What first-time buyers should know about the costs of homeownership


Closing costs can add between 2% and 5% to the sale price of your home — but those aren’t the only homeownership costs you’ll need to consider. Learn more. (Shutterstock)

Buying a home is usually the most expensive transaction of your life. In addition to the cost of the home itself, closing costs can add 2% to 5% to the total expense of buying a home. But that’s just the beginning.

Once you own the home, routine maintenance costs, yearly property tax and annual homeowners insurance premium increases can quickly complicate your housing budget. Keep reading to learn more about the costs of homeownership every first-time homebuyer needs to know. 

Credible makes it easy to research your mortgage options and compare rates from multiple lenders.

  • What are common costs of buying a house?
  • What are some predictable costs of homeownership?
  • What are some unexpected costs of homeownership?
  • How to cut some common homeownership costs

What are common costs of buying a house?

While you may encounter a few surprises — like needing to come up with extra money down to cover a shortfall between the appraised value and the sale price — buying a house usually involves a set of predictable costs. 

Your individual cost will depend on how much you put down, the interest rate on your mortgage, local market rates for things like appraisals and inspections, and the value of the home you’re buying. 

Down payment

Your down payment will vary based on the amount of cash you have, the home's price and the type of loan you choose. 

Conventional loans can be available for as low as 3% down through the Fannie Mae HomeReady and Freddie Mac Home Possible programs. 

VA loans and USDA loans allow you to put nothing down. There are also FHA loans, which require a minimum of 3.5% down if your credit score is 580 or higher, or 10% if your credit score is as low as 500. 

Closing costs

Closing costs also vary across the board, but you may be able to get the seller to pay for all or a portion of them.

Common closing costs include fees paid to your mortgage lender (like an origination fee), mortgage discount points, appraisal fees, title fees, recording fees, pest and other specialized inspection fees, and real estate commissions. 

What are some predictable costs of homeownership?

Homeownership includes regularly occurring costs that you can easily predict and budget for. Here are the costs you’ll need to factor into your monthly home budget.

Mortgage payment

Your mortgage payment is composed of four standard components — principal, interest, taxes and insurance, or PITI. To pay for these expenses, most lenders require you to have an escrow account, also called an impound account. Typically, this is where payments for your taxes and insurance go.

While the principal and interest portions of your loan will remain the same if you have a fixed-interest rate mortgage, your taxes and insurance can change. When property taxes increase or your home’s assessed value increases, you’ll pay more monthly. 

The insurance part of your monthly payment includes your homeowners insurance premiums and any private mortgage insurance (PMI) or mortgage insurance premiums (MIPs) that you paid if you didn’t put 20% down.

Save money on your mortgage payment. Credible can help you find a great interest rate from a variety of mortgage lenders.

Homeowners association (HOA) dues

If you live in a community with a homeowners association, you’ll have to pay HOA dues. Typically, HOA dues for condos and other complexes with significant amenities require higher HOA dues than single-family neighborhoods that may come with fewer amenities.  

You may need to pay your dues monthly, quarterly or even annually. Check with your real estate agent to see what dues you’ll be responsible for and how often you must pay them. 

Keep in mind that HOAs can also have rules (sometimes referred to as restrictive covenants) that are easy to violate and can lead to fines. For example, you could be fined for leaving your trash can visible or parking outside of your designated spot. Read through your HOA rules to make sure you’re compliant and not caught off guard by surprise fines. 

Regular maintenance

You’ll want to set aside a small emergency fund and contribute to it regularly for home maintenance costs. The general rule of thumb is to set aside 1% of the total purchase price of your home for maintenance every year. For example, if you purchased your home for $500,000, set aside $5,000 every year for maintenance. 


Utility costs vary significantly depending on your area and home. A small home with energy-efficient appliances and high-quality insulation will naturally have lower utility bills than a large home with poor insulation, old appliances or inefficient HVAC equipment. 

When shopping for a home, ask the current owners what they pay on average for utilities. While your actual usage may vary, it can give you a good idea of what to expect for the home. 


Landscaping costs will depend on your climate, neighborhood, yard and preferences. If your time is limited or you have physical limitations, you may need to pay a service to handle your yard work, which could get pricey depending on your area. 

If you’re handling yard work yourself, you’ll need to budget for tools, sprinklers, fertilizers, seeds, pest and weed control, mulch, plants, and tree care, depending on your yard. 

What are some unexpected costs of homeownership?

In addition to regularly occurring expenses, owning your own home means planning for unexpected costs. Here are some costs that you’ll want to set aside money for:

  • Emergency home damage — Your homeowners insurance may cover some types of sudden damage, but not all. A tree limb falling on your home is likely covered, but your child throwing a baseball through your window may not be. Check your insurance coverage, but keep in mind that you’ll have to pay a deductible, and your insurance carrier may raise your rate after you make a claim.
  • Plumbing emergencies — Plumbing repairs cost around $325 on average, according to Angi, but that’s assuming you catch the problem quickly. A major leak could add up to thousands of dollars if it leads to pooling water which could damage your floors, drywall, cabinets and belongings.
  • HVAC replacement — The average furnace is expected to last 15 to 20 years, according to Carrier, a company that manufactures both. If yours is due to be replaced, you could be on the hook for a large bill. The average cost to replace an HVAC system is $7,000, according to HomeAdvisor. Try to figure out the age of your HVAC equipment and plan ahead for this cost. Suddenly losing heat or cooling can be deadly in the winter or summer.

How to cut some common homeownership costs

You may be able to reduce your homeownership costs by shopping around, staying on top of maintenance, and keeping up with your mortgage payments. Some common ways to cut your homeownership costs include: 

  • Shop around — You can lower your monthly mortgage payment by reducing your purchase budget, shopping around for the best interest rate, and putting as much money down as you can afford. Comparison shopping for homeowners insurance by getting quotes annually can also help keep your payments down.
  • Eliminate PMI — Once you hit 20% equity in your home, you can get rid of PMI. You’ll hit 20% equity in your home by paying down your mortgage, but you can also build equity as your home increases in value.
  • Maintain your property — You can prevent many large repair costs by performing proactive maintenance. For example, vacuuming behind your appliances and cleaning out their air intakes can help them last longer.
  • Do it yourself — Performing tasks yourself can save you a ton of money, but make sure that you’re doing a good job and leaving the tricky tasks to professionals. A DIY plumbing or electrical fix could cost you more in the long run and may be dangerous.

Finding a great mortgage rate could help offset the cost of common closing fees. You can compare mortgage rates with Credible.

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