Buying your first home is an exciting milestone, but many first-time buyers focus only on the purchase price and forget about the additional expenses involved. From down payments and closing costs to property taxes and maintenance, homeownership comes with various upfront and ongoing costs that can impact your budget.
So, how much does it really cost to buy a house? This guide will break down all the expenses—both initial and long-term—to help you financially prepare for homeownership.
Upfront Costs of Buying a House
Before moving into your new home, you’ll need to cover several one-time expenses. These include the down payment, earnest money deposit, closing costs, and moving expenses.
1. Down Payment: The Largest Upfront Expense
Your down payment is the portion of the home’s price you pay upfront. It’s also a key factor in determining your mortgage terms.
How much do you need?
- 20% Down (Traditional Approach): Avoids Private Mortgage Insurance (PMI) but requires significant savings.
- 3% – 5% Down (Conventional Loan): Requires PMI but makes homeownership more accessible.
- 0% Down (VA or USDA Loans): Available to eligible veterans and rural homebuyers.
📌 Example: If you’re purchasing a $300,000 home:
- A 20% down payment = $60,000
- A 5% down payment = $15,000
💡 Quick Tip: Many first-time buyers qualify for down payment assistance programs that help cover a portion of this cost.
2. Earnest Money Deposit: Proving You’re a Serious Buyer
The earnest money deposit is a good faith payment that shows the seller you’re committed to buying their home. It’s usually 1% – 3% of the purchase price.
- If the deal closes, the deposit is applied to your down payment or closing costs.
- If the deal falls through, you could lose the deposit unless you have contingencies in place.
📌 Example: For a $300,000 home, an earnest money deposit may range from $3,000 – $9,000.
3. Closing Costs: Fees to Finalize Your Home Purchase
Closing costs are additional fees you’ll need to pay when taking legal ownership of the property. Expect to pay 2% – 6% of the loan amount in closing costs.
Common Closing Costs Include:
- Loan Origination Fees: Charged by lenders to process your mortgage.
- Home Appraisal: Determines the property’s market value (~$500).
- Title Insurance: Protects against ownership disputes.
- Attorney Fees: Covers legal paperwork and contract reviews.
- Escrow Fees: Third-party costs for handling transaction funds.
📌 Example: If you take out a $250,000 mortgage, closing costs could range from $5,000 – $15,000.
💡 Quick Tip: Some sellers may agree to cover part of your closing costs, so always negotiate!
4. Moving Costs: Budgeting for the Transition
The cost of moving varies based on distance and whether you hire professionals.
Average Moving Costs:
- Local Move: ~$1,500
- Long-Distance Move (100+ miles): $3,000 – $10,000
💡 Quick Tip: Reduce moving costs by packing yourself, choosing an off-peak moving date, or renting a moving truck.
Ongoing Costs of Homeownership
Owning a home isn’t just about making mortgage payments—you’ll also need to budget for taxes, insurance, maintenance, and utilities.
1. Mortgage Payments: The Core of Homeownership Costs
Your monthly mortgage payment includes:
- Principal: The amount you borrowed.
- Interest: The cost of borrowing.
- PMI (If Applicable): Required if your down payment is under 20%.
📌 Example: A $300,000 home with a 5% down payment and a 6.5% interest rate may have a monthly payment of around $2,000 (including taxes and insurance).
💡 Quick Tip: Use an online mortgage calculator to estimate your monthly costs before buying a home.
2. Property Taxes: Annual Obligations
Property taxes are paid to local governments to fund schools, roads, and emergency services.
Estimated Property Tax Costs:
- Average Rate: 1% – 3% of your home’s value.
- Example: If your home is worth $250,000, you may pay $2,500 – $7,500 per year.
💡 Quick Tip: Your mortgage lender may include property tax payments in your monthly mortgage bill through an escrow account.
3. Homeowners Insurance & HOA Fees
🔹 Homeowners Insurance: Covers damages and liability ($1,200 per year).
🔹 HOA Fees (If Applicable): Covers community upkeep ($200 – $500 per month).
📌 Example: If your HOA fees are $300 per month, that’s an extra $3,600 per year in housing costs.
💡 Quick Tip: Shop around for homeowners insurance quotes to find the best deal.
4. Utilities, Maintenance, and Repairs
As a homeowner, you’re responsible for all home-related costs.
💡 Estimated Monthly Costs:
- Utilities (Electric, Water, Gas, Internet): ~$350 – $500
- Maintenance & Repairs: 1% – 3% of the home’s value annually
- Major Repairs (Roof, HVAC, Plumbing): Can cost thousands over time
📌 Example: For a $300,000 home, setting aside $3,000 – $9,000 per year for repairs and maintenance is smart.
💡 Quick Tip: Start an emergency fund to cover unexpected home expenses.
Frequently Asked Questions (FAQs)
How much money do I need to buy a house as a first-time buyer?
You should budget for:
- 3% – 20% down payment
- 2% – 6% closing costs
- $1,500+ in moving expenses
What are the hidden costs of buying a home?
Many buyers overlook PMI, HOA fees, home maintenance, and property taxes—make sure to include them in your budget!
Can I buy a house with less than 20% down?
Yes! Many loans allow 3% – 5% down payments, though you may need PMI if you put down less than 20%.
The Bottom Line: Plan for More Than Just the Sale Price
Buying a home involves more than just the listing price—upfront costs and ongoing expenses add up. By understanding and planning for these costs, you can confidently move forward with homeownership.
Next Steps:
✅ Check your credit score & mortgage options
✅ Start saving for a down payment & closing costs
✅ Research first-time home buyer programs in your area
💡 Ready to buy your first home? Get started today by exploring mortgage rates and speaking with a home loan expert!