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When buying a home, most buyers focus on the mortgage payment. While that’s the biggest piece of the puzzle, it’s far from the only cost. To avoid financial surprises, it’s important to understand the additional expenses that come with homeownership. Here’s a breakdown of what to budget for beyond your mortgage.
Down Payment
Your down payment is typically the largest upfront cost of buying a home. Many lenders recommend 20% down, which helps you avoid extra fees and lower your monthly payments. However, some loan programs allow you to put less down, sometimes as low as 3%, but expect higher monthly costs in exchange.
Primary Mortgage Insurance (PMI)
If you put less than 20% down, most lenders require private mortgage insurance (PMI). This fee is added to your monthly mortgage payment and protects the lender in case of default. While it increases your costs, it allows more buyers to purchase a home sooner without needing the full 20% down.
Closing Costs
Closing costs are the fees and expenses required to finalize your mortgage. These typically range from 2% to 5% of your loan amount and may include:
- Appraisal fees
- Title insurance
- Taxes
- Loan origination fees
It’s a good idea to get an estimate from your lender early in the process so you can plan ahead.
Ongoing Costs of Ownership
Once you’re in your home, you’ll have ongoing expenses beyond your mortgage. Be sure to budget for:
- Homeowners Insurance – protects your home and belongings.
- Property Taxes – vary depending on location and assessed value.
- HOA Fees – if your neighborhood has a homeowners association.
- Maintenance and Repairs – from lawn care to unexpected fixes, these costs add up over time.
Moving Expenses
Don’t forget about the cost of actually moving into your new home. Expenses vary widely based on how far you’re moving and how much you’re bringing with you. Whether you hire movers or rent a truck, plan for these costs in advance.
Pro Tip: Plan Ahead
Buying a home is one of the biggest financial decisions you’ll make. By understanding the full scope of costs, beyond just the mortgage, you’ll set yourself up for long-term success. Plan ahead, budget wisely, and you’ll make your home purchase a smart one.
