Hidden costs homebuyers should know


Knowing these under-the-radar expenses can help you close with confidence.

Congratulations if you’re considering buying a home! Amid the excitement of this big change, following one simple rule can help you move forward with confidence: 

Budget for hidden costs.

You’ve determined a price range for your home and are excited to go home-shopping. Before you get ready to make an offer, consider the hidden costs you may not have thought about while determining your price range. Factoring these additional costs into your final budget can reduce surprises and help you be sure you’re making an appropriate offer and have a mortgage that works for you.

Here are seven expenses—some of which could be included in the cost of your mortgage—that every homebuyer should know about: 

1. Closing costs: 2 – 5% of home price

This is your final step in homebuying but the first thing to talk about with your lender. Think of closing costs as a big umbrella term covering everything from attorney fees for handling contracts to taxes, land survey, and homeowner association fees. 

Some sellers will pay for your closing costs, and some lenders will include them in the mortgage loan. Just ask so you know ahead of time.

“Ask about the general closing costs and loan fees to be expected given your pre-approval amount,” says Brendon DeSimone, a real estate expert and author of Next Generation Real Estate: New Rules for Smarter Home Buying & Faster Selling.

Harrine Freeman, financial planner and owner of H.E. Freeman Enterprises, adds that “depending on the arrangement, [costs] can typically range from 2 to 5% of the sale price.” For example, a $250,000 home can have a closing cost between $5,000 and $12,500.

Closing costs can add up, so be prepared for a high price and pay it with pleasure because you’ve already accounted for the amount. No sticker-shock here. 

2. Home inspection: $200 – $2,000

While not always required, most real estate experts agree that a home inspection is a must before you close on a home (even if it’s new construction).

This is an exciting process, but it’s important to consider what a home might be hiding: Are the walls full of termites? Does the plumbing predate the internet? Knowing the ins and outs of your future home’s health can give you peace of mind and save you from spending big on unexpected repairs. It can also give you clarity as to whether a home is right for you, your plan, your family, or your toolbox. 

“Homebuyers don’t understand how important it is to see what repairs are needed upfront,” says Freeman.

“Depending on where you live, home inspection fees could cost between $200 and $2,000,” says DeSimone. “Yes, that’s a hefty price tag, but if the inspection reveals something major, you might be able to negotiate more aggressively on the purchase price—or walk away from a potential money pit altogether. If all is good, you’ll come away with peace of mind. Money well spent either way.”

3. Land survey: $100 – $900

Much like a home inspection, a land survey helps you get all the necessary details on your new home and the land it sits on.

Think of buying a home like dating: You want to know all the details before signing up.

Here’s what you get with a land survey:

  • The exact dimensions of your home
  • The exact size of the property
  • The exact location
  • Any other improvements
  • Where your property line sits

With this information, you’ll be prepared if neighborly disputes arise over things like building a fence or maintaining tree growth and landscaping. Although land surveys are not always required, the more you’re prepared for property line “what-ifs,” the more confident and happier you may feel during and after the process. 

4. Appraisal: $250 – $600

Mortgage lenders don’t want to be on the hook for a home that’s radically overpriced. Then again, neither do you. Before lenders provide a loan, they may require an independent appraisal to determine the property’s worth.

That fee falls to the homebuyer, but think of it as a good thing.

“Appraisals are used to verify that the sale price of the home is equal to or lesser than the fair market value,” says Freeman, who has over 10 years of personal finance counseling experience.

Think of an appraiser as your private sleuth. They check everything from the cabinets to the closets to ensure you’re paying a fair price. Bigger homes cost more to appraise, but Freeman suggests putting aside $250 to $600—a difference that can depend on the home, lender, or state. 

5. HVAC inspection: $200 – $600

Heating and air systems are one of the biggest investments when purchasing a home—but the average home inspection doesn’t include an HVAC inspection. It can be a good idea, especially if you’re buying an older home or a fixer-upper. You likely don’t want a home inspector checking HVAC anyway. Enlist a licensed specialist and keep in mind, all you DIYers: simply looking at your HVAC won’t reveal possible underlying problems.

So why do you need an inspection?

HVAC can be an overlooked source of problems for new homebuyers. Heat and air conditioning will comprise a hefty portion of your overall energy bill, according to Energy Star. If these systems are in good shape, your home will be more energy-efficient, and you’ll likely save on monthly expenses. If they are on their last legs and die, they can require thousands of dollars to replace. 

6. Escrow fees

Some mortgage lenders require you to open an escrow account along with your mortgage agreement. If you have a Federal Housing Administration loan, escrow accounts are mandatory. But if you add it to your homebuying to-do list, it won’t be a surprise.

An escrow account sets aside funds each month for expenses that aren’t related to the actual mortgage, like property taxes and homeowners insurance.

Your lender manages these payments and budgeting; one less task you have to think about. Also, looking on the bright side, making automatic monthly contributions to tax and insurance payments can reduce the stress of having one big bill at the end of the year.

If you’re beginning to hone your savings skills and haven’t put money aside, you may have to make an initial escrow payment during the close of your new home. 

7. Moving costs: $500 – $4,000

With all the moving pieces, it can be easy to forget that you’ll eventually have to, well, move. But who needs furniture when you’re basking in the delight of your new home?

Base your moving budget on how much stuff you have and whether you’ll hire professionals or rely on a band of buddies. If you plan to use movers, get quotes ahead of the move date and compare different companies.

Factor in the small stuff, too, like boxes, tape, padding, and labels. It adds up quickly.

Buying a home is an exciting milestone that should be enjoyed. If you’re reading this, maybe the experience will already be a little less stressful. 

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.