I grew up always wanting to be a homeowner. So when my now husband and I bought our first house I was over the moon…yet a little naïve on what all went into buying our first house. It was a major milestones; however, as we dove into the process, it was more than simply finding a place within our budget and falling in love with its look. So here are the hidden expenses, overlooked details, and long-term commitments that can surprise many first-time buyers.

1. Hidden Costs Beyond the Purchase Price

Most first-time buyers focus on the sale price of the house and their monthly mortgage payment, but they often miss the other hidden costs that come with homeownership:

• Closing Costs: These fees can range from 2% to 5% of your loan amount and can include appraisal fees, title insurance, escrow fees, and more. California recently passed a law where the buyer must now pay the closing costs. I am so thankful we didn’t have to deal with this cost when we purchased our home but now it is something to take into consideration.
• Property Taxes: Depending on your location, property taxes can significantly increase your monthly payments. Do your research on the local tax rate before you commit. You can roll these into your account or pay them yourself. When you get your initial quote from a lender, make sure to ask if the payment includes an escrow account, which is an account that you pay into every month as part of your mortgage payment. That money is then used to pay your property taxes for the year. If you don’t have an escrow account, you will be expected to have the lump sum needed to pay your property taxes in addition to your monthly mortgage payment. Very important when determining the monthly payment you can comfortably afford.
• Homeowners Insurance: Insurance is mandatory with most loans, but make sure you understand what is covered and consider whether additional coverage (like flood or earthquake insurance) might be necessary. We knew we needed fire insurance but we didn’t know we needed a specific, very expensive type because of where our house is located in the hills. We had not planned on paying $4,000 for 6 months of insurance up front and it was a hard pill to swallow.
• Homeowners Association (HOA) Fees: If you’re buying in a community governed by an HOA, you’ll be expected to pay fees that may increase over time. Build this into your ‘monthly cost’ that you have determined prior to the homebuying process (and your heart gets in the way).
• Maintenance Costs: Unlike renting, where maintenance is someone else’s responsibility, owning a home means you’re on the hook for repairs. From leaky roofs to HVAC issues, it’s a good idea to set aside about 1% of your home’s value annually for repairs and maintenance.
• Random costs you’re forced to pay for no reason: I found the most frustrating part of buying a home was the random costs that you had to pay that no one could really explain. $75 to send me a digital version of the CC&Rs that you’re required to have for no reason? Great… Every dollar counted when we were purchasing our home so these small expenses sometimes do sneak up on you. Nothing to cry over, just expect them. That’s all.
• Conventional Loan Limits in Different Counties: When we moved from our first house in Porter Ranch it was part of LA county but when we moved to our current house in Simi Valley we didn’t fully take into account the cutoff for conventional loans in Ventura County were X less than LA County. We wanted to stay out of the jumbo loan interest rate so we found money wherever we could to come up with the extra capital.

2. How Location Affects Your Lifestyle (and Wallet)

While the house itself might check all your boxes, think critically about the neighborhood:

• Commute: Consider how your commute might change, both in terms of time and cost. A long drive could mean higher fuel costs, more wear and tear on your car, and less free time.
• Local Amenities: Is the area walkable? Are there grocery stores, schools, parks, and entertainment options nearby? A home that’s far from convenient could become a burden, especially as your needs change over time. Our house has 3 parks within walking distance and that is one of the biggest perks for us as a family with a 14-month-old. These kinds of amenities make a big difference in the convenience of everyday life and I wasn’t even thinking about the parks when we purchased this house (even though my husband says he was).
• Resale Value: A beautiful house in an undesirable or slowly declining neighborhood may be difficult to sell down the road. Look for neighborhoods with strong, sustainable growth. Both our houses have been in neighborhoods that have increased in value substantially shortly after us moving in. We probably wouldn’t have been able to afford either of our houses 6 months after we purchased them due to property values and interest rates increasing drastically.

3. Future-Proofing Your Home

It’s easy to think in terms of your current situation, but buying a house means planning for the future. Consider how your needs might change in the next 5-10 years:

• Growing Family: Are you planning to have children or expand your family? If so, consider the number of bedrooms and bathrooms, and proximity to good schools. When we bought our current home and met our neighbors for the first time the wife asked “That’s an awfully big house for two people”. But we didn’t buy it for two people since we knew we wanted a family and I am thankful we thought about that going into buying our next house.
• Accessibility: As you grow older, or if you have elderly family members, think about whether stairs, narrow hallways, or small bathrooms might become issues. A home with good accessibility can save you costly renovations later.
• Flexibility for Home Office: More jobs allow work-from-home arrangements. Does your new home have a space that can easily be transformed into an office? In my first house the second bedroom was an office/guest room/craft room situation, and I do wish we had prioritized a third bedroom when buying that home because having a dedicated office is definitely helpful during COVID.

