The Costs of Buying a Home Explained: What First Time Buyers Need to Know The Costs of Buying a Home Explained: What First Time Buyers Need to Know
Buying a home is one of the biggest financial milestones you’ll ever reach—and while the down payment often gets most of the attention, it’s far from the only cost involved. Many first‑time homebuyers are surprised by the variety of expenses that appear along the way, from inspection fees to closing costs to moving expenses. Understanding these costs upfront can help you budget confidently, avoid last‑minute stress, and step into homeownership with financial clarity.
This guide breaks down a wide range of costs associated with buying a home so you can plan ahead and make informed decisions throughout your journey.
Understanding the True Cost of Buying a Home
Homebuying expenses fall into several categories: upfront costs due before closing, transaction fees paid at closing, and immediate post‑purchase costs many buyers forget to plan for. Knowing what to expect can help you build a realistic budget.
Upfront Costs Before You Close on a Home
Earnest Money Deposit
When you submit an offer on a home, you typically include an earnest money deposit—often 1–3% of the purchase price. This shows sellers you’re serious about your offer. If the deal goes through, this deposit is applied toward your down payment or closing costs. However, if your offer is accepted but the purchase is never finalized, in certain circumstances you may not get your deposit returned.
Home Inspection Fees
Once your offer is accepted, a home inspection is one of the most important steps. Inspection costs vary by location and home size, but generally range from $300 to $800. Additional specialized inspections—such as radon, pest, septic, or mold—may add to this cost. While optional, skipping an inspection can lead to expensive surprises later.
Appraisal Fee
Your lender will require an appraisal to confirm that the home’s value supports the mortgage amount. Appraisal fees typically run between $400 and $700, depending on your region and the complexity of the property.
Credit Report and Application Fees
Some lenders charge small fees to pull your credit report or process your mortgage application. These generally range from $25 to $150, depending on the lender.
Closing Costs Every Buyer Should Expect
Closing costs are often the largest homebuying expenses outside of the down payment. These typically total 2–5% of the home’s purchase price, and they include a combination of lender fees, legal fees, insurance, and taxes.
Below are some of the most common components.
Loan Origination Fees
These fees cover the lender’s administrative costs for underwriting and approving your mortgage. They often amount to about 0.5–1% of the loan amount.
Title Insurance and Title Services
Title services include a title search to ensure the property is free of legal issues, plus title insurance, which protects you and the lender against claims that someone else owns the property. Together, these costs can range from several hundred to several thousand dollars.
Attorney Fees (in Attorney States)
In many states, including parts of New England, an attorney must be involved in any real estate closing. Fees vary widely, typically between $500 and $1,500, depending on complexity.
Property Taxes and Prepaid Interest
You may be required to prepay a portion of your property taxes at closing, depending on the timing of your purchase. Additionally, you’ll pay prepaid interest to cover interest charges from closing until your first official mortgage payment.
Homeowners Insurance Premium
Lenders typically require you to pay your first annual homeowners insurance premium upfront at closing. This insurance protects your home from damage or loss.
Private Mortgage Insurance (PMI) Setup Costs
If your down payment is less than 20%, your lender may require PMI. Some PMI costs may be rolled into your monthly payment, while others may be collected at closing.
Moving and Immediate Post‑Purchase Costs
Even after closing, new homeowners often face additional out‑of‑pocket expenses.
Moving Expenses
Moving can cost anywhere from a few hundred dollars for DIY truck rental to several thousand for full‑service movers. Families moving long distances may spend significantly more.
Utility Set‑Up Costs
Some utility providers charge activation or deposit fees when starting new service for electricity, gas, water, internet, or cable.
Furniture and Essentials
Many new buyers quickly discover they need items they didn’t have in their previous home—from blinds to garden tools to replacement appliances. Setting aside a cushion for these purchases can reduce stress once you move in.
Repairs and Upgrades
Even with a solid inspection, many homes require small fixes or cosmetic updates after move‑in. Planning ahead for paint, hardware, or basic maintenance helps avoid the “surprise expense” feeling.
How to Budget for All These Costs
Start With a Realistic Total
Many experts recommend saving enough to cover your down payment plus an additional 3–6% of the home’s value for closing costs and miscellaneous expenses.
Work Backward From Your Purchase Timeline
If you’re aiming to buy within a year, calculate how much you need to save each month to reach your goal.
Keep Your Savings Separate
Use dedicated savings tools to make sure your down payment and closing funds stay on track and grow steadily.
Ready to Take the Next Step? Two Paths to Move Forward
1) If You’re Still Saving for a Down Payment
Make your savings work harder with Leader Bank’s Homeowner CD. This unique product offers a competitive 4.00% APY** along with an additional 4.00%** annualized bonus if paired with a Leader Bank mortgage or refinance—plus penalty‑free access when the funds are used toward closing.
2) If You’re Ready to Start Shopping for a Home
Connect with one of Leader Bank’s expert Loan Officers. Their knowledge, guidance, and personalized support can help you navigate your mortgage options with confidence.
This is for informational purposes only, and nothing contained herein constitutes investment advice.
*Annual Percentage Yield (APY) effective as of 9 January, 2026. New money only. Minimum balance to open and earn APY is $1,000. Interest rate of 3.96% for 6 Month CD. $100,000 maximum deposit. Only one CD per household; business entities are not eligible for this product. A penalty may be imposed for early withdrawal from a Certificate of Deposit prior to maturity; Fees may reduce earnings.
** To receive the 4.00% annualized bonus, eligible clients must apply for a first lien closed end mortgage loan with Leader Bank, N.A. on or after December 25, 2025, and close on said loan on or before the initial maturity date; such bonus will be paid at the initial maturity date. If a client redeems their CD on or before the initial six-month maturity date to apply such funds towards the closing on a purchase or refinance with Leader Bank, any early withdrawal penalty shall be waived and the client shall be eligible for the 4.00% annualized bonus. Leader Bank retains the right to determine whether the use of proceeds or early redemption meets these criteria. The 4.00% annualized bonus may be earned only in the initial six-month term of the CD; if the CD renews into a new term, client shall not be eligible to any additional bonus and the APY of the renewal term will be determined by Leader Bank in its sole discretion with prior notice to client.
