You've found the perfect house, and the listing price fits your budget. You're already picturing where your furniture will go and planning your first dinner party. Don't send the invites just yet, because the sticker price on a real estate listing doesn’t always tell the full story. From closing costs and inspection fees to those sneaky post-move expenses, hidden costs can throw off your budget if you’re not prepared.
In this guide, we’ll walk through the typical (and sometimes unexpected) expenses that come up when you’re buying a house. By the end, you’ll have a clearer picture of what to expect—and how to keep your finances in check while settling into your new space.
Closing Costs: The First Big Surprise
A Bundle of Fees
When someone mentions closing costs, they’re referring to a handful of separate fees, each covering a different aspect of finalizing your home purchase. You might see charges for loan origination, title insurance, escrow fees, and sometimes attorney services, depending on your state. Some states even tack on extra taxes when properties change hands.
How Much They Might Run You
Closing costs typically range from 2% to 5% of the purchase price. That means on a $400,000 house, you could end up paying between $8,000 and $20,000 in fees, on top of your down payment. It can be a large extra payment many buyers don’t factor in until the last minute.
New Construction vs. Existing Homes
New Homes: Some builders may offer credits or closing cost assistance as an incentive. However, that credit might only cover certain fees, leaving you responsible for the rest. Always ask for a precise breakdown.
Move-In Ready: Sellers often share in closing costs, especially in cooler markets. Or they might refuse if the market is hot. Either way, it pays to negotiate—but be prepared to pay for the bulk of closing fees yourself if competition is fierce.
Inspection Fees: Your Best Defense
More Than Just a Formality
It might be tempting to skip the home inspection, especially if you’re buying a brand-new place. But even freshly built homes can hide construction oversights—like faulty wiring or incomplete insulation. For existing homes, an inspection is practically a must-have to safeguard against big surprises down the road (such as mold or crumbling foundations).
Price Range and Add-Ons
A general home inspection can cost anywhere from $300 to $600, with specialized checks (radon, termite, sewer line) adding extra fees. If the inspector flags significant issues, you can use their report to request repairs, negotiate a lower price, or in some cases, walk away without penalty.
Brand-New vs. Older Property
Brand-New: The likelihood of major structural flaws is lower, but minor slip-ups happen. Inspectors can also catch subtle issues while warranties are still in effect, giving you leverage to get them fixed.
Previously Owned: Older homes are more prone to hidden damage, from leaky roofs to out-of-date wiring. A good inspection is crucial so you don’t sink your budget into immediate repairs.
Property Taxes and Homeowner’s Insurance
Why These Costs Vary
Property taxes are based on your local government’s assessment of your home’s value and the set tax rate. This number can fluctuate yearly, sometimes rising when neighborhoods become more desirable. Meanwhile, homeowner’s insurance protects you financially if your house is damaged or destroyed, but rates vary based on factors like location, home size, and any special risks (like living in a flood zone).
Budgeting for Taxes and Insurance
Your lender usually requires an escrow account for your property taxes and insurance, collecting a monthly amount with your mortgage payment. If the actual bill ends up higher than expected, your monthly payment can jump to cover the difference. So it’s wise to keep a little extra on hand.
Construction vs. Move-In Ready
New Construction: Tax assessments can start out low if the home wasn’t fully completed at the time of appraisal. Expect a bigger jump once the home’s full value is registered by your local assessor. Insurance may be slightly cheaper if you’ve got modern building codes, but some new developments may be in remote areas with higher base rates.
Older Homes: Taxes are typically more predictable, assuming the local government has had years to assess the property. Insurance can be pricier if the home has older wiring or a worn roof, though. Always get a couple of quotes to compare.
Mortgage Insurance (PMI) and Other Loan-Related Costs
The Role of PMI
If you’re putting down less than 20% on a conventional loan, lenders often require Private Mortgage Insurance (PMI). This extra monthly fee helps protect them if you default on the loan. It doesn’t protect you, but you’ll still pay for it until you build enough equity (usually when your loan balance hits 80% of the home’s appraised value).
Don’t Forget Rate Locks
If your closing is delayed, you might have to pay a fee to extend your mortgage rate lock, or face a higher interest rate if the lock expires. These added charges can be significant if the delay is lengthy.
New Home vs. Older Home Scenarios
New Construction: Rate locks can be tricky if the builder’s timeline shifts. Consider a longer lock or keep a contingency fund in case you need to extend.
Existing Homes: Closings generally happen faster, so rate-lock extensions may not be as big an issue—unless the seller requests extra time to move out or you’re dealing with a complicated transaction.
