Being a first-time homebuyer is an exciting time. But it can also be very stressful, especially when costs start to escalate. While first-time homebuyers typically know to prepare for a down payment, that is definitely not the only cost to consider when buying a home. Home-buying costs add up quickly with numbers that often startle first-time buyers.

Before signing on the dotted line, check out the list below and prepare yourself for all of the costs that go along with buying a home.

Earnest Money

When you make an offer on a home, you will be required to fill out a home application. Along with the application, you can opt to include a check for earnest money. Earnest money is like a deposit toward the home you want to buy. It is a good way of showing the seller that you are a committed and trustworthy buyer who truly wants to purchase their home. Here’s how it works.

If the contract goes through, the earnest money will be applied toward the down payment and closing costs. However, if the contract does not go through, there are many contingencies in place that will ensure you get your money back.

Note that backing out of your contract at the last minute simply because you changed your mind most likely won’t count as a legitimate excuse, so before putting down earnest money, be sure to carefully review any contracts before putting earnest money down.

Appraisals and Inspections

Appraisals and inspections are required when purchasing a house. Just know that both come at a cost. Here’s what each entails.

Appraisals ensure an accurate asking price, which provides you and your lending institution some protection. The buyer is generally responsible for the appraisal cost – often as much as several hundred dollars. However, keep in mind that you may be able to negotiate with the seller and split the cost.

Home inspections are another cost homebuyers are responsible for. Inspections are separate from the appraisal process and offer additional security for homebuyers. During a home inspection, everything is thoroughly checked – the foundation, electrical outlets, roof, pipes, toilets, etc. If an inspection results in any problems, it will affect your purchasing decision; it will also give you bargaining power. In some instances, you can ask the seller to address any concerns you have before the closing or negotiate a better asking price.


Insurances comes in many forms, from health to dental and even auto. But did you know there is also home insurance? Homeowner’s and mortgage insurance are the two biggies you should know about.

Homeowner’s insurance is something every homeowner needs – and most lending institutions require you to purchase it and pay for a year’s worth of coverage before they will approve your loan. Why is it so valuable to have? Homeowner’s insurance will help pay for repairs, a rebuild, any damaged personal belongings, etc.

Mortgage insurance is a way for lenders to protect themselves in the event that the buyer doesn’t end up paying them back. Unless you put down 20% or more on a home, you will be required to purchase mortgage insurance. If you are required to purchase it, the cost will be included in your monthly mortgage payments.

Escrow Fees

When purchasing a house, an escrow officer – usually a lawyer or title company representative – will serve as an independent third party that ensures closing procedures go smoothly and that everyone you owe money to is paid accordingly. Unfortunately, escrow officers also require a fee for their services, so you will need to pay them as well. The good news here is that the escrow fee is typically split between buyers and sellers.


If you’ve been renting a home until your first-home purchase, you have probably paid connection fees for services like electricity or gas. But when you own a home, you will be responsible for many more utilities – which will be pricier than you were previously used to. You will be responsible for paying set-up fees and monthly payments for all utilities, including electricity, gas, water, sewage, trash, recycling, and cable and internet. When you set up these services, utility companies will check your credit history and may even require you to pay a deposit to use their service.

Maintenance, Repairs and Other Home Improvements

If there’s one thing to remember as a first-time homebuyer, it is that nothing ever goes as smoothly as you’d like. A seller may cover major repairs, like sewage system leaks or issues with the foundation, but you may still come face to face with maintenance and repair costs after moving in. Some things may be important to fix right away, like the water heater, roof or HVAC system, while others may be done over time, like cosmetic upgrades to flooring and cabinetry.

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