16 Hidden Costs of Buying a Home for New Homeowners [Infographic]

Here’s a list of costs that many prospective homeowners aren’t aware of when they are looking into buying their first home.

Hidden Costs of Purchasing a New Home Infographic

Home Purchasing Fees

Some of these fees may be optional depending on a number of factors such as your financial situation and the stakeholders you are dealing with.

1. Mortgage Application Fee
This is the fee you pay to submit a mortgage application to the financial institutions. Fee varies among the lending institutions. If the fee is high then you’ll want to know ahead of time whether your application is likely to be approved or not.

2. Mortgage Loan Insurance
If your down payment is less than 20% then it is more than likely that you’ll need to get a loan insurance. Most home buyers will have to get what is called a private mortgage insurance (PMI). USDA, FHA, and VA loans may be alternative options for those in unique circumstances.

3. Mortgage Life Insurance
This is an insurance that’ll pay off the mortgage payment in the event of your death. Most home buyers won’t need this type of insurance.

4. Home Inspection Fee
A home inspector will perform a visual examination of the property. Getting a home inspection is highly recommended because it may uncover issues that could affect the value of a property.

5. Pest Inspection Fee
A separate pest inspection may be necessary if the area is known for having home-damaging pests like termites.

6. Land Survey Fee
A land survey helps define the boundaries of a property. This will come in handy if you want to understand all of the features that come with the property. The information compiled from a land survey could also help with legal issues (e.g. if you think a neighbor is interfering with your land).

7. Property Appraisal Fee
Appraisal is required to help determine the market value of a property. Lenders may need this information to determine how much mortgage they should grant.

8. Credit Report Fee
Lenders may charge a fee when they pull up your credit report. Some officers may charge upfront while others may include it as part of the closing costs.

9. Real Estate Attorney Fee
A real estate attorney may be needed to prepare the home purchase documents and to help close the deal. Attorneys can also help with any legal issues that may arise during and after the home purchasing process.

10. Property Transfer Tax
This is a tax that’s paid for the transfer of the property from one individual to another. Transfer tax may differ based on where the property is located.

11. Escrow Fee
The funds provided by the buyer is typically held by a third party until all conditions of the deal are met.

Post-Home Purchase Fees

12. Monthly/Annual Maintenance Fee
Some homeowners may have to pay a mandatory maintenance fee to the Homeowners Association (HOA). The fees paid to the HOA could cover a number of services such as neighborhood pest inspection, maintenance of community facilities, and lawn mowing.

13. Home Repair Fees
One popular rule of thumb is to set aside at least 1% of the home value each year for ongoing home repairs and maintenance. For example, if your home costs $500,000 then you should budget around $5,000 each year for home repairs.

14. Property Taxes
Everyone who owns or occupies a property pays property taxes. The rate, however, will vary widely state by state. For example, in 2016, New Jersey had the highest property tax of 2.29%.

15. Higher Utility Bills
Your utility bills are likely to be higher than what you paid when you were renting a home. A study by the Bureau of Labor Statistics shows that the average annual utility bill was $4,314 for homeowners vs. $2,413 for renters.

16. Building Permit Fees
Want to remodel your home or add something new to the existing property? You’ll most likely need to get a building permit, which is an official approval to proceed with a construction project.

As you can see, there are a lot of hidden costs associated with home ownership. Homes are a big investment and it is very important that you account for every potential expense as part of your budget.