Six Indirect or Hidden Costs of Buying a House

You already know that houses are expensive. You’ve probably already begun the process of shopping for home loans to finance the purchase of your dream house. However, it’s crucial to be aware of some of the other less obvious costs of buying a house. If you fail to account for these added expenses, then you may inadvertently financially over-extend yourself. You should speak with a lawyer if you are still unsure about how to finance a real estate transaction after reading this article.

Closing Costs

One of the biggest additional costs embedded in a real estate transaction are closing costs. This is an umbrella term covering every expense that goes toward actually closing escrow and completing the transaction. Examples of possible closing costs include buyer credit checks, paying for an appraisal of the home’s value, and paying for professional inspections of the property. You will also likely have to pay a title search and title insurance, as well as the fees necessary to process the loan documents. Finally, you’ll most likely have to pay a lawyer and real estate agent for their services over the course of the transaction. In all, closing costs could add up to 7% of the purchase price of the property.

Personal Mortgage Insurance

A buyer will be required to buy personal mortgage insurance (PMI) if they fail to make a down payment of at least 20% of the purchase price. This is intended to protect lenders in cases of a higher risk loan (the buyer putting virtually nothing down and then almost immediately defaulting on a loan for the whole purchase price). Also, keep in mind that, even if you don’t have to pay for PMI, you should definitely get homeowner’s insurance to protect yourself from damage to, or destruction of, your home. Both types of insurance can add up to thousands of dollars a year.

Utilities and Taxes

When you own your own home, you’ll be responsible for all of your utility bills, unlike renters who usually have at least some of these bills paid by their landlord. Older homes may have less effective plumbing and insulation making these costs even higher. Also, keep in mind that you have to pay for your own trash pickup, sewage fees, and property taxes.


This is perhaps the biggest ongoing cost of homeownership. As a renter, you could rely on your landlord to handle and pay for all repairs (unless you caused the damage). As a homeowner, you have to clean your own gutters, repave your own driveway, and replace your own roof. Also, don’t forget landscaping, paining, and snow removal. Owning a home is constant work – and constant expense. However, if you forego regular maintenance, you’ll only exacerbate potential issues and wind up with bigger, more expensive issues down the road.


Unless you’re a hardcore minimalist, you’re going to want to buy furniture for your new home. You may also need to buy appliances, like a washer and dryer, if the house didn’t come with them. As much fun as sitting on lawn chairs and sleeping on a mattress on the floor was in college, you’ll want proper furnishings when you own your home as an adult.


Sometimes, things just happen that are beyond your control. Appliances malfunction, storms strike, plumbing backs up – all of these things can make your home unpleasant or impossible to live in and need to be repaired as fast as possible. Unfortunately, this means a sudden drain on your savings. Therefore, you’ll need to be financially prepared for this kind of contingency, either through diligent financial planning, insurance, or a combination of the two.


Although you may have considered the purchase price when budgeting for a new home, you may have overlooked some of the above hidden costs. The above items can add up quickly, and could drastically change the kind of house you are actually able to afford. Make sure to consider these additional expenses before you end up biting off more than you can chew.

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