The Hidden Costs of Buying a Home (That No One Tells You About!)

You’re finally ready to buy a home—congrats! That’s a huge milestone.

But before you pack boxes or plan the housewarming, there’s one thing you need to know: how much this is really going to cost.

Yes, you’ll need a down payment and closing costs. But that’s not all. Many first-time buyers are caught off guard by prepaid expenses—costs that must be paid upfront before you even move in.

In this blog post, we’ll break down the most common prepaid costs and help you understand exactly what to expect when buying a home.

Homeowners Insurance Premium

One major prepaid cost when buying a home? Homeowners insurance. It’s essential—and required by most lenders before closing.

This insurance protects you if your home is damaged or destroyed by things like fire, wind, or vandalism. No policy in place? No loan.

Your premium will vary. It depends on your home's value, location, and the coverage you select.

Specific Hazard Insurance

Depending on where you buy, you may need extra hazard insurance. Live in a flood zone or wildfire-prone area? Your lender might require flood or wildfire coverage.

Costs vary based on the type and amount of protection. Even if it’s not required, consider it. A little extra coverage can save you from big losses later. Better safe than sorry!

Property Taxes 

Property taxes often catch first-time buyers off guard. State and local governments charge these taxes to fund public services like schools, roads, and parks.

What you pay at closing depends on your home’s location, its assessed value, and the timing of your purchase.

Mortgage Insurance Premium 

If your lender requires mortgage insurance (MI), you’ll likely include the premium in your prepaid costs. Mortgage insurance protects the lender if you default on your loan.

You usually pay MI monthly as part of your mortgage, but you may also pay a lump sum at closing. 

Initial Escrow Deposit

In addition to the prepaid expenses mentioned above, you'll also need to make an initial escrow deposit at closing. This deposit is used to establish your escrow account, which is used to pay your property taxes and homeowners insurance premiums on your behalf each year. 

Be Prepared

There are a lot of things to factor in when you're buying a home. It's not just the list price that you need to be aware of, but also the prepaid expenses. Homeowners insurance, mortgage insurance, and property taxes can all add up. Be sure to factor in these costs when you're budgeting for your new home so that you don't end up being surprised down the road.

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