The Costs of Buying a Home That First-Timers Should Plan For

When people start saving for a home, they usually focus on the down payment. That makes sense, but it is only one piece of the budget. First-time buyers who plan for the full range of costs tend to feel much more relaxed on move-in day and in the months that follow. Here is a look at what to expect.

The Down Payment

Your down payment depends on the loan you choose and your qualifications. Many buyers are surprised to learn how flexible the options can be:

• Conventional loans: as low as 3% down for eligible buyers. With less than 20% down, you will typically pay private mortgage insurance, which can be removed once you reach 80% loan-to-value.
• FHA loans: 3.5% down with a credit score of 580 or higher, plus a 1.75% upfront mortgage insurance premium that is usually added to the loan.
• VA loans: $0 down for eligible veterans and service members with full entitlement, with no monthly mortgage insurance. Most borrowers pay a funding fee.
• USDA loans: no down payment for eligible buyers in qualifying rural and suburban areas.

You can explore more in our low down payment options.

Closing Costs

Closing costs are the fees and prepaid items needed to finalize your loan and transfer ownership. They often add up to a few percent of the loan amount, though the total depends on your location, loan and situation. Common items include:

• Appraisal and credit report fees
• Lender fees for processing and underwriting
• Title search and title insurance
• Attorney or settlement fees
• Government recording fees and transfer taxes
• Prepaid property taxes, homeowners insurance and interest

You will see an estimate early in the process on your Loan Estimate, and a final itemized list on your Closing Disclosure a few days before you sign. In some cases, sellers may agree to help with closing costs, within limits set by your loan program.

Moving and Settling In

Do not forget the cost of getting there. Movers, truck rentals, packing supplies, utility deposits and new locks all add up. If you are moving a long distance, travel and temporary lodging may also be part of the picture.

Furniture and Appliances

A bigger home means more rooms to fill. Some homes do not come with a refrigerator, washer or dryer, so check what conveys with the sale. You do not need to furnish everything at once. Many new owners start with the essentials and add pieces over time. It is also wise to hold off on financing big purchases until after closing so you do not affect your loan approval.

Ongoing Costs of Ownership

Maintenance and Repairs

As a renter, a broken water heater was your landlord’s problem. As an owner, it is yours. Set aside money each month for routine upkeep like air filters, lawn care and pest control, and build an emergency fund for bigger surprises like a roof leak or an air conditioner replacement.

HOA Dues

If the home is in a community with a homeowners association, you will pay regular dues. These can vary widely depending on the amenities and services included, such as pools, gated entry, landscaping or exterior maintenance. In some communities, dues can be a significant part of the monthly budget, so ask about them early, along with any special assessments.

Taxes and Insurance

Property taxes and homeowners insurance are usually included in your monthly payment through an escrow account. Both can change over time, so plan for some increases.

Putting It All Together

A clear savings plan for each of these categories helps you buy with confidence instead of stretching every dollar. Our mortgage calculator can give you a starting estimate of your monthly payment.

Want a personalized breakdown of what your purchase may cost? A FLO Mortgage loan officer can walk you through it. Reach out to our team and let us help you plan ahead.

This article is for general education and is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines and program availability. FLO Mortgage, Company NMLS #1835856. Equal Housing Opportunity.