The most obvious difference between renting vs. buying a home is that you make a mortgage payment to your lender instead of paying rent to the property owner each month. But if you’re used to renting, you should know there are extra costs to consider when buying a house beyond paying the mortgage.

Jules Borbely, a strategic real estate consultant for Real Estate Bees and COO of Oxford Property Group based in New York City, says that the biggest misconception first-time homebuyers have is that they only have to think about paying property taxes and the mortgage each month.

“Buyers often realize the true cost of homeownership too late, and get blindsided by the unexpected bills,” he says.

Hidden Costs of Buying a Home

When you buy a home, you make a down payment and pay closing costs to get the property officially in your name. Some closing costs seem manageable on their own, but they add up quickly.

“Generally, you should expect to pay between 3% and 5% of the mortgage amount (in closing costs),” says Robert Ingram, a certified financial planner at the Center for Financial Planning in Southfield, Michigan.

Here’s a rundown of the different costs you can expect when you close on your new home. The details of your home purchase and the property itself will determine which costs you have to pay, and which are optional.

Loan costs

  • Application fee. You may need to pay a nonrefundable fee to process your mortgage application, which can cost up to $500.
  • Assumption fee. A mortgage assumption is when the buyer takes over the seller’s loan. If you assume a conventional loan, you likely will need to pay the lender $800 to $1,000, or 1% of the mortgage amount.
  • Credit reporting fee. The lender pulls your credit score to approve you for your mortgage. Each credit report costs $10 to $100.
  • Discount points. Buying points means you’re paying interest upfront to reduce the interest rate on your loan. The amount you pay depends on your lender’s rates and how many points you decide to buy.
  • Escrow funds. You likely need to pay the first several months of property taxes and homeowners insurance into an escrow account to close the sale.
  • Origination fee. This fee covers the lender’s cost to set up your loan, which is generally about 1% of the total loan amount.
  • Prepaid interest. This covers the interest that accrues between closing on your loan and your first monthly mortgage payment.
  • Rate lock fee. You pay this fee to your lender to lock in your interest rate for the period between mortgage preapproval and closing. Some lenders will lock your rate for free, but other times it can cost 0.25% to 0.5% of the total value of the loan.
  • Underwriting fee. Some lenders split the origination fee into an underwriting fee and a processing fee. For your mortgage to be approved, an underwriter must review your income, assets, and debts to verify that you can afford the loan, and to evaluate how much of a risk you pose to the lender. This may cost up to $1,000.
  • Federal Housing Administration mortgage insurance. If you have an FHA-backed loan, then you’ll need to pay a mortgage insurance premium of 1.75% of your loan amount.
  • U.S. Department of Agriculture guarantee fee. USDA loans require that you pay a loan guarantee fee upfront in exchange for the government backing. This costs up to 3.5% of the total loan amount.
  • Veterans Affairs funding fee. VA loans require a funding fee. If you put at least 10% down, then the fee is 1.4% of the total loan amount; if you put at least 5% down, then your fee is 1.65%; and if you put less than 5% down, then the fee for first-time VA borrowers is 2.3%.

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Title costs

  • Title search fee. A title search is performed to detect claims, liens, or unpaid taxes on the property. This fee typically costs anywhere from $75 to $400.
  • Lenders title insurance. Expect your mortgage lender to require lenders title insurance, which protects the lender in case there’s a legal challenge to the home’s title. The cost ranges from $500 to $1,000, depending on the home.
  • Owners title insurance. Owners title insurance covers you against any claims or past liens on the home’s title. The cost ranges from $150 to $1,000, depending on the home.

Documentation costs

  • Courier fee. This fee is charged to transport your mortgage paperwork, and usually costs around $30.
  • Notary fee. If you sign your loan documents outside of the escrow office, you’ll likely need a notary. Fees vary widely, but expect to pay about $100 to $150.
  • Recording fee. This fee costs about $125, and covers registering and recording your home sale in public records.

Property costs

  • Appraisal fee. Before you close on your home, a home appraisal will be ordered to assess the property’s market value. The average appraisal typically costs $300 to $600 for a single-family residence, though it can vary based on the home’s size and location.
  • Flood certification fee. You may have to pay a fee of between $15 and $35 to the Federal Emergency Management Agency to verify whether your property is in a flood zone.
  • Home inspection fee. Not to be confused with the appraisal, the home inspection evaluates the condition of the home to make you aware of any damage or safety concerns. The inspection typically takes place after you sign the purchase agreement. The average home inspection costs $300 to $500, according to the Department of Housing and Urban Development.
  • Lead-based paint inspection fee. Homes built prior to 1978 may contain lead paint and require an inspection that costs roughly $300.
  • Pest inspection fee. Some states require a pest inspection. You also may need one if you have a VA loan. This costs about $100.
  • Survey fee. The survey details your property lines and includes any known easements that give other parties the right to use your property. The survey fee can cost anywhere from $200 to $1,000.

