, electricity can cost around $100 a month or more. In 2020, the national monthly average cost for electricity was $117 according to a report released from the United States Energy Information Administration.

Lawn and Lot Maintenance

Homes with lawns and large lots can require a lot of time and commitment to maintain. Outside maintenance also comes with the costs of equipment like lawnmowers, weed whackers, or wheelbarrows. Mapping out lawncare or garden plans can help you prepare your finances and develop an action plan to complete your project.

Decorations and Appliances

Getting every room in your home in order may involve buying necessities, like furniture and lighting. You may also wish to purchase new decorating elements as you continue to settle in.

Most homes come equipped with appliances unless you’re purchasing a newly built home that doesn’t. Generally, you’ll need to buy a washer and dryer for your laundry because those appliances are taken by the original seller. Most contracts stipulate leaving the stove, refrigerator, and dishwasher. However, appliances can break frequently and it’s not unusual to have to replace at least one appliance in your home.

Stay Prepared with a Lender Who Cares

Being prepared for all of your future costs will help you feel more confident as you begin your new journey as a homeowner. If you have questions about the process or you’re ready to begin, be sure to contact us today. One of our Loan Originators will walk you through every bit of the process to ensure your mortgage success.

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