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What Are 18 Overlooked Costs Of Buying A Home?

Real Estate Agent with Big Block Realty 858.232.8722 CA BRE# 01261476

You need the trusted advice from your local area expert, your REALTOR®, to help you navigate today's market. We are seeing so many changes in the market, we literally adapt to a new market about every 3-6 months these days. As your trusted advisor, I have your best interest at heart, in fact, "I've got your six covered!"

Buying a primary residence home is emotional. I can share that no matter how many time I buy a principle property I get emotionally involved. It's after all going to be my personal residence.

Yet, when I buy rental property, I have no emotional feelings because I'll never live in it and it's all about the bottom-line numbers. It's a business.  Exhilaration, pride and anxiety are just some of the feelings that the soon-to-be homeowner may have as they take on this major lifechanging event.

For new buyers, there is often one other emotion they may feel if their real estate agent has not prepared them ahead of time – the out of pocket expenses and costs of borrowing money. 

What Are 18 Surprisingly Overlooked Costs Of Buying A Home? 
Not all of these are overlooked, but many surprisingly are unknown to first time buyers and forgotten by repeat buyers if it's been a while. I'm going to reveal the typical expenses here. These are not all of them, just the typical 18 in my SoCal Market. Items 1 -3 breakdown the most obvious expense; the purchase price.

1. Earnest Money Deposit (EMD). This is commonly known as the "good faith deposit" and is wired in to Escrow when the offer you've written has been accepted by the seller. In CA, you have 3 business days typically to wire it in.
The amount is traditionally 3% of the purchase price, but can vary from 1%-3% depending on the strategy of the buyer or the negotiated amount by the seller.
It shows that the buyer is serious about purchasing the home; (and capable).

2 Down Payment Your EMD is deducted from your total down payment. Your down payment balance is due at the time of funding your loan, typically 48-72 hours prior to closing escrow. NOTE: bot your Earnest Money and your Deposit are held by the Escrow Company chosen to be a third party to the transaction. You funds do not transfer to the seller, until you've actually closed escrow (in most cases).

3. Mortgages. If you are not going to purchase with cash, most buyers need to apply for financing. Depending on the type of loan, you will also need to plan on having enough cash to cover your down payment, the cash portion of the loan. VA Buyers typically are 0% down, although in CA the last 10 years, they realized that's a losing strategy in our bidding war markets, so they tend to pony up some down payment to remain competitive. FHA Buyers put down 3.5% and Conventional Loan Buyers vary from 3% - 50% or more down, depending on the source of cash.

Understanding Additional Closing Costs

Closing costs can vary, but are pretty typical, they are the expenses a buyer (and seller) must pay to close a deal and for buyers: secure a loan. The total of these costs vary, but I ballpark the cost at 2% of the purchase price. Prices vary from county to county and state to state, but this post is about California escrows.

4. Loan Origination Fees. All lenders charge fees to cover the cost of processing, underwriting, and executing the loan. This is typically 1% of the overall mortgage, however this can be waived or be more, depending on the lender, your circumstances and the over all relationship you have with your mortgage lender.

5. Private Mortgage Insurance (PMI). This additional insurance is required if the mortgage down payment is less than 20%. It can be removed by request after you've paid off 20% or can demonstrate a 20% or better equity in your home.
FYI to you that get FHA Loans, this is a permanent fee.

6. "Points". A mortgage point is equal to one percent of the total loan amount. You pay points to buy down your rate, so you can lower your monthly "I" payment in your PITI = Principle, Interest, *Taxes & *Insurance. 

*Each buyer's mortgage lender creates an escrow account to receive your property taxes and insurance premiums as part of your overall monthly payment; the PITI. In order for your lien holder to pay your property taxes and insurance payments for you, the collect 12 equal payments per year and require an initial deposit at close of escrow. FYI: you are responsible for paying your own Supplemental Tax Bill in fiscal year 1 of owning your home.

7. Property Taxes. You need to pay property taxes in CA and in San Diego, they are roughly 1.125% of your purchase price. Some areas of San Diego require an additional Mello Roos Tax, a special bond tax that typically lasts 20-25 years in an area of new development. Chula Vista is an area of SD County that has a lot of communities subject to Mello Roos Taxes.

8. Homeowner’s Insurance. Is a required expense of any borrower by their lender. In addition, even if you are an all-cash buyer, it's still an extremely advisable protection to have on your home against fire, flood, break-in, seismic, etc.

