The Hidden Costs of Becoming a First-Time Homebuyer

May 5, 2025

by Christian Phillips

Understanding Homeownership Costs

While purchasing a home is a great way to build equity and generational wealth, it’s essential to understand the various expenses associated with homeownership. Here are ten common expenses homebuyers should know.

Property Tax
This is calculated based on your home’s value and the local tax rate. Property tax is often included in your monthly mortgage payment.

Mortgage Insurance
Many first-time homebuyers don’t have a 20 percent down payment when they sign their purchase agreement. If you don't have 20 percent for your down payment, that's perfectly fine. This means you'll need private mortgage insurance (PMI), which protects the lender in case of foreclosure.

Closing Costs
Homebuyers pay closing costs when the property title is transferred from the seller to you. Buyers can expect to pay between two to five percent of the purchase price in closing costs.

Homeowners Insurance
Homebuyers need to provide proof of homeowners insurance to cover potential losses and damages that may occur to the home. This insurance can protect you in various situations, such as if a tree limb falls on your roof or someone has an accident on your property, like slipping on icy stairs or walkways. In most cases, homeowners insurance costs are included in your monthly mortgage payment.

Appliances
If the seller took the appliances or they are outdated and nonfunctional, you will need to pay for replacements.

Furniture
When you purchase a home, your new space is usually larger, requiring more furniture to fill the rooms. You will need to budget and pay for these items out of your pocket.

Windows and Electrical
Depending on the age of your home, you may need to update your windows and electrical systems. Fortunately, some state governments provide programs to help offset these costs. While upgrading to more energy-efficient windows and modern electrical systems can be pricey, these improvements can bring long-term benefits.

Utilities
When transitioning from an apartment to a house, you will find that utilities are generally more expensive.

Driveway, Lawn Care, and Home Exterior
Whether you need to repair your driveway, improve your curb appeal, or replace the siding on your house, these expenses can accumulate quickly.

Trash Services
Depending on your location, you may be required to pay a trash fee, which can be included in your property tax. If this is not the case, you will need to use a private trash service.

Take the Next Steps
Buying a home comes with significant responsibilities. Frandsen Bank & Trust mortgage lenders can help you outline your finances to see if you are ready for homeownership. Find your local Frandsen lender to kickstart your homebuying journey! 

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