Here Are the Unexpected Expenses That Can Pop Up When You Buy a House
When you’re in the market for a home, you expect to pay some agreed-upon price for the house you eventually buy. What you may not anticipate, however, are several smaller expenses that can arise during the home buying process.
If you don’t know what those costs are — or how much they tend to run — you could blow your budget and get yourself into a deep financial hole.
To help you avoid that, here’s a walk through some of the most common, yet unforeseen, expenses associated with buying a home and how much you should generally budget for each.
1. Mortgage Loan Fees
If you need to take out a mortgage to buy a house (like ~2 in 3 homebuyers do, statistics show), that’s going to come at a cost. In fact, mortgage loan fees typically cover several costs associated with originating, processing, and underwriting a loan, with those including (and not limited to):
- Application fees
- Credit report fees
- Taxes
- Commissions
- Other administrative costs
Average Cost: ~2% to 5% of the purchase price
2. Mortgage Insurance Fees
What’s your down payment going to be? How much can you afford to put down?
If it’s going to be less than 20% of the purchase price, your lender is probably going to require property mortgage insurance (PMI). This coverage protects the lender in case you stop paying your mortgage. If that happens, your lender can get reimbursed for its losses via the PMI.
Average Cost: ~0.25% to 2.25% of the mortgage loan amount
3. Homeowner’s Insurance Expenses
Many lenders require at least one year of homeowner’s insurance as a condition for issuing a mortgage loan. This coverage is to protect both you and the lender in the event some disaster damages or destroys the house.
Please note that if you take out homeowner’s insurance, you let it lapse, and your lender requires this coverage, your loan could go into “default” status until you reactivate that insurance.
Average Cost: ~$1,000 to $2,000/year
4. Home Appraisal & Inspection Costs
Appraisals can give you a clear idea of what a home is really worth when you’re serious about buying it. Similarly (and typically done around the same time as the appraisal), the home inspection can alert you to any possible problems with a house’s structure, foundation, plumbing, electrical system, and more.
As with most of these hidden expenses of buying a home, the costs of a home appraisal and inspection are somewhat of an investment in that they are meant to:
- Protect and inform you
- Help you make an informed decision about whether to buy a house
- Give you a better idea of what to offer (and what’s too much).
Average Costs: ~$700 to $1,250 for a home appraisal and a home inspection
5. Earnest Money Deposits
Also known as a “good faith” deposit, earnest money is essentially a down payment that shows you’re serious about buying a house.
It’s usually paid to the seller when the buyer signs the purchase agreement, and that earnest money can be rolled into the offer or refunded at some point, based on the terms of the purchase agreement.
While not every homebuyer may need to put down earnest money, it’s smart to budget for it just in case — and especially if you want to buy a home in more competitive real estate markets, like in Houston or Austin.
Average Cost: ~1 to 3% of the purchase price
6. Closing Costs
Sellers may pay some or all of the closing costs, but you can’t walk into the home buying process expecting a seller to cover these costs no matter what. Instead, you need to be prepared to pay closing costs. And if you’re trying to buy a house in a seller’s market or your offer is one of many that sellers are considering, you may even want to consider offering to cover some or all the seller’s closing costs as a way to sweeten the deal.
Average Cost: ~3 to 6% of the purchase price
7. Moving Costs
When it’s time to relocate into your new home, moving expenses can drain your wallet pretty quickly. In fact, there could be several costs you need to cover as you relocate, like the costs of a rental truck, movers, boxes, new items for your new home, and more.
Along with that, moving expenses can also include the costs of vacating your old place, like cleaning fees or the costs of fixing certain wear and tear.
Average Cost: ~$1,000 to $3,000 for local moves and $2,000 to $5,000+ for long-distance moves
Budgeting, Unexpected Costs & Buying a Home: The Bottom Line
Whether you’re a first-time or repeat homebuyer, you’re probably not buying houses every day. So, the ins and outs of the homebuying process aren’t necessarily second nature — and you may not be fully aware of every expense that could arise, even if you’ve bought a house in the past.
To get the information, guidance, and support you need as you buy a house in Texas, work with experienced Realtor® at New Home Gurus of Gurus Realty.
We can guide you through the process, helping you with offers, negotiations, and every aspect of closing. Plus, we’ll split our commission with you at closing.
Homebuyers and sellers who work with New Home Gurus can get back an average of $4,500 to $12,000 at closing.
How Much Cash Can You Get after Closing?
Call (281) 668-8124 or Contact Us to Find Out Now
We are standing by, ready to answer your questions and explain the details of our commission-sharing program.