By: Matt Carson

There are few things more satisfying than buying your first home and staking a claim to the time-honored dream of American homeownership. More than a right of passage, it’s an investment in your future and a satisfying benchmark of arriving in adulthood.

However, beyond the feeling of fulfillment lies the anguish of additional costs—some of which first-time buyers may not be entirely aware of. Sure, most folks entering into a purchase will be well acquainted with costs such as down payment, monthly mortgage payments, real estate taxes and assorted closing costs, but there are others that are less clearly identified.

Although there is no expense to some of these items, the lack of attention could cause major damage.  Let’s take a look at some of these “hidden costs,” though it’s probably better to call them “unexpected expenses,” and determine the best way to prepare for them so you’re not caught off guard and your home purchase remains a positive experience.

Home repairs and light renovation

Once you move in, you may discover that the home of your dreams needs a little TLC. Even if it doesn't, a home requires routine maintenance to keep it running smoothly.  Recent research suggests that new homeowners on average have to pay almost $27,000 to make their homes move-in ready. That’s likely a bit more than the typical homeowner has in mind. Most individuals understand that some cosmetic alterations will be necessary, but not everyone is thrilled about replacing HVAC systems.

Mechanical systems: HVAC should be cleaned and tested every season, the furnace should be done in the fall and the central air units in the spring. Any landscaping should be kept from the AC’s condenser unit. Boilers should also be cleaned and hot water heaters inspected every year. Homeowners should change filters regularly.  All of this contributes to the lifespan of the units.  Skipping maintenance will cost more as units will be taxed, run inefficiently, and need to be replaced sooner.

Exterior maintenance and foundation: Hoses should be drained and outside spigots turned off before winter to avoid burst pipes. Water, snow, and ice can cause foundation damage so homeowners should observe this regularly. If the basement is unfinished or  the home has acrawl space, lookiclosely at walls, creases, and floors.  If the basement is finished, check drywall for cracks or stains. On the outside, make sure the ground is pitched away from the home so water does not collect and leak into the house.

Gutters and downspouts: Get them cleaned in the late fall after leaves have dropped and in the spring to prevent ice damming.  Some owners have done this themselves but be aware that it involves climbing on a roof and many homeowner accidents involve climbing a latter.

Roof and chimney: A roof should be checked yearly for missing shingles, holes and issues around flashing. This will keep water from entering the home which could create mold. A Chimney expert should clean the flue, check for cracks in mortar and ensure a cap in securely in place.  All of this will keep animals from entering your home.

Septic system and well:  The septic tank needs to be pumped every three years or so, depending on size and number of people in the house. Wells should be inspected annually.

Smoke/carbon monoxide detectors and fire extinguishers: Every level of a house should have these. The smoke and carbon dioxide detectors should be placed near each bedroom, and batteries should be replaced as needed - experts suggest doing so with time changes. One fire extinguisher should go in the kitchen.  All of this should have been done at the time of purchase but you are responsible for maintaining them.

Pest control. Keep an eye out for the presence of rodents and insects - better yet, hire an expert.  All owners should know what wildlife lives in their area. 

 

Appliance upgrades

While a new home would have all new appliances, most people are buying older homes. If you are one of the many people who do not buy new construction,  be prepared to finance repairs on things like refrigerators, washing machines, dishwashers, air-conditioning systems and heaters.  Costs can run several hundred dollars per appliance and more for top of the line refrigerators, freezers or HVAC systems. These can be financed, of course, but they shouldn’t be ignored. Always do your due diligence ahead of time to know exactly what the state of your new home’s appliances are in and prepare accordingly.

 

Homeowner’s insurance and homeowner association fees

If you purchased with a Realtor, these should not be hidden costs.  While these costs may have been explained ahead of time, paying these month after month can still be a little taxing.  Some homeowners are surprised when the HOA does NOT cover certain expenses and there are times when an additional assessment can be made - think a year with exceptional amounts of snow.  Home owners insurance should not be a surpise as this is required before closing but rates do increase every year.  If you have made a claim, some companies will increase their rate the following year.  You should shop around if this is the case.  Finally, FEMA is always reassessing flood insurance.  In 2022, this was a decrease for some homes but an increase in others.

 

Utilities

Anyone who’s ever rented will already be acquainted with certain utilities. They are essential to keeping the lights on, the gas coming through the pipes and the water pouring through the faucets.

But when you graduate into homeownership, you’re catapulted into a whole new realm of utility payments. And there’s not much you can do about it except prepare to dig deeper into your wallet each month. Utilities that homeowners are typically on the hook for include the following:

• Water and sewer
• Garbage pickup
• Electric
• Natural gas
• Cable
• Internet

If you live in a rural area, you may have to contend with the following in addition to what we’ve listed above:

• Septic repair and maintenance
• Propane
• Wood or wood pellets for heating

 

Home inspectors mitigate unwelcome surprises

To help you avoid some of these hidden costs, make sure you contact a reputable home inspector before buying a home and understand the state of the home you are about to buy. Be aware of life expectancy of the appliances and mechanical systems and if you receive an evaluation that tells you the house will need more improvements than expected, you may be able to get a credit from the sellers.  However, many times a seller will not give concessions for problems that do not exist or systems that are still working.  In this case, you may need to cancel the contract if your budget will not allow for upgrades.

Always empower yourself through due diligence and don’t forget to factor in all the costs and fees that come with owning a home. While no one enjoys shelling out for hidden costs, this alone should not dissuade you from owning a home when the right opportunity presents itself.

 

Remember the rule of thumb

Even after a thorough inspection, issues can and do pop up.  A sewer backup or a fallen tree are some of the incidences that can occur.  To combat these unexpected expenses, it’s widely recommended that homeowners should anticipate unexpected costs in the neighborhood of 1-4% of a home’s purchase price. In addition to your down payment, have this amount reserved and ready to go once you move in. 

Image credit: Unsplash

All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Guaranteed Rate, Inc. does not guarantee the quality, accuracy, completeness or timeliness of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error-free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Guaranteed Rate, Inc. Guaranteed Rate, Inc. its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.