15 Little-Known Costs That Tend To Shock First-Time Homebuyers

There are more costs than you might think.

The ins and outs of buying a house can be as overwhelming as navigating tax law or health insurance — and many first-time homebuyers end up surprised by all the added costs.

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There's so much more to buying a house than saving up for a down payment and getting a loan to cover the listing price. According to a 2021 Realtor.com survey of nearly 3,000 adults, 44% say they weren't aware of all the costs associated with buying a home. 

For example, in 2020, single-family homebuyers paid an average of $6,087 for closing costs, according to real estate data and technology company ClosingCorp. And that number doesn't include things like home inspections, insurance, moving costs, or property taxes. 

In short, buying a home may be pricier than you think. 

To learn how to reduce the number of financial surprises during the home-buying process, I talked with Clare Trapasso, the deputy news editor at Realtor.com.

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She provided me with a clear rundown of what first-time homebuyers can expect to pay in addition to a home's listing price.

As a general rule, she says, "The important thing to do is shop around whenever you can for lower rates, without cutting corners on the important things like home inspections and insurance that can save buyers money down the line.”  

Here are 15 hidden costs that often take first-time homebuyers by surprise:

Note: The costs listed here are general guidelines and may vary depending on where you choose to buy a home.

1. Home Inspection

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Cost: $300–$600+

A home inspection lets you know of any potential problems — like mold, bad roof, old septic system, etc. — so you know what you're getting into before you buy. 

"No one wants to max out their budget purchasing a home and then find out they need to spend an unexpected $50,000 to fix the foundation," says Trapasso. "Even if it costs more, it’s better to pay extra for the right inspectors or specialized experts (mold, etc.) as needed. It’s also important for first-time buyers to educate themselves on what a home inspection does and does not cover."

She recommends that buyers attend the inspection so they can ask questions and learn about the house from a trained professional.  

2. Appraisals

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Cost: $300+

Trapasso says it's not uncommon for first-time homebuyers to over-bid and pay more than a home is actually worth. To avoid this pricey mistake, you'll want to make sure the house is appraised by an unbiased professional (it's usually done on behalf of the real estate agent or lender).

The process typically costs between $300 or $400, but can be much higher if you're looking to buy in an expensive area or neighborhood. To come up with the value of the home, the appraiser considers its size, location, and condition and compares it to nearby properties.

Trapasso notes that "If your home doesn't appraise as you were hoping, you do have the option to contest and ask for a potential price adjustment."

3. Home Insurance

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Cost: $1,312 per year on average

Home insurance protects your house and belongings from disasters like floods or hail storms — but a word of warning: It isn't cheap. Trapasso says the "average national cost of home insurance, which provides financial protection of your home and belongings, is around $1,312 per year." That works out to a monthly payment of about $109.

Getting a good insurance rate may take a little extra work. Trapasso suggests looking for discounts, comparing quotes from different companies, and bundling your home insurance with your car or boat insurance. Once you've found a plan, avoid filing unnecessary claims to keep your premium low.

4. Credit Report

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Cost: free to $20

Before you start the home-buying process, you should request a credit report to make sure your credit is in good shape. The report will tell you (and the lender) all about your previous credit and debt history and provide a credit score that will determine what sort of loan you qualify for. 

While you're entitled to one free credit report a year, you might have to get several during the home-buying process (like if you're working to increase your credit score to qualify for a loan). 

"Credit reports should also be checked around two to three months prior to a major credit application, such as a mortgage loan, to ensure that credit information is accurate and up to date," says Trapasso.

5. Private Mortgage Insurance

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Cost: 0.58% to 1.86% of the original loan amount per year

If you can't afford a down payment of 20% on a house, you might have to pay for private mortgage insurance (PMI). Buying this type of insurance might help you get the loan you need, but it'll cost you. 

"You can pay for this through a monthly premium, a one-time upfront premium, or both, and the costs of these are located on your Loan Estimate and Closing Disclosure documents," says Trapasso. 

Keep in mind that you might be able to find a lender who will give you a mortgage even if you don't have a 20% down payment. Trapasso's advice: Shop around so you can avoid the PMI. 

6. Flood Certification

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Cost: $20 (and more if the house is in a flood zone)

Depending on where you live, this certification may be essential. Basically you're paying someone to review a flood map and determine whether or not your house is in a flood zone 😬. 

Just know that if the home is in a flood zone, you'll need to be prepared to pay a whole lot more to protect your home.

