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You found it. It’s a perfect house for you with all the amenities you have been looking for, and it’s the right price. But how much do you really need to buy that dream house? And how much to keep it, maintain it and still live the life you want to live? The answer depends on the hidden costs of buying a home.
That’s tough to truly know until you write it all down and research it. You also need to understand what short-term and long-term costs of owning a home are all about. The cost of ownership doesn’t stop at the mortgage. It’s all those other things, like property taxes (that can go up and up), property insurance and utility costs. You may need to replace a broken refrigerator, plus a whole bunch of other things.
“People get so excited about the purchasing of a home that that’s the only thing they can think about,” says Linda Ferrari. She is a realtor, a national consumer credit score expert and the author of The Big Score, Buying Power for Life.
“You just don’t want to over purchase. You need to include everything that goes into a budget and all your monthly bills and your lifetime expenses that will come up such as college for your kids or retirement fund,” she says.
How much can I afford? Know the debt limits
Lenders limit how much of your before-tax income can go to your total housing expense plus all other debt payments. This share is your debt-to-income ratio. The limit depends on the loan program. It’s about 41 percent for VA loans (a guideline) and 43 percent for FHA loans (the base manual level). Conventional loans approved by Fannie Mae’s automated system can go up to 50 percent. The lender’s own limit and the underwriting result decide.
But that doesn’t mean the borrower should try to borrow the most a lender will approve. Some experts advise a home payment based on take-home pay instead of before-tax income. That can be quite a difference from the amount the lender will approve.
It is important to plan for possible future expenses. Many first time home buyers, by definition, don’t have the homeownership experience to foresee everything that might come up.
Ferrari recommends that you find a really good realtor who knows these costs.
“You need a buyer’s consultation with that realtor to go over everything that is entailed with buying a house,” she says. “There is a lack of information and a lack of planning when people buy a house. I am proactive and a believer in doing the research you need to do and knowing exactly what you are getting in to.”
Find hidden costs in the home purchase agreement
Once you do find the house you want, it’s very important to read the residential purchase agreement. It may be 10 pages or more. However, it explains all of the things that a buyer will be responsible for.
“Everything is open to negotiation, but it gives you a very good idea of what you will be paying,” she says.
Costs due before and at closing
Here are the big and little items that can drain your checking account when you first buy a house:
Earnest money: It’s the deposit prospective buyers make as their goodwill gesture saying they are in it for the long haul.
Inspections: You pay for the home inspection. If you want any other inspections (and Ferrari always advises a sewer inspection), the cost can add up.
Closing costs: This includes all kinds of fees such as title services, lender’s origination fee, lender’s title insurance, and credit report fee. These can add up quickly.
Down payment: Depending on your loan, it can be zero percent for a VA loan or a USDA loan. For an FHA loan, it can be 3.5 percent with a credit score of 580 or higher. For a conventional loan, it can be 5 percent. It can drop to 3 percent (97 percent financing) for eligible buyers, such as first-time buyers.
Moving, move-in and insurance costs
Moving expenses: Maybe you can woo your cousins with trucks and friends with strong backs to lift 30-pound boxes and heavy couches. If you can’t beg, borrow or woo that help, you need to hire movers.
Initial Moving-In Costs: The black paint in your new master bedroom just won’t cut it. So, you have to paint it before or right when you move in. And then there’s that hideous gold carpet throughout the first floor. What about buying a lawnmower, a shovel or a snow blower? Or a new water heater because the old one broke the day you moved in? It all adds up.
Flood or earthquake insurance: Depending on your region of the country, these can save you financial devastation if something happens. The government’s National Flood Insurance Program sets flood insurance prices by each property’s flood risk, so costs vary by home. Earthquake insurance can also be expensive in high-risk areas.
“You just have to make sure you get the very best value of every financial commitment you make: not paying higher interest rates or not putting your money into big deposits or down payments. That’s wasted money,” Ferrari says.
Check your home buying eligibility. Start here (Nov 8th, 2026)
Hidden costs of buying a home can force sacrifices
Even people who have already bought a home can find it tough financially. Over half of U.S. adults (52 percent) made at least one sacrifice to cover their rent or mortgage. That was over a three-year period, according to the MacArthur Foundation’s 2014 How Housing Matters Survey.
Some of those sacrifices were postponing saving for retirement, cutting back on health care and working a second job. Others included running up credit cards and moving to a less safe neighborhood or one with worse schools.
So the lesson in much of this is to be prepared and knowledgeable about all of the expenses that come with purchasing a house. That means more than the bills you would naturally expect. Buying a home brings hidden costs, unexpected costs and continuous costs.
Check your home buying eligibility. Start here (Nov 8th, 2026)
