What are the hidden costs of home buying?

Asked by Sfnewbie, San Francisco, CA Tue Jan 17, 2012

I'm used to renting and am new to home ownership. What hidden costs should I watch out for as I go through the home buying process?

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Katie Daire, Home Owner, Piedmont Pines, Oakland, CA
Wed Jan 18, 2012
I think Fred has a great point - we found that most of the things we weren't expecting came AFTER the purchase itself. We had planned for things like new appliances, window treatments and some big furniture, but things like unexpected plumbing repairs, lawn clean-up, plants, and frequent trips to Lowes really added up. Would definitely expect at least a couple hundred additional dollars a month - if not more - to planned expenses in the first 3-4 months.

Good luck!
2 votes
Shaban Shako…, Agent, San Francisco, CA
Wed Jan 18, 2012
Inspections range from $500-$2500 depending on the type of inspections you choose and what is warranted for the particular property. Be careful to choose the right ones based on the area you are looking in and the type of property you want.

Closing costs can be anywhere from $5000-$20,000+. The biggest variable are financing costs, including points that you may pay to buy the rate down or get a special loan.

Insurance and property taxes are another "hidden" cost as are any particular maintenance costs such as elevator or boiler maintenance, if applicable. HOA fees, including both regular and special assessments, may apply to condos, townhomes and cooperatives.
Web Reference:  http://www.residentialsf.com
1 vote
John Arendsen, Agent, Leucadia, CA
Wed Jan 18, 2012
To sum it up. I always used to tell my customers when I was a boat manufacturer in the 60's and 70's that the cost of owning a boat starts the day you buy it. It's a revolving door of ongoing expenses. The cost to own, operate, maintain and insure your home is an ongoing obligation that doesn't stop until the day you sell it and start renting again.

Even after you pay it off it remains a bottomless pit. But the alternative is to always be a renter and never be able to really have that sense of "Pride of Owership". Plus you'd never want to do to your rental what you can do with your home.
1 vote
Rich Bennett, Agent, San Francisco, CA
Wed Jan 18, 2012

To summarize, you'll have 2 sets of expenses during the home buying process:

1. Inspections: pest and contractor's and any other inspection you may wish to do. Generally a pest and contractor inspections can run about $1,000-$1,200 depending on the size of a house (versus a condo/TIC). Multi-unit properties may be more.

2. Financing expenses which will include any points of your loan, underwriting/originations fees, title/escrow fees. Your lender can give you their estimated costs. A title company can give you the estimated title/escrow fees.

Your agent should help guide you through the financing process.

Feel free to drop me a line if you have any questions. Thanks!

Rich Bennett, Realtor in SF since 2002
415.305.4911 cell


Zephyr Real Estate
Web Reference:  http://www.RichBennettSF.com
1 vote
Robert Chome…, , San Diego, CA
Wed Jan 18, 2012
1. Closing costs (if the seller doesn't pay closing costs, you will also have 1-3% of the loan amount in closing costs in additional to the down payment)
2. Repairs...you don't have repairs when you rent. There are a lot of things that can break...plumbing, electrical, leaks, toilet, drains stopped up, painting exterior and interior, landscaping, water heater, garage door, windows, furnace, AC, appliances...it goes on and on. And bigger costlier issues like drainage, foundation, roof leaks, etc.. When you rent if something goes wrong you call the landlord to fix, now it is all on you.
3. Upgrades to the house...if you want to upgrade floors, kitchen, bath, etc... it's all on you now, not the landlord.
4. You don't have a water bill as renter, you will as a homeowner,,,and possibly garbage cost too.
5. When you rent you may have more flexibility to move for a job change, etc...when you buy it's a little less flexible, you would have to rent your house if you were relocated

Some very key "hidden costs of renting":
1. You do not get the tax break of writing off mortgage interest and property taxes (this is big) when you rent
2. When you make a mortgage payment every month part of that goes to paying down the loan principle, so you will own the property outright one day. When you rent, 100% of you rent goes to paying off the landlords loan.
3. When you rent the owner can sell or move in and you are forced to move without much notice
4. When you rent you can't upgrade the place as you like it (paint, re-do kitchen, etc....but when you buy and upgrade it's an investment).
1 vote
Gabrielle Da…, Agent, San Francisco, CA
Thu Jan 26, 2012
Your real estate agent can supply you with a net sheet that lists all costs and nothing there should be hidden. There are some costs that many buyers like yourself are often unaware of at the outset and those include: inspection costs, HOA dues, insurance and taxes as well as closing costs. Feel free to call me at 415-200-7202 for additional clarifications.
0 votes
Oggi Kashi, Agent, San Francisco, CA
Wed Jan 18, 2012
- Property inspections: around $500 per
- Appraisal: around $500
- Loan fees & points: Ask your lender
- Closing costs: Will depend on your purchase price, ask title co
- Property Taxes: about 1.17% of the purchase price
- Suplemental Tax Bill
- Property Insurance

That should just about do it.