9. Appraisals.  Mortgage lenders require an appraisal of value to be given on any home they are lending on, to confirm they are making a sound investment into the property you are purchasing. Please understand, the appraisal is for the benefit of the mortgage lender, not the buyer, which is why most cash buyers forgo them. (Your REALTOR® can provide a Market Value Report).

10. Title Insurance. A title search is required to ensure there are no clouds on the title of the property you are purchasing. What is a "cloud"? Clouds on Title basically means undisclosed liens on the property. The Title Company's main responsibility is to review all public records to verify there are no outstanding judgements, claims or liens that would delay or destroy the sale.
These can be, but are not limited to: loans, IRS liens, gambling liens, mechanic's liens - unpaid tradesmen, child support liens, etc.

Additional Expenses (pending the property).

11. Inspections: Property Inspections are strongly advised but not required. I personally have never advised a client to close without one. They are comprised of a general property inspection that reveals the general condition of the envelope of the property, it's systems and appliances. This inspection may beget additional expertise inspections like: termite, roof, chimney, electrical, plumbing, HVAC, boundary surveys, mold inspections, etc. These are all out of pocket C.O.D. costs to evaluate the condition of the property and these fees are non-refundable.
Repairs are negotiable, but not required of the seller because in CA, all re-sale homes are sold as-is. Depending on the type of market you find yourself in, you can either be awarded repairs by the seller, credits toward closing costs valued at the repair costs or be told "take it as-is or leave it" by the seller.

Note: VA and FHA loan borrower-buyers are typically required to provide a clear termite report. 

12. Home Warranty. This is an optional "insurance policy" or service contract that limits the new homeowners expenses on all covered repairs or replacement items in the home for one year. In CA the deductible is $75.00 currently and the policy is renewable annually.

13. Incidental Fees: Wire Transfer Fees (in CA, 99% of the time, you are wiring funds), courier fees, notary fees, documentation fees, etc. Nominal on their own, but they add up on the balance sheet at closing. These are typically factored in to the estimated 2% closing costs fees I prepare my buyers for.

14. Moving Expenses. Buyers should research and factor in the cost of both packing materials and hiring a moving company and possibly a storage company if they do not plan to move directly in  and they themselves are not using their own or rented vehicles.

Once You Move In,  There Are The Additional Costs Of Living:

15. HOA Fees. If you are buying a Condominium, a Townhome or even a single family home located within a Homeowner Association aka (HOA), there are monthly HOA fees associated with living there. These fees vary but are typically to cover common area and landscaping maintenance, exterior insurance, and amenities like private roads, gates, guards, elevators, pools, gyms, sport courts, walking trails, etc. There can also be occasional assessments to cover unexpected large repairs that benefit the entire community, like all new roofs.

16. Utilities. New Homeowners need to factor in utility bills (not covered by an HOA): power, gas, water, sewer, trash collections, solar (if the home came with it and it's leased, private swimming pools and hot tubs are just a few monthly expenses to into your monthly cost of living budget.

17. Miscellaneous Services and Expenses. Depending on where you will be living, extra expenses include: landscaping, pest control, pool services, palm tree services, regular maintenance items like HVAC filters, roof inspections, security systems, new appliances, new furniture, garden tools, etc.

18. Tip From A Pro:

While the buy in can be tough for some and certain home expenses go up over time like taxes, insurance and HOA fees:
the benefits mentally, emotionally and financially out weigh the costs. You'll adapt to it, much like getting a new puppy or having a child, your life adapts to the new responsibilities. Your priorities change, allowing you to financially absorb it as part of your new normal. Trust me, it's better to pay your own mortgage than your landlord's!



1. Photo by Andrea Piacquadio: https://www.pexels.com

Posted by

Thomas J. Nelson
REALTOR®, CRS, RCS-D, CDPE, e-Pro, Certified Military Home Specialist, Luxury Home Specialist, Author, Keynote Speaker and  Podcast Host 

Serving Coastal San Diego from Carlsbad to Coronado, Downtown, Balboa Park Area,
La Jolla/UCSD & Mission Bay Park Areas
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& Active Duty

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Disclaimer:  Nothing in this blog article is to be construed as legal advice, tax advice, medical advice or financial advice.  For legal advice see an attorney.   For tax advice, health or financial advice see a tax attorney, certified public accountant, or other qualified professional.

