More than a mortgage: The true cost of homeownership

When thinking about your budget for buying a house, you probably focus on the down payment and monthly mortgage payment. But, as a future homeowner, these aren’t the only costs you should factor in.

To get a head start on calculating your expected costs, you’ll first want to start with the average price of a home in your state or desired neighborhood. This Home Value Index can help you find the median value of a home in your area.

The golden rule used to be that down payments must be 20% of the purchase price, but that’s no longer a steadfast expectation . Today, a variety of financing options and programs are available. Many are geared toward low- to moderate-income borrowers to allow a wider range of access for buyers considering homeownership.

For example, HomeReady mortgages , a type of conventional loan offered by Fannie Mae, allows qualified first-time and repeat buyers to purchase a home with as little as 3% down. So if you’re buying a $350,000 house, for instance, you could make a down payment as low as $10,500 with a HomeReady mortgage, available through Ally Home . Plus, this type of mortgage allows for more flexible payment requirements, making homeownership feasible for those who may not have enough cash on hand to cover a traditional down payment.

If you can, it can be a smart move to put more money down up front, since you’ll pay less in interest charges in the long run. But if that’s not possible, it doesn’t mean your dream of homeownership is out of reach. HomeReady mortgages and certain loans offered by the Federal Housing Association (FHA) provide mortgages with reasonable rates and down payment options to first-time homebuyers.

Note: When you make a down payment of less than 20%, your lender might require you to get private mortgage insurance (or PMI).

If you’re planning to get a mortgage, your lender will likely require you to get a home appraisal , which typically costs $550 to $1050 for a single-family home or condo. An appraisal is intended to provide an unbiased estimate of the property’s fair market value (based on its condition, location, and size; current market trends and recent sales of similar, nearby homes).

A home inspection examines the physical condition of the house to bring existing (and sometimes potential) issues to your attention before closing. (It can also clue you into future maintenance costs. More on these costs later.) The average cost of an inspection is $325, but this step could save you thousands. During an inspection, you may uncover issues with the home’s mechanical systems, physical structure or appliances — giving you the ability to renegotiate the selling price or have the seller fix the problem.

Note: The provided estimates are examples and are subject to vary based on factors mentioned throughout the article. 

Closing costs aren’t the only expenses you should anticipate. Ongoing costs can pop up over time, while others can be anticipated from the moment you enter a contract.

When you take out a mortgage, you have the ability to repay it over a predetermined term (typically 15 or 30 years). Payments are usually made monthly — a portion pays down the principal and the remainder goes toward interest charges. Some lenders require you to pay your property taxes and your homeowner’s insurance as part of your mortgage payment. Find out all the cost components that make up a typical mortgage and use our calculator to get an estimate of your monthly mortgage payment.

When you purchase something in a store, you usually have to pay sales tax. And when you buy a house, you’ll be responsible for paying property tax, too. This tax is levied by your local government and is usually based on your home’s value and location. Funds raised through property taxes typically go toward things that benefit your local community, such as public schools, parks, and roads. This cost varies greatly based on where you live, but on average, a typical homeowner pays around $2,400 a year in property taxes.

Home insurance is like a bike helmet. On most rides you won’t have to depend on it, but the one time you fall off your bike, it could save your life. Even if you think you don’t need home insurance, many mortgage lenders require you to have it. There are two main types of homeowner’s insurance: dwelling and personal property insurance. Dwelling coverage protects your house, while personal property covers the items inside your house. The price fluctuates based on your level of coverage and location. But on average, homeowner’s insurance costs around $1,300 a year. When deciding on how much coverage to purchase, consider how much it would cost to rebuild your house instead of looking at how much your house is worth.

When you make a down payment of less than 20%, your lender may require PMI, which can be paid in full as part of your closing costs or paid monthly. Once you reach 20% equity in your home, you may be able to cancel it.

If you buy property in a homeowner association (HOA), you’ll likely have monthly or quarterly fees. The average monthly HOA fee is about $250 a month. In exchange, you’ll receive home improvements and maintenance (for example, replacing your roof or weekly lawn care could be covered) and upkeep of any shared space, like a pool, gym or community center.

Even if you don’t buy a “fixer upper,” most houses need maintenance and upkeep at some point. (Yes, even if you buy one in tiptop shape.) It’s smart to include maintenance costs as part of your annual home budget. In general, you can expect to spend about 1% of your home’s value safeguarding your property each year. You can also consider some popular affordable upgrades to potentially boost your home’s value (which could lead to a higher sale price should you decide to move).

Utilities may not be top of mind when it comes to homeownership costs, but whether it’s your electricity, water, air conditioning, heat, or WiFi — they are hard to live without and pricing can vary based on your location and size of your home (even the age of you’re A/C can affect your costs). On average, homeowners pay around $400 a month for utility bills, but researching costs in your area and accounting for your preferences (such as subscriptions, internet speed and more) will help you determine how much you’ll need to budget.

From broken appliances to landscaping, there are bound to be some expenses that you may not have considered. While you can’t foretell every extra expense, there a some you can try to anticipate.

If you live in an area where the cooler seasons come with falling leaves and snow, you may need to consider removal. If you don’t want to break out the rake and shovel yourself, you can pay for professionals to do the job for you. Leaf removal averages between $400 and $1,000 per acre. Annual snow removal averages between $350 to $450.

The outside of your home needs to be cared for, too. To keep your curb appeal in tip-top shape, you may want to hire a professional landscaping or tree care service. The cost will vary depending on your needs, whether that’s mowing your lawn every other week or an occasional garden refresh. But overall, the average cost of lawn maintenance is $65 to $150 per visit.

The last thing you want to worry about as a homeowner is pests invading your home. To keep critters out of your space, you may need to invest in professional pest control. The average pest control price for a one-time visit is between $250 and $400 but can vary depending on your circumstances.

Many homeowners opt for a security system to give them peace of mind, but the costs can vary significantly depending on the type of services you’re looking for. Security systems can offer a range of equipment such as sensors, detectors, cameras, video archiving as well as smart home devices like door locks and thermostats. In general, the more equipment you have, the more you will pay in both upfront and monthly costs. If you’re looking for a security team to monitor your home, there are a variety of options on the market. Depending on the provider, there are both non-contract and contract monitoring plans that could protect you and your home. Should you sign a monitoring agreement, contracts typically range from 12 to 36 months, and early termination fees may apply.

Overall, you can expect to pay between $300 and $840 upfront for alarm equipment, installation and activation fees. If you require ongoing monitoring, expect to pay between $25 and $50 per month.

Your home may come with major appliances, such as a stove, oven, refrigerator and dishwasher. But if your home is missing any appliances you can’t live without, you’ll need to start saving for them. New appliances can vary widely depending on the type, model and tier (ranging in average between $350 and $8,000) so be sure to account for any missing appliances while you house hunt.

And don’t forget the furniture. You may want to spend some time living in the space to figure out your exact needs in terms of storage, organization and yes, even style. Take inventory of pieces you already have that you plan to bring into your new home and start saving now for those bigger purchases down the road. If you’re looking to furnish your entire home, the average cost is $16,000.

The amount of money you need to save as a homeowner can feel unclear (and sometimes overwhelming). But once you make it past the number crunching (and expecting the unexpected) you’ll be more prepared to take the leap.