4. Understanding Your Loan Options and Terms

First-time buyers are often overwhelmed by the array of mortgage options available. It’s critical to educate yourself on the following:

• Fixed vs. Adjustable-Rate Mortgages: A fixed-rate mortgage keeps the same interest rate throughout the loan term, while an adjustable-rate mortgage (ARM) starts with lower rates but can increase over time. While an ARM might seem appealing at first, rising rates could strain your finances if you don’t plan accordingly.
• Loan Terms: Understand the impact of choosing a 15-year vs. a 30-year mortgage. A shorter term means higher monthly payments but saves you a significant amount of interest over time. Meanwhile, a 30-year mortgage offers lower monthly payments but costs more in the long run.
• Down Payment: While a 20% down payment is traditional, many first-time buyers use FHA loans or similar programs that allow for lower down payments. However, putting down less than 20% often requires private mortgage insurance (PMI), which can increase your monthly expenses.
• Buying a Home with a Partner: If you and your partner are buying a home together, considering having only one of you on the mortgage so it only counts against your credit. If you ever want to buy another property or large financed purchase, your partner will have a larger line of credit available because they are not associated with the house loan.

5. Renovation Costs: A Potential Money Pit

Everyone thinks they are Joanna Gaines these days until 3 years has past buy and they have less than what they started with. It’s easy to be lured by a “fixer-upper” or a home with a slightly outdated kitchen, but before you commit, ask yourself if you have the funds and time for renovations. Here’s what to keep in mind:

• Budget for the Unexpected: Renovation costs often exceed initial estimates. Plan for a cushion of about 20-30% more than you think you’ll need.
• Permits and Codes: Depending on your location, certain renovations may require permits, and the work must meet local building codes. Failing to comply can lead to fines and even difficulty selling your home in the future. It can also take a long time so if you’re going to be misplaced from your home during construction, take into account where you will stay and any costs associated to that. 
• DIY vs. Professionals: While DIY projects can save money, they can also take up a lot of time and may end up costing more if done incorrectly. Know when it’s best to call in a pro. Everyone thinks they can be Joanna Gaines until they try to be Joanna Gaines. 

6. Long-Term Financial Planning

Homeownership is not just a place to live; it’s a financial commitment. Think beyond the immediate excitement:

• Equity Building: A home can be a great way to build wealth, but that depends on market conditions, how long you stay, and the home’s appreciation. Don’t expect quick returns.
• Selling Costs: Should you need to sell in the future, you’ll likely pay about 6% of the sale price in agent commissions and possible repairs requested by the buyer. Luckily for the seller they now don’t need to pay the buying agents commission at 1-3%.
• Refinancing: If interest rates drop, refinancing might lower your payments, but there are costs involved. Weigh these carefully before refinancing to ensure it makes financial sense. We refinanced our loan for our first house twice during COVID because interest rates were dropping so drastically that we were able to save over $650 a month on our loan payment from what it started at to what it ended up as after refinancing twice. 

7. Emotion vs. Logic: Keeping a Clear Head

It’s easy to fall in love with a home because of its aesthetic appeal or how it makes you feel. However, making a decision based solely on emotion can lead to regrets. Take a step back and ensure that:

• Is it a Long or Short Term Home: If you’re only buying a place with the mindset it is a starter home and you will only be there in 3-5 years, consider buying a home more with your head than your heart. I loved our first house but it also set us up really well to buy our second, more permanent home, because it was in an area that became even more desirable after we moved in.  We never used the ‘F’ word with that house and it’s a good thing because we ended up only being there 3 years.
• You’ve Considered Potential Problems: Does it have structural issues, water damage, or an aging roof? Have a home inspection done, and carefully review the report. It’s better to walk away from a home than to deal with costly problems down the line. One of my good friends was determined to buy a house even though she knew it had a structurally unsound tree in the front. The deal ended up falling through…and so did the tree through the house a couple months after my friend lost the house. She dodged that tree this time but not everyone may be that lucky.
• Don’t get in a bidding war: When we bought our house in 2020 it was the height of the market and there were 6 other offers on the house we wanted. The asking price was $940 and by the 2 rounds of negotiations the highest offer was over a million. We could have lost the house over $5,000 but there had to be a breaking point that didn’t make finance sense for us…even if it meant losing the house.

Buying your first home is a monumental step, and it’s crucial to think beyond the surface. While finding a home that feels perfect is important, understanding the hidden costs, planning for the future, and thinking logically can save you from unforeseen financial strain. Take your time, do your research, and approach the process with both excitement and caution—you’ll be grateful you did.