Utility Hookups, Transfer Fees, and More
Start-Up Costs You Might Overlook
In an older neighborhood, utilities are typically established. You might only pay modest transfer fees to get the water, electricity, or gas under your name. In brand-new developments, hooking up utilities can mean paying for new meters, trenching for lines, or separate connections that cost more than you’d expect.
Typical Examples
Water, Sewer, or Well: In some localities, connecting to city water and sewer can trigger a separate hookup fee. If it’s rural, you may be dealing with a well and septic system.
Electric and Gas: The utility company might charge for installing a new line or meter.
Cable and Internet: The service might not be fully built out yet. If you’re the first on your street, the installation might come with extra fees.
New vs. Move-In Ready
Brand-New: Expect to pay for any lines not yet installed, or special expansions that bring utilities to your specific lot.
Older Place: Typically, the lines are there; you just switch the billing into your name. But if the previous owner used a provider you don’t like, you may pay a smaller setup fee for a new provider anyway.
Inspection, Appraisal, and Possibly a Survey
Why a Survey?
For many newly developed lots, the boundaries and easements might be well-documented, but you could choose to get a survey to ensure you know exactly where your property lines begin and end. This can help you avoid future disputes if you want to add a fence or other structure.
The Price Tag
A land survey can range from $200 to $800 or more, depending on land size and complexity. While it’s not mandatory in all areas, some lenders require a survey for brand-new construction or if the property boundaries have changed.
Move-In Ready vs. Freshly Built
New Construction: If your lot is one of the very first sold in the subdivision, you might want that extra peace of mind confirming the boundaries.
Resale: Older neighborhoods often have well-established survey records. But if fences have been moved or neighbors expanded driveways, you’ll want to verify that everything matches official records.
Ongoing Maintenance and Repair Surprises
Don’t Assume “New” Means “No Issues”
Just because a home is fresh out of construction doesn’t mean you’ll never face an unexpected fix. Materials can warp, HVAC systems may develop quirks, or a quick patch job might fail under heavy rain. In older homes, the risk could be a worn-out roof or a furnace on its last legs.
Budgeting Ahead
Experts often suggest putting aside 1% to 3% of your home’s value each year for upkeep. Even if you don’t use it all in one go, you’ll accumulate funds for future larger repairs. That foresight can save you from panic if the water heater fails at an inconvenient time.
New vs. Older
New Construction: Often covered by a short-term builder warranty, so catastrophic issues might be fixed at no cost to you. However, anything outside that coverage—like small aesthetic fixes or “wear and tear”—is on you.
Move-In Ready: Some sellers include a home warranty, but once that expires, you’re responsible for everything. On the plus side, a well-maintained older home may run smoothly if the previous owners were diligent about repairs.
Extra Fees Like Transfer Taxes or Community Assessments
Why States and Municipalities Do This
Some states charge a transfer tax every time a property changes ownership. Local governments might also impose community improvement fees if your area is part of a special district that funds roads, schools, or parks.
Potentially Big Expenses
Depending on where you live, transfer taxes can be low or surprisingly high (a few thousand dollars or more). If you’re in a brand-new development that’s partially financed by special bonds or levies, you could face ongoing extra taxes until those bonds are paid off.
Considering New vs. Established
Brand-New: Some newly built communities are funded by special taxes or local bonds that cover infrastructure projects like roads and drainage. If your development falls under one of these programs, you may face extra yearly fees.
Older Homes: Taxes might be stable, but if the city recently passed a levy for a new school or library, your property tax rate can still rise. Always check local data for any upcoming proposals.
Conclusion
Buying a house can be exciting, but those hidden costs can occasionally add a sour note to an otherwise sweet experience. From property taxes and utility hookups to unexpected repairs and closing fees, these line items deserve a spot on your radar. When you plan ahead, you can avoid sticker shock and protect your hard-earned savings.
Key Takeaways
Get Detailed Estimates: Don’t settle for general numbers. Ask for itemized breakdowns on upgrades, taxes, and possible HOA fees.
Always Inspect: Even brand-new construction can have oversights. A professional home inspection is money well spent.
Budget for the “What-Ifs”: Whether it’s a delayed closing or a faulty water heater, surprises happen. Keep a contingency fund.
Compare New vs. Existing: From potential builder warranties to pre-installed kitchens, weigh your short-term convenience against long-term repairs or updates.
Stay Flexible: Real estate often comes with twists. If you can adapt—by negotiating or adjusting your move-in timeline—you’ll save both cash and stress.
Ready to Find the Perfect Home?
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Michael Letendre
Michael Letendre is a writer for NewHomeSource and Builder Magazine.