The Unexpected Costs of Becoming a Homeowner

There are many unexpected costs when purchasing a house, so I want to break down all of those expenses for you today.

“You should always get a home warranty when you purchase a home.”

Most homebuyers know about the down payment and have an idea of how much it will cost to remodel the kitchen, but they don’t necessarily know some of the smaller line item expenses that occur during a home purchase.

Buying a home costs money, and owning a home costs money as well. A house is a depreciable asset. Even if no one was living in the home, the siding, the roof, and the appliances are going to fail over time. The experts out there say that you should expect to pay between 0.5% and 1% per year for maintenance and repairs, and I think that holds true depending on how old your home is.

For example, if you have a $300,000 house, you can generally expect to pay between $1,500 and $3,000 a year in expenses related to preventative maintenance and repairs.

Now, let’s get back to some of the forgotten expenses you’ll encounter when buying a home.

1. Earnest money. Earnest money is negotiable. In fact, 0% is a perfectly acceptable amount, as is 100% of the purchase price and everywhere in between. It completely depends on the situation. In our area, earnest money usually runs between $500 and 1% of the purchase price. If you are buying a $300,000 house, $3,000 would be an appropriate amount of earnest money. Anything less would not be considered enough by most sellers and agents. Anything over 1% of the purchase price is a good amount, which will work in your favor.

The good news is that the earnest money doesn’t just disappear (unless you walk away from the contract without a contingency). The earnest money winds up being applied to your down payment or closing costs.

2. Inspections and appraisals. Depending on the size of the house and whether it needs a sewer, septic, or well inspection, you can expect to pay about $300 to $700 for the inspection and $500 to $900 for the appraisal. That’s $1,000+ alone in out-of-pocket expenses.

Even if you are getting a VA loan with 0% down, you may still have to pay money out of pocket for earnest money, inspections, and appraisals.

3. Money for moving expenses. A lot of buyers think, “We’ll move ourselves. It won’t cost anything.” However, you still have to rent a U-Haul, take time off work, buy boxes, disconnect the cable, alarm systems, and other services and reconnect them at the new house (which costs money), and more. Things break during the move as well, and you may want to pay to replace some of those items. 

4. Money for surprise expenses. Are all of the appliances included in the home? You may have to buy a new washer and dryer. You may also need to buy blinds or curtains and take care of some smaller items uncovered in the inspection that weren’t repaired during escrow. Then there are those pet projects that you want to do, like painting the bedroom or installing carpet. All of that can really add up.

First-time homebuyers may also need to purchase things like a lawn mower and other tools so that you can take care of some of these repairs yourself, so definitely have some initial money set aside for things like that.

Finally, you should always get a home warranty when you purchase a home. When you work with us, every buyer gets a one-year home warranty. We either negotiate to have the seller pay for it or we buy it for you, so this is not an unexpected cost. If you work with someone else, you may have to pay $500 for a home warranty if the seller doesn’t agree to cover it.

The home warranty is such an inexpensive way to protect yourself during the first year of homeownership. If your appliances fail, your electrical system has issues, or your plumbing system has issues, the home warranty will pay to replace or repair those issues.

Those are some of the hidden costs and surprise costs of becoming a homeowner. If you have any other questions about the home buying process, just give me a call or send me an email. I would be happy to help you!

Gavin Shnieder

Gavin is the founder and owner of Abode Base Real Estate & Smart Pad Property Management. When he's not helping folks buy and sell homes or training agents, he enjoys spending time with his 3 daughters and beautiful wife.

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