Comments (16)

Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

It is expensive but worthwhile to buy a home

Apr 09, 2023 01:31 PM
Jeff Masich-Scottsdale AZ Associate Broker,MBA,GRI
HomeSmart Real Estate - Scottsdale, AZ
Arizona Homes and Land Group/ Buy or Sell

This is a great list and valuable post Thomas and I will bookmark it. For me other surprises for buyers are land leases and capital expenditure fees by HOAs over and top of their regular fees. Also any special tax assessments.  Here in Arizona water wells that get over used and homeowners later on have to haul in water to top off their storage tanks can be a surprise also. Thank you. Jeff

Apr 09, 2023 08:54 PM
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Thomas. Must read for every buyer, experienced or a novice. Enjoy your day.

Apr 10, 2023 04:01 AM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

Good morning, Thomas... what a great post... so many buyers, including those who are not first-time buyers, don't factor in the cost of buying a home besides purchase price.

Apr 10, 2023 05:25 AM
Brian England
Ambrose Realty Management LLC - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

It's because of all these fees that some people figure that it is better to just rent than buy, but they are not correct, haha.

Apr 10, 2023 05:30 AM
Michael Jacobs
Pasadena, CA
Pasadena And Southern California 818.516.4393

Hello Thomas - there is definitely much food for thought and plenty to munch.  Some may become dismayed and push away.  And then there are those who understand better awareness can also lead to multiple meals of good fortune.  Feast or famine?  Perspective plays a role.  Again.  

Apr 10, 2023 06:00 AM
Kat Palmiotti
eXp Commercial, Referral Divison - Kalispell, MT
Helping your Montana dreams take root

This is an excellent list and one every future home buyer should be familiar with!

Apr 10, 2023 06:09 AM
Kathy Streib
Cypress, TX
Home Stager/Redesign

Love this Thomas!    I'm sure that many first-time buyers aren't aware of all of the different expenses they will have when buying a home!!!  

Apr 15, 2023 05:32 PM
Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets
Big Block Realty 858.232.8722 - La Jolla, CA
CEO of Vision Drive Realty - Coastal San Diego

Kathy Streib THANK YOU SO MUCH! I'm trying use my FAQ's to guide my 2023 posts, so I can send the evergreen answers to my newer clients asking the usual questions. It saves a lot of time to share articles I wrote vs. rewriting a blogworthy email each time I'm asked.

Apr 15, 2023 05:43 PM
Kathy Streib
Cypress, TX
Home Stager/Redesign

Apr 15, 2023 06:49 PM
Eva B. Liland Century 21 Doug Anderson
Century 21 Doug Anderson - Lancaster, CA
Glad to be of Service 661-714-1643

Yes, it all adds up but so worth it. Additional "costs" and expenditures if you're buying a mobile home is the deposit for the park. If you pay your space rent on time for the first 12 months, you can request in writing to get it back. To get your park application turned in, there's also an application fee.

I also advise all my buyers to replace the locks to avoid any problems of past owners having access to your home. Paying for a smart doorbell is also advisable.

Apr 16, 2023 05:43 AM
Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets
Big Block Realty 858.232.8722 - La Jolla, CA
CEO of Vision Drive Realty - Coastal San Diego

Great points Eva B. Liland Century 21 Doug Anderson thank you for your contribution and comments. Happy Sunday!

Apr 16, 2023 06:55 AM
Sheri Sperry - MCNE®
Coldwell Banker Realty - Sedona, AZ
(928) 274-7355 ~ YOUR Solutions REALTOR®

Hi Thomas,

I know buyers will appreciate your concise list of costs to help them plan.  Great post.

Apr 16, 2023 01:01 PM
George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets most of my Borrowers are surprised at first when I break down all of the closing cost with them.

Apr 16, 2023 02:59 PM
Hannah Williams
HomeStarr Realty - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-820-3376

Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets  Great points this is why before showing houses to buyers I always have an initial meeting with buyers and explain the costs in detail So glad Kathy Streib featured this post as I missed it 

Apr 17, 2023 08:26 AM
Thomas J. Nelson, REALTOR ® e-Pro CRS RCS-D Vets
Big Block Realty 858.232.8722 - La Jolla, CA
CEO of Vision Drive Realty - Coastal San Diego

Hannah Williams absolutely, I never show property these days without a buyer orientation meeting and a pre-approval letter. I was less formal early in my career and wasted time being busy vs. productive.

Apr 17, 2023 08:51 AM