• Initial Deposits: Be prepared to pay 1–2% of the price as earnest money upfront and an average of 6–7% for a down payment if you are a first-time buyer.
• Transaction Fees: Budget $3,800 to $7,000 for closing costs, which cover your appraisal, home inspections, title insurance, and loan origination.
• Tax & Insurance: Plan for ongoing annual expenses, including property taxes (averaging $2,500) and homeowners insurance (averaging $1,272).
• Maintenance & HOA: Set aside $1 per square foot annually for repairs and budget $200–$300 monthly if your home is in a community with HOA fees.
• Moving & Utilities: Factor in the physical move (costing $500 to $10,000) and new monthly responsibilities for water, electricity, gas, and trash.

When it comes to the costs of buying a home, many prospective homeowners focus on closing costs and the mortgage payment. This is a good start, but there are many other home buying costs to consider. Learning how to factor in all upfront and ongoing expenses, as well as distinguishing your needs versus your wants, can help you make your final buying decision.

As you begin to take steps toward homeownership, here are the financial outlays for buying a house to keep in mind.

Costs of Buying a Home

Before you step into your new dream home, you'll pay several upfront costs. There are also many ongoing expenses of buying a house. Taking this information into account and gathering estimates can help you plan and budget as you move through the home purchase process.

Some of the upfront costs of buying a home include:

• Earnest money deposit
• Down payment costs
• Moving expenses
• Closing costs for homebuyers, which include appraisal and home inspection fees

Some of the ongoing costs involved in buying a property include:

• Property taxes
• Mortgage fees, such as private mortgage insurance (PMI)
• Homeowners insurance
• Homeowners association (HOA) fees
• Home maintenance
• Utilities

Earnest Money Deposit

An earnest money deposit, or earnest payment, is money you pay upfront after making an offer on a home. The earnest payment, typically 1-2% of the purchase price, is paid once the buyer and seller enter into a purchase agreement. From the seller's perspective, the deposit shows you’re serious about the offer. After closing, the deposit is applied to the down payment or closing costs.

Down Payment Costs

A key factor when considering the financial outlay for buying a house is the down payment. This is the percentage of your home's purchase price that you pay upfront. For first-time buyers, the average down payment is often between 6% and 7%, whereas repeat buyers typically put down around 17%. A larger down payment reduces your monthly mortgage payment. However, a down payment below 20% generally requires you to pay private mortgage insurance until you reach a 20% equity level.

Moving Costs

The cost of moving depends on the size of your home and the distance of the move. For example, a local move from a one-bedroom apartment may cost about $500. Conversely, an out-of-state move for a large home more than 1,000 miles away could cost up to $10,000. Including this expense when budgeting for home purchase expenses is key.

Closing Costs for Homebuyers

Typical closing costs for homebuyers include items like loan origination fees, appraisal fees, home inspections, title search, title insurance, taxes, and any discount points you may choose to pay. Closing costs vary by state, so it’s helpful to research them in your area. On average, buyers in the U.S. paid $3,860 in closing costs (excluding transfer taxes) or $6,905 (including transfer taxes) in 2021. Certain states have no transfer tax, while others may designate whether the buyer or seller is responsible for this cost.

Property Taxes

Property taxes are a significant ongoing cost of owning a home. The amount you pay depends on the size of your property and the local tax rate. Property taxes in the U.S. average about $2,500 annually but can range widely, from $500 to upwards of $8,000, depending on the state. A lender or real estate agent can assist in estimating the property taxes for homes in your desired area.

Homeowners Insurance

Homeowners insurance is another recurring cost to consider. The average expense in the U.S. is around $1,272 annually, though it varies depending on the property’s size and location. For homes near water or in flood-prone areas, you may also need an additional flood insurance policy.

HOA Fees

If your new home is part of a private community, there may be homeowners association fees to pay. These fees cover shared maintenance, amenities, or services. HOA fees can range from $200 to $300 per month on average but vary widely depending on the community and its offerings.

Home Maintenance

Maintenance is an often-overlooked aspect of home purchase expenses. A general guideline is to budget about $1 for every square foot of livable space annually. This accounts for repairs, upkeep, and yard maintenance. Your costs may vary depending on the age of your home and whether you hire professionals for the work.

Utilities

Owning a home means taking on utility bills, including gas, electricity, water, and internet. Many real estate professionals can provide utility cost estimates for properties based on previous usage, helping you better anticipate these ongoing financial responsibilities.

Consider Needs vs. Wants When Buying a Home

When weighing the costs involved in buying a property, it’s essential to separate your must-haves from your nice-to-haves. This can make it easier to establish a realistic budget. For example, you may need three bedrooms and two bathrooms but prefer to have an additional study or larger yard. Sacrificing some wants could reduce your down payment, property taxes, and maintenance costs, making the overall financial commitment more manageable.

It’s easy to focus on mortgage fees and closing costs while overlooking other expenses of buying a house. However, by proactively gathering information, consulting with your real estate agent, and working with a knowledgeable lender, you’ll gain a comprehensive understanding of the costs of buying a home. This will help you enter homeownership financially prepared and confident.

Calculating the Total Costs of Buying a Home: From Down Payments to Ongoing Expenses

Buying a home requires looking beyond the monthly mortgage payment to account for both one-time "entry" costs and recurring ownership expenses. From upfront requirements like the earnest money deposit and closing costs to ongoing responsibilities like property taxes, HOA fees, and maintenance, a complete budget is essential for long-term financial stability.

By distinguishing your "must-haves" from "nice-to-haves," you can better manage these variables and ensure your new home remains an affordable asset. Contact a loanDepot licensed lending officer today to get a detailed estimate of your total costs and start your journey to homeownership with confidence.