Hidden costs of buying a home

First-time buyers often focus on the mortgage payment. Here are the costs that frequently surprise them.

Closing costs (3–5% of purchase price)

On a $400k home, that's $12,000–$20,000 due at closing — on top of the down payment. Includes loan origination fees, appraisal, title insurance, attorney fees, and prepaid property taxes and insurance.

Maintenance (1–2% of home value annually)

The classic rule of thumb. A $400k home costs $4,000–$8,000/year on average for maintenance and repairs — and it's lumpy: some years $500, some years $15,000 when the roof needs replacing. Building a reserve fund is essential.

New construction typically costs less to maintain early on; older homes can cost significantly more than the 1% rule suggests.

Property taxes and insurance

Property taxes average about 1.1% of home value annually in the US but range from 0.3% (Hawaii) to 2.2% (New Jersey). Homeowner's insurance typically runs $1,000–$3,000/year. These costs rise with home value and can increase year over year.

Opportunity cost of the down payment

A $80,000 down payment invested in an index fund at 7%/year would grow to $157,000 in 10 years. That forgone growth is a real cost of homeownership that most people don't include in their calculations.

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