What new homeowners (or wannabes) need to know

Buying your first home may involve some expenses you hadn’t counted on. But information is the best preparation.

Becoming a homeowner is a major milestone that requires a great deal of preparation. Dreaming about it and looking at homes online is part of the process, but so are the myriad of details and potentially unforeseen expenses that might arise, particularly if they’re outside a strict budget.

Up next, you’ll find that we've summarized some top tips for potential homebuyers in a short video.


The cost of homebuying

Here are some additional costs you’ll likely encounter during the process:

  • Appraisal, which HomeAdvisor estimates at $313 to $421
  • Inspection, which the Consumer Financial Protection Bureau recommends, about $300
  • Down payment, which is about 3% to 20% of the home’s selling price (note that there may be extra insurance required for lower down payments)
  • Closing costs, which are 2% to 5% of the selling price and include interest until the first payment is due, prepaid insurance, taxes, commissions, title insurance, mortgage origination fees and more
  • Moving costs, which will depend on where you live and how much stuff you have to move


Keep in mind that almost everything is negotiable. For example, you could split closing costs with the seller if they’re willing.

Ongoing expenses

When you own a house, you'll also have ongoing expenses. Expect:

  • Homeowners insurance and property tax: These are often rolled into your mortgage payment, and costs will depend on where you live and the assessed value of your property.
  • Homeowner association (HOA) fees: If you live in a co-op, condo, townhouse or other type of development, common area maintenance and other services are performed by an organization that oversees the community. You’ll need to pay a monthly fee, which can be significant.
  • Utilities and maintenance: You’re your own landlord now. So, when the heating bill comes, the sink is clogged, the gutters are full or repairs need to be made, etc., the cost is your responsibility. (There may be exceptions when an HOA is involved.)


What else?

Basically, anything that has to do with living in and maintaining a home is an expense — from decor to appliances and yard tools. Here are some examples:

  • Furniture, window treatments, rugs, electronics and knick-knacks
  • Lawn mower, hose and other lawn equipment
  • Large appliances (although, these may be negotiated into the selling price)
  • Office equipment if you work from home, and the potentially higher price to commute if you are moving farther away from the office


Making your dream come true

If all these expenses make saving up for a home seem out of your reach, it’s understandable. An environment of rising interest rates, which followed a big rise in home prices, can make the whole process a bit overwhelming.

But the advice on saving for a home doesn’t change with the economic environment. The time to buy a home is when you can afford it and when it makes sense.

 In the meantime, here are some ways you could make your designated “house fund” grow:

  • Develop and stick to a budget. Small goals like, “I’ll prepare at least three meals this week instead of getting takeout,” are more easily achieved than, “I’ll accumulate $50,000 in the bank by x date.”
  • Avoiding impulse purchases is a simple step to help build savings.
  • Automate savings. It’s easier to put money aside if you never touch it.
  • Polish your credit score. The best mortgage rates go to people with excellent credit. And over the life of a loan, the difference can be tens of thousands of dollars.
  • Look into assistance programs for first-time homebuyers. If you qualify, this could help you buy a house sooner.


This page and the information contained herein is for educational purposes only. The information is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any product, service, or strategy to your unique circumstances. For specific advice about your unique circumstances, you may wish to consult a qualified professional. Any links to other websites are included for your convenience only. Bread Financial does not endorse any product or service, and is not responsible for the accuracy or reliability of the information, made available through such sites.

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