Buying a house is one of the biggest financial decisions most people will ever make. Because it’s such a major purchase, few want to risk costly mistakes—yet many buyers overlook expenses beyond the listing price that can quickly increase the true cost of homeownership.
A reader recently asked for guidance on saving to buy a house, including a recommended down payment percentage and other costs to plan for, such as homeowners insurance and inspection fees. While I’m not a professional home-buying advisor, I’ve purchased a home before and we’re beginning the process again, so I’ll share practical advice based on experience and common best practices.
When we bought our first house, we researched extensively and anticipated many small expenses that come with owning a home. That preparation helped avoid major surprises, though a few unexpected issues still arose. Not everyone plans this carefully; many buyers focus only on the sticker price, which can lead to unexpected financial strain. Below are key questions to ask and expenses to include when planning to buy a home.
What expenses come with a home?
Many costs go into owning a home, and all should be included in a realistic budget. Being prepared lowers the chance of being surprised by ongoing or one-time expenses.
Possible home expenses include:
The purchase price and mortgage. This is the amount you pay for the house and the mortgage you take on. Don’t forget closing costs and the interest rate. Even a 1% difference in interest can change monthly payments by a significant amount.
Property taxes. Property taxes vary greatly by location. Two homes with the same price can have very different annual taxes depending on the jurisdiction—one might be $2,400 per year and another $4,800. That difference could push a property out of your budget.
Homeowners insurance. Insurance costs depend on where you live, the home’s size, and whether you need specialized coverage for risks like floods, earthquakes, or hurricanes. Annual premiums can vary widely—from a few hundred dollars to several thousand—so get insurance quotes early in the decision process.
Utilities and monthly bills. Utility costs differ by home age, efficiency, and climate. Older homes often have higher heating and cooling costs due to less efficient windows, insulation, or HVAC systems. Typical bills include electricity, gas, water, sewer, trash, and internet or cable. A similar-priced house might have a $75 monthly electric bill, while another could run $500.
Home inspection fees. Always get a professional home inspection before purchase. Skipping or using an extremely cheap inspector can be a costly mistake—hidden issues can surface after move-in, like structural damage, mold, or long-standing plumbing problems. Inspections should cover foundation, roof, plumbing, electrical, presence of pests or termites, mold, and radon testing where relevant. If an inspection reveals problems, you may negotiate repairs or concessions with the seller.
Furniture and appliances. If the home isn’t already furnished, budget for essential furniture and appliances. Forgetting this can leave you living with minimal furnishings or unexpected expenses. You can save by buying secondhand or during sales, but costs still add up quickly.
Maintenance and repairs. Homeownership requires ongoing upkeep. Common maintenance costs include:
- Lawn care and yard cleanup;
- Plumbing repairs, pipe replacement, and clearing clogs;
- Painting interior or exterior surfaces;
- Electrical repairs, including damage from animals or aging wiring;
- Window replacement or repair;
- Homeowners association (HOA) fees, if applicable;
- Other unexpected repairs—appliances, roof, foundation, and so on.
How much should I budget for a new home?
Determining a budget depends on your financial situation, lifestyle, and risk tolerance. Many online mortgage affordability calculators can help estimate what you might qualify for, but the bank’s approval doesn’t always mean you can comfortably afford those monthly payments.
Some people aim for housing-related costs that equal 25% to 30% of their after-tax take-home pay. Personally, I prefer a lower ratio—around 10% to 15%—because my income is variable and I live in a lower-cost area. A conservative budget helps absorb unexpected expenses without stress.
Before house hunting, decide on a realistic budget and get pre-approved for a mortgage. Pre-approval helps ensure you won’t waste time looking at homes outside your financial reach. Remember that bank approvals are often generous; using their figure as a maximum rather than a target is usually wiser.
How much should I put down for a down payment?
Down payment recommendations vary. Some programs allow as little as 2.5% down, while others require 20% or more. The amount you choose depends on whether you want to avoid private mortgage insurance (PMI), how quickly you want to pay off the home, and how much cash you’re comfortable tying up in the property.
If you put down less than 20%, you’ll likely pay PMI, which can add a couple of hundred dollars or more to your monthly mortgage payment and could affect affordability. On the other hand, putting a large down payment might delay other financial goals or prevent investment in higher-return opportunities.
Decide whether your priority is a lower monthly payment, avoiding PMI, or preserving cash for other needs. Each choice has trade-offs, and there’s no single correct answer that fits everyone.
In summary: plan for the full cost of homeownership—purchase price, taxes, insurance, utilities, inspection and repair costs, furniture, and maintenance. Set a conservative budget before you shop, get pre-approved, and weigh down payment options against your broader financial goals. Careful planning and realistic expectations will help you find a home you can truly afford without unwelcome surprises.