Oggi Kashi
Broker Associate, Paragon Real Estate Group CA DRE 01844627
All data from sources deemed reliable but subject to errors and omissions, and not warranted.
Web Reference:  http://www.oggikashi.com
0 votes
Kevin Ho, Agent, San Francisco, CA
Tue Jan 17, 2012

All of the answers raise good points. You should probably look at cost over time however.

Short term costs are ones related to escrow: inspections, title insurance, escrow fees, moving costs, move-out costs. For an average $700,000 purchase with 20 percent down with a 30-year fixed mortgage at 4 percent interest (no points), by the close of escrow, your fees look something like this: Price: $700k, Loan is $560k, Downpayment is $140k, and Escrow fees around $11k to $15k. Your monthly costs (excluding utilities and living costs) will be in the $2700 range for mortgage and $680 for property tax (payable 2x a year).

And, over the long term, you'd have to consult an amortization table for the total interest paid.

Of course, your CPA will tell you what the 'real' costs are after tax benefits. That figure will also depend on your circumstances.

In the end, however, remember that with renting property you have little (if any) chance at seeing your money back when it's all said and done. When you buy this is usually not the case as you have (at least) a fighting chance that your home's value would have held in the intervening period.

And, last, don't forget the intangible benefits of having your own place, or the contentment you may achieve that aren't so easily quantifiable.
0 votes
David Tapper, Agent, Burlingame, CA
Tue Jan 17, 2012
Good question SFbewbie. If you are working with "PROFESSIONALS" you should never have any hidden costs.

If you haven't chosen an agent yet, interview a few different ones to see if you like their style and will be comfortable working with them. If you can get a referral to one from a friend or relative even better. You will probably be working with him/her for at least a couple of months.

Ask your agent to explain the buying process and have them refer you to a good mortgage professional.

The mortgage professional will give you a complete breakdown ofyour costs. Your real estate agent can go over the cost of inspections and which ones are needed.

Communication is one of the most important things you will need to have a good, smooth transaction.


0 votes
Diana S, Agent, New York, NY
Tue Jan 17, 2012
If you are seriously considering purchasing a home, talking to a mortgage professional would be a good start. They can help you with some of these calculations

Even before you close on your home, you might need to do a home inspection which can be 250$ and up - just as a start. Then come the closing costs - and yes the GFE (good faith estimate) will give you an idea of how much you will need to pay at closing. Some of those fees include legal fees, title fees, buydown points, origination charge, taxes, etc.

Once you own your home, you will of course have your mortgage and interest, homeowners insurance and property taxes. The latter will vary greatly based on where you will be living. In addition you need to consider maintenance that you normally wouldnt do when you rent - i e, taking care of landscaping, plumbing/heating issues, etc.
I am a real estate agent and a homeowner as well. Please feel free to contact me if you have any questions. Good luck!
Web Reference:  http://www.pantigagroup.com
0 votes
Maria Gilda…, Agent, Manchester, CT
Tue Jan 17, 2012
Hi Sfnewbie:

The Truth in Lending Act or Regulation Z requires disclosures by the creditors or entities which lend money to protect the consumer. TILA requires lenders to make certain disclosures on loans subject to the Real Estate Settlement Procedures Act (RESPA) within three business days after their receipt of a written application.

This early disclosure statement or Good Faith Estimate (GFA) is partially based on the initial information provided by the consumer. A final disclosure statement is provided at the time of loan closing. The disclosure is required to be in a specific format and include the following information:
1.Name and address of creditor
2.Amount financed
3.Itemization of amount financed (optional, if Good Faith Estimate is provided)
4.Finance charge
5.Annual percentage rate (APR)
6.Variable rate information
7.Payment schedule
8.Total of payments
9.Demand feature
10.Total sales price
11.Prepayment policy
12.Late payment policy
13.Security interest
14.Insurance requirements
15.Certain security interest charges
16.Contract reference
17.Assumption policy
18.Required deposit information

I hope this helps.

0 votes
Fred Glick, Agent, Mountain View, CA
Tue Jan 17, 2012
A good real estate and mortgage broker will show you the real costs. Don't worry if you have them.

The REAL hidden costs is what happens after you move in.

You'll be making those Home Depot and Bed, Bath and Beyond runs that will add up.

Drapes, new bathroom carpets, paint and it's supplies....that's where the real fun (and secret costs) come from!

Best of luck!

Web Reference:  http://fredglick.com
0 votes
Jed Lane, Agent, Petaluma, CA
Tue Jan 17, 2012
Ask your agent to do a net sheet for you.
There are no hidden costs. In fact there are laws against hidden costs so don't pay for anything that hasn't
been explained.
0 votes
Glenn Groves, , Santa Rosa, CA
Tue Jan 17, 2012
There are lot of costs but few are considered hidden... I would suggest giving a mortgage broker a call to discuss what options are out there and what to look for. (Hint, give Elise a call)

Glenn & Elise Groves, Mortgage Retrievers!
Web Reference:  http://www.groves-team.net
0 votes
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