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Buying a home comes with a lot of expenses. It’s not just a down payment and monthly payments. There’s also insurance, taxes and in some cases association fees, to name a few. Homeownership isn’t cheap.
If you’re thinking of buying a home for the first time, you’re probably wondering, “What does it cost to buy a house?” Read on for a deeper dive into what you’re signing up for.
One-time costs of homebuying
When you buy a house, there are a few big costs you only have to pay once.
- Down payment: Unless you’re getting a loan backed by the U.S. Department of Veterans Affairs or U.S. Department of Agriculture, you’ll probably need to put some money down. While there are benefits to putting down at least the old standard of 20% of the home’s purchase price — one of them often being a lower interest rate — some lenders now offer conventional loans for as little as 3% down, and Federal Housing Administration (or FHA) loans allow as little as 3.5% down.
- Closing costs: These are fees you have to pay when you close on your mortgage. They’re based on the individual purchase, but can vary from 2% to 7% of the purchase price of the home, but they’re often split between the buyer and seller. According to Realtor.com, buyers typically pay 3% to 4% in closing costs and sellers typically pay 1% to 3% (you can try to negotiate who pays which closing costs). With some closing costs, you have to use a certain service, but with others, you’re allowed to shop around for a better price. Here are some common closing costs.
- Title insurance
- Prepaid property tax and prorated property tax
- Homeowners insurance
- Home inspection fee
- Appraisal fee
- Loan origination fee
Recurring costs of homeownership
In addition to a monthly mortgage payment, there are a bunch of other ongoing costs you may not know about.
- Homeowners insurance and property taxes: You’ll typically have to prepay homeowners insurance and property taxes at closing, and you should pay them on an ongoing basis as long as you own the home. The cost varies depending on your home and location. If you have an escrow account set up, these charges are rolled up into your monthly mortgage payment. But if you don’t have an escrow account, you’re in charge of paying them on your own, and you may have the choice of paying them monthly or annually.
- Mortgage insurance: If you take out a conventional loan and put down less than 20%, it’s possible you’ll have to pay private mortgage insurance, which protects the lender financially. You can typically request for PMI to be canceled once you reach 20% equity in your home. If you take out an FHA loan, you have to pay mortgage insurance, though you may be able to cancel your insurance once you pay down enough of your loan.
- Homeowners association fees: Some planned neighborhoods or condo buildings charge ongoing fees to cover maintenance and repairs of common spaces. According to Realtor.com, HOA fees can cost $200 to $300 a month for a single-family home, though it can vary greatly depending on amenities and home size.
- Maintenance: Depending on the age and condition of the home, you’ll face ongoing repairs and maintenance costs. A 2017 analysis by Zillow found that landscaping, cleaning and maintenance alone can add more than $3,000 per year to the cost of homeownership.
So what does it cost to buy a house? Some of it depends on your location, the size of the home and the type of loan you get. But nearly all homeowners will face some of the costs listed above, and preparing for them can help make the homebuying experience easier — and more financially comfortable.Keep reading: 6 tips to save for a house