10 Hidden Fees You Didn’t Know Came with Buying a House

This post may contain affiliate links.

Buying a house is one of life’s milestone purchases. We usually expect to break our bank account paying for the home itself, sometimes a bit more for tiny renovations or furniture, but the hidden fees are the real surprise. Buyers are often in for an unpleasant surprise when costs that they were never expecting crop up. While these expenses can rack up quickly, understanding what you need to watch out for can ease the home-buying process a lot more.

If you’re hoping to buy a home, it’s best to be ready. Concealed in there can be hundreds, if not thousands, of dollars in hidden costs. We hope these will help you stay ahead of the game and help you also budget for the following common hidden fees you may not expect.

Appraisal Fee

15 Things Everyone Should Know Before Buying Their First House — Image Credit: Antoni Shkraba/ Pexels

Your lender will likely want an appraisal if you’re taking out a mortgage so it can determine how much the property is worth on the open market. The appraisal may cost you extra, but it’s a necessary step for you and the lender to assure that the property is worth the loan amount.

Title Insurance

To protect the property from any claims from owners who had previously owned the home and from claims like unpaid taxes or an open dispute, the title insurance will pay for it. It’s a one time fee, but just an unwelcome addition to the budget. Title insurance costs several hundred to a few thousand dollars, depending on the property and state, and it’s split between an owner’s policy and a lender’s policy.

Closing Costs

There’s a bundle of fees that make up closing costs and these fees can sneak up on you if you’re not careful. Along with attorney fees, notary fees, and recording fees, these are items in this catch-all category. These are expenses that usually come out to about 2 – 5 percent of the home’s purchase price, so they’re not small potatoes. Ask your lender for such an itemized list–even early on–so you won’t get sticker shock.

Private Mortgage Insurance (PMI)

If your down payment is less than 20% of the homes value, your lender probably will require your to pay private mortgage insurance or PMI. The PMI is meant to protect the lender if you do default on your loan. Unfortunately, it can cost you hundreds of dollars each month on your mortgage. The good news? You typically can cancel PMI once you reach 20% equity in your home, meaning you can save all that money.

Property Taxes

Photo Credit: Karolina Kaboompics/ Pexels

You know you’ll pay property taxes, but the timing and the amount may be something that shocks the majority of homeowners. When paying property taxes, typically you will pay upfront at closing and you are paying the taxes up front, but they vary widely by location. The tax bill could be as low as a few hundred dollars in some places, and easily into the thousands in others. Set aside some time to research your local tax rate before you ink your name on the dotted line.

HOA Fees

22 Everyday Scams You Didn’t Know You’ve Been Falling For! — Image Credit: Karolina Kaboompics/Pexels

When you’re moving into a community with a homeowners’ association you’re going to be paying monthly or yearly dues. According to Investopedia, the range of HOA fees is between $100 to $1000 per month, depending on what amenities and services the association provides. These fees are for landscaping and shared facilities, and they’re an extra charge that some buyers don’t include in their initial budget.

Transfer Taxes

The fees that the state or local government charges to register an owner of property, is known as transfer taxes. The amount of fees that they can charge can be wildly different from place to place, and sometimes the buyer and seller take turns in the expenses. Transfer taxes aren’t going to be a huge expense in and of themselves, but they’re still something you’ll want to include in your budget so you don’t get a surprise at closing.

Utility Connection Fees

If you’re moving into a new home, most likely you will want to set up utilities such as water, electricity, gas, and internet. Utility companies often charge connection fees or deposits before you can begin using the service, and especially if you’re a first timer. Though easy to ignore, costs can be as much as they add up quickly and its a good idea to check out with local providers and plan for these fees ahead of time.

Mortgage Origination Fee

A Broker Showing a Couple the Mortgage Contract — Image Credit: RDNE Stock project/ Pexels

Lenders charge the mortgage origination fee for processing of your loan. The amount of the fee usually 0.5% to 1% of loan amount, according to Bankrate. This banking fee may seem like it’s nothing, until you realize that it’s largely the lender’s way to bear administrative costs. Sometimes this fee can be fairly reduced through negotiation with the lender, but it’s usually something you’re just going to have to live with when buying a home.

Escrow Fees

Female,Real,Estate,Agent,In,Suit,Showing,Numbers,And,Calculating — Photo credit: Shutterstock

It involves the setting up of an escrow account to keep the money for the property tax and homeowners insurance in the closing process. Title companies or escrow agents charges escrow fees to maintain the account and process the transactions. It’s a relatively small fee compared to other but it’s another line item on your final bill. Since they see the escrow company as a cost to you, bidding out the escrow company, if they will allow you, will let you shop around and get a better rate.

Disclaimer: This list is solely the author’s opinion based on research and publicly available information.