So you've been saving for a down payment, and you're finally ready to buy your first home. You've got your 3% or 5% or whatever amount tucked away, and you're thinking, "Great! I'm ready to go house hunting!"
Not so fast.
Here's what nobody tells you when you're scrolling through Zillow at 2 AM: that down payment is just the beginning. There's a whole parade of expenses that show up between "offer accepted" and "here are your keys," and if you're not prepared for them, you could find yourself scrambling to cover costs you never saw coming.
Let's talk about the real money you'll need on hand when you buy a home.
The Costs That Hit Before You Even Own Anything
Before you officially own your home, you'll pay for several services that help determine whether you should own this particular home. Think of these as the "let's make sure this is actually a good idea" expenses.
First up is the home inspection, which typically runs between $300 and $500, depending on where you live and how large the home is. This is money well spent because a good inspector will crawl through the attic, peek under sinks, test the electrical panel, and generally look for anything that might cost you thousands down the road. They're not there to kill your deal—they're there to make sure you know what you're buying.
Then there's the appraisal, which your lender requires to confirm the home is actually worth what you're paying for it. This usually costs $400 to $600. The bank wants to know they're not loaning you $350,000 for a house that's really only worth $280,000. Makes sense, right?
You'll also pay for a credit report—though this one's usually pretty cheap, maybe $25 to $50. Some lenders roll this into their application fees, but it's worth knowing it exists.
Add these together and you're looking at roughly $700 to $1,150 before you've signed a single closing document. And here's the thing: you're paying these costs even if the deal falls through. If the inspection reveals major problems and you walk away, you don't get that money back. It's the cost of doing your homework.
Understanding Your Closing Costs
Now we get to the big one: closing costs. You've probably heard people mention that you'll need "a few percent" for closing costs, but what does that actually mean?
As Mike Oddo, CEO of HouseJet, explains: "Buying a home is a significant investment, and while many costs can be wrapped into your loan, there are essential investments that need to be made before you can close on a home. These upfront costs ensure you're protected and that the transaction goes smoothly. That's why we always recommend buyers seek out an expert lender to get preapproved. As part of the process, the lender will provide a Good Faith Estimate that details all aspects of the loan, including the investments required before closing. This transparency helps buyers plan properly and avoid surprises at the closing table."
Closing costs typically range from 2% to 5% of your home's purchase price. On a $300,000 home, that's somewhere between $6,000 and $15,000. That's a pretty wide range, and where you land depends on your location, your lender, and your specific loan terms.
What's actually included in closing costs? Quite a bit: loan origination fees, title insurance, title search fees, attorney fees (in some states), recording fees, transfer taxes, and prepaid items like property taxes and homeowners insurance. Some of these you can shop around for—like your homeowners insurance or title company. Others are pretty much fixed costs you can't negotiate.
Your lender will give you a Loan Estimate within three days of applying for your mortgage, which breaks down these costs. Pay attention to it. Then, three days before closing, you'll get a Closing Disclosure that shows the final numbers. Compare these documents carefully. If something jumps significantly from the estimate to the final disclosure, ask why.
The First Month Reality Check
You've closed on your home. Congratulations! Now the fun begins.
Within the first 30 days of homeownership, you're going to spend money you probably didn't budget for. Even if the home inspection came back clean, there's almost always something that needs immediate attention.
Maybe it's changing the locks—because you have no idea how many copies of the keys are floating around out there. That's $100 to $300, depending on how fancy your locks are. Perhaps the smoke detectors are chirping or outdated. You'll want to replace them. The HVAC filter needs changing. The previous owners took the washer and dryer, and you need those pretty much immediately.
Then there are the little things that suddenly become priorities. You might need window treatments because your neighbors can see directly into your living room. Or you realize the garage door opener only has one remote, and you need another. These $50 and $100 purchases add up faster than you'd think.
A smart move? Set aside at least $1,000 for these first-month essentials. You'll probably spend it all.
Home buying expert hack: Close a day or two after the first of the month and you won't have a mortgage payment for two months. This will help you recoup some of the cash you had to lay out to buy your home. Talk to your lender and real estate agent about how to make that happen.
The Hidden Fees Nobody Mentions
Let's talk about utility deposits and HOA fees, because these can catch first-time buyers completely off guard.
Many utility companies require deposits when you set up new service, especially if you don't have an established payment history with them. Electricity, gas, water, trash collection—each one might want $100 to $200 upfront. In some areas, you're looking at $500 to $800 just to turn on your utilities.
If you're buying a home in a community with a Homeowners Association, there's often a transfer fee when ownership changes hands. This can range from $200 to $500, and it's due at closing. Some HOAs also require new owners to pay the first month's or quarter's dues upfront. Depending on your HOA fees, that could be another $200 to $600 right off the bat.
These aren't costs your lender will include in your closing estimates unless you specifically ask about them. You need to find out about these fees yourself by asking the seller's agent or the HOA directly.
Your Financial Safety Net
Here's the most important thing: you need an emergency repair fund before you close on your home, not after.
When you rent, a broken water heater is your landlord's problem. When you own, it's your problem—and your expense. A new water heater costs $1,000 to $3,000 installed. An AC unit in the summer? That could be $3,000 to $7,000. A roof leak that needs immediate attention might set you back $500 to $1,500 just for the emergency repair.
Financial experts recommend having three to six months of expenses saved as an emergency fund, but when you're a new homeowner, you should also have a separate home repair fund of at least $3,000 to $5,000. This isn't money for renovations or upgrades—this is your "something broke and it needs to be fixed now" fund.
Because something will break. Maybe not in the first month, maybe not in the first six months, but it will happen. And when it does, you'll be grateful you have the cash ready.
What This Actually Looks Like in Real Life
Let's walk through what a first-time buyer actually needs for a $300,000 home purchase:
Down payment (5%): $15,000 Closing costs (3%): $9,000 Inspection and appraisal: $1,000 First-month expenses: $1,000 Utility deposits: $600 HOA transfer and first payment: $500 Emergency repair fund: $5,000
Total cash needed: $32,100
Notice something? That's more than double the down payment amount. This is why so many first-time buyers get stressed during the process—they budgeted for the down payment but not for everything else.
The good news is that you can plan for this. Working with a knowledgeable lender who provides detailed estimates helps you understand exactly what you'll need and when you'll need it. Some sellers will agree to cover a portion of closing costs as part of the negotiation. Some first-time buyer programs offer assistance with these upfront costs.
The key is knowing these expenses exist before you start house hunting. That way, you're not caught off guard when your lender asks if you have funds available for closing costs, or when you realize you need to write five different checks in your first week of homeownership.
Buying a home is exciting, but it's also a major financial commitment that extends beyond the down payment. Do your homework, work with professionals who will walk you through every cost, and make sure you've got enough cushion in your budget to handle both the expected and unexpected expenses. Your future homeowner self will thank you.