"If you happen to be in a flood zone, next steps should be looking into flood insurance or investing in flood prevention renovations, like installing pumps or waterproofing. While waterproofing a basement can cost on average anywhere from $1,900 to $6,500, it still beats having to pay over $25,000 after a flood has already done its damage," says Trapasso.

7. Property Taxes

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Cost: $2,471 on average per year

This cost is a big one. Property taxes are typically paid twice a year to fund things like local schools and the fire department. While the annual cost is substantial, it may slip under your radar because it's often tacked onto your monthly mortgage payment.

To make sure you're getting the lowest possible tax rate, Trapasso says you might need to do a little leg work. "Some states even offer rebates that can lower property taxes, like homestead exemptions, depending on factors like age, veteran status, or income, so be sure to check to see what you qualify for."

8. Title Fees

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Cost: typically 2% to 5% of the total loan amount

Title fees are a group of fees that fall under your home closing costs. Trapasso says that these fees basically ensure that "your new home is fully and legally your own." Examples of title fees include a title search fee, title settlement fee, lender’s and owner’s title insurance, and attorney fees. 

Just keep in mind that in some cases and in certain locations, who pays these fees is negotiable — meaning the seller may pay them (whoop!). It pays to ask the right questions.

9. Title Policies

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Cost: 0.5% to 1.0% of the home purchase price for both title policies

This one-time fee is also included in the closing cost. It protects you from any claims made by a third party or any issues with the house's history or title. 

Trapasso explains, "There are two types of title insurance: owner’s, which protects the homebuyer, and lender’s, which protects the company that issues the mortgage."

10. Title Insurance

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Cost: $300–$2,000

This sounds freaky, but basically after you buy a home someone else could claim partial ownership. To ensure this doesn't happen, you'll need to make sure that the person selling the property has the ability to do so. Enter the title review and title insurance (which also ensures there aren’t any liens on the property that you might be forced to take on once the sale is complete).

"One way to save on this fee is by asking the seller to pay for your policy or by negotiating on closing costs. If that seems too bold, you can also shop around and compare insurance companies to find the best deal," says Trapasso.

11. Recording and Settlement Fees

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Cost: $125 on average for recording fees, while settlement fees vary widely

These two fees also fall under the umbrella of title fees and closing costs. 

"Settlement fees ultimately cover closing costs like escrow, survey fees, notary fees, and deed prep fees. Recording fees are determined by the county and pay for mortgages and deeds to be entered into land records," explains Trapasso.

Since the cost of these two fees can vary, Trapasso recommends asking your lender for an itemized worksheet of costs.

12. Land Surveys

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Cost: $500 on average

The purpose of a land survey is to clarify where your property begins and ends so you know exactly what you legally own. 

"You can find a copy of a recorded land survey at a building department or land recorder’s office, and sometimes even through a title company. First-time homebuyers should make sure their land survey is up-to-date and accurate to avoid potential property or construction issues down the line," says Trapasso, who notes that while the average land survey costs around $500, that price will increase based on property size. 

13. Transfer Taxes

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Cost: varies from state to state, determined by the cost of the home

This one-time fee pays for the transfer of a property title or deed from the seller to the buyer. This tax is included in a home's closing cost and can vary based on what state you're buying in and the cost of the home. Also, Trapasso notes that the seller may be responsible for this fee, not you. 

"To determine the total amount, or if you even have to pay at all, search for the average transfer tax cost in your state or ask your lender," she says.

14. Moving Expenses

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Cost: $1,250–$5,000

Believe it or not, many first-time homebuyers completely overlook this cost as it feels removed from the home-buying process. But anyone who has moved before knows that moving isn't cheap (or fun).

To get a moving quote that's tailored to you, you can use a tool like Realtor.com’s free moving cost calculator. But in general, Trapasso says that average cost of a local move is $1,250, while a long-distance move could run you just under $5,000. (Tip: Moving during the work week or over your area's "off season" may help you find lower rates.)

15. Renovations

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Cost: around $13,000 per project

This is a big home-buying cost that many first-time homebuyers don't consider until it's too late. Trapasso says that according to recent data, "53% of homeowners did not factor potential renovations into their budget when they purchased their home."

To avoid the shock of scary bills later on, Trapasso recommends really knowing the ins and outs of the home you're buying and being honest with yourself about renovations you want done.

"When it comes to big home projects, it’s not just the cost, but the time, as well. You don't want to end up without a place to live during a renovation that lasts way longer than you thought; so, you should make a clear and coherent plan of exactly what you want to be redone and when."

Homeowners, what hidden costs surprised you when you bought your house? Tell us about them in the comments!

And for more stories about life and money, check out the rest of our personal finance posts.