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Third-party services

  • Moving service fee.
  • Attorney fee.
  • Closing or escrow account fee. This typically costs 1% to 2% of the home purchase price.
  • Real estate agent commission. This generally costs 5% to 6% of the total loan value, and the total is split between the buyer’s agent and the seller’s agent.
  • Broker commission. After the real estate agent commission is split, it may then be divided again between the broker and buyer’s agent.
  • Home warranty services.

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Hidden Costs of Owning a Home

After you close on the home and move in, there are a number of ongoing costs you’ll face as a homeowner. Some will be recurring, such as utilities, property taxes, and homeowners insurance. Others will be one-time expenses, but they could catch you by surprise and be expensive.

Here are some of the additional costs of owning a home.


  • Homeowners insurance. This policy helps protect you from the financial consequences of potentially catastrophic events, like storms, fires, or theft. It also provides liability protection if someone sues you over an injury that occurred on your property. You’ll typically be required to pay your first year of coverage as part of your closing costs. Note that the following types of coverage are not included in a standard homeowners insurance policy, and need to be purchased separately:
  • Private mortgage insurance. If your down payment on a conventional loan is less than 20% of the purchase price, then you’ll need to pay for PMI to protect the lender in case you stop making payments.


  • Property tax. Local governments collect property taxes, so the amount you pay varies depending on where you live. In addition to the property tax rate in your area, what you owe is based on the value of your home. “Annual property taxes average about 1% of the home value nationwide,” Ingram says.
  • Transfer tax. You likely have to pay a transfer tax to get your home’s title updated and transferred to you. This fee is paid to your local government.

Homeowners association fees

If your home is a condominium or located in a community with an HOA, then you’ll likely need to pay a monthly or annual fee to cover the maintenance of common areas and shared amenities. These can include swimming pools, clubhouses, lounges, landscaped outdoor spaces, parking garages, and security gates.

HOA dues also often cover certain utilities, such as water, trash removal, and sewage, which means you don’t have to pay separately for each service every month.

“Depending on the amount of amenities and, of course, the location, the average association (or) condo fees range from $200 to $400 per month,” Ingram says.

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Emergency repairs

When you’re renting a home and there’s a plumbing emergency, the property manager typically arranges and pays for repairs. But when you’re a homeowner, emergency repairs are your responsibility.

Depending on the extent of the damage, repairs can be expensive — and time sensitive. If your central heating system breaks down in wintertime or a pipe bursts, you’ll need to hire someone to fix it immediately.

Some common emergency home repairs you may face include:

  • Burst, broken, or clogged pipes.
  • Roof damage.
  • Broken furnace.
  • Broken air-conditioning system.
  • Electrical issues.
  • Broken water heater.

Exterior maintenance

If you currently rent, then you’re probably used to the property owner paying maintenance costs. For example, you might pay your utility bills, but the property owner maintains the building exterior and takes care of upkeep, like plumbing or fresh coats of paint.

Owning your home means that you’re responsible for routine maintenance, which isn’t as simple as paying a fixed amount every month.

“Consider the tools and equipment you would need to buy, or the services you would hire to do the work,” Ingram says.

This includes:

  • Trash collection. This is often either charged as part of your property taxes or included in homeowners association fees.
  • Painting the exterior.
  • Deck or patio maintenance.
  • Fences.
  • Siding and awnings.
  • Pool or spa maintenance.
  • Pest control.


The condition of the grounds contributes to your home’s value, so it’s important to keep things tidy. Depending on where you live, you may also have to consider the costs of:

  • Lawn care.
  • Snow removal.
  • Tree trimming.

Interior maintenance

Lights will go out and need to be replaced, appliances will need to be repaired, and furniture will need to be purchased and maintained. Be mindful of the following expenses:

  • Paint.
  • Appliances.
  • Floors and carpets.
  • Furniture.
  • Security system.
  • Lights.


As a renter, you may already be used to paying for certain utilities, such as electricity and gas. Homeowners typically must cover all the costs involved with running their homes, which will likely be an increase from what you currently spend on utilities.

The size and location of your new home also affect your utility bills. Moving from an 800-square-foot apartment to a 2,500-square-foot house could double or triple your energy costs, according to Ingram. Once you’ve factored in the fees for your water and sewage services, your utilities could exceed $500 per month, he says.

You can expect the following recurring utility bills:

  • Electricity.
  • Gas.
  • Water.
  • Internet.
  • Cable or satellite TV.

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The Bottom Line on the Hidden Costs of Homeownership

The hidden fees of buying a house can put you over budget and under financial pressure. The homebuying process on its own already involves certain fees to close the sale and get the property officially in your name. Once you’re living in your new home, you’ll face maintenance and utility costs, along with homeowners insurance and property taxes. You also may have to pay regular HOA fees.

The true cost of homeownership is the sum of your mortgage and all these additional costs. Some of them will become typical monthly expenses, while others — like accidental damage — could show up unannounced. By planning for these hidden costs when you’re buying a home, you can be better prepared to expect the unexpected.