Buying your first home is exciting, but it can also feel overwhelming. One of the biggest questions for first-time homebuyers is, “What am I missing?”, “What are my options?”, or “What unexpected costs should I prepare for?”
Here’s what every first-time homebuyer should know before starting the process.
The Home Price Isn’t the Only Cost You’ll Pay
Many buyers focus on the purchase price of a home, but there are several additional expenses that come with buying a property. Understanding the full cost of homeownership helps ensure you’re comfortable not just at closing, but long after you’ve moved in.
Beyond your monthly mortgage payment, you’ll want to budget for:
- Property taxes
- Homeowners insurance
- HOA fees (if applicable)
- Utilities
- Maintenance and repairs
You’ll Need More Than Just a Down Payment
One of the biggest surprises for first-time buyers is learning about closing costs.
Closing costs are fees associated with finalizing your mortgage and transferring ownership of the property. They typically range between 2% and 5% of the home’s purchase price.
Common closing costs include:
- Loan origination fees
- Appraisal fees
- Title insurance
- Attorney fees
- Recording fees
- Home inspection costs
- Prepaid property taxes
- Prepaid homeowners insurance
For example, on a $350,000 home, closing costs could range from approximately $7,000 to $17,500 depending on the loan program and transaction details.
The good news? There may be ways to reduce these costs through seller concessions or homebuyer assistance programs.
Getting Pre-Approved Should Be Your First Step
Before falling in love with a home online, the first step is getting pre-approved by a lender.
A pre-approval helps you:
- Understand your budget
- Estimate your monthly payment
- Identify loan options
- Strengthen your offer when you’re ready to buy
Most importantly, it helps prevent disappointment by ensuring you’re shopping within a comfortable price range.
One of the biggest misconceptions among first-time buyers is that they need tens of thousands of dollars saved before they can purchase a home. Depending on your situation, there may be programs available that can help reduce your upfront costs.
Programs Designed to Help First-Time Homebuyers
Many buyers assume they need a large amount of cash saved before they can purchase a home. That’s not always the case.
In Delaware, the Delaware State Housing Authority (DSHA) offers programs that can help qualified buyers with down payment and closing costs.
Programs may include:
- First State Home Loan: Provides a zero-interest second mortgage equal to 3% of the first mortgage amount.
- Keys4You Home Loan: Offers 4% assistance through a deferred, zero-interest second mortgage.
- Take5 Home Loan: Provides 5% assistance toward down payment and closing costs.
- Diamond in the Rough Home Loan: Designed for buyers purchasing homes that need minor repairs and qualify for an FHA 203(k) Limited loan.
Many buyers are surprised to learn that these assistance programs often require no monthly payments. Repayment is typically deferred until the property is sold, refinanced, transferred, or no longer serves as the owner’s primary residence.
Not every buyer qualifies, but it’s worth exploring all available options before assuming you need to cover every expense out of pocket.
Your Earnest Money Deposit Is Different From Your Down Payment
Another common point of confusion is earnest money.
When your offer is accepted, you’ll typically submit an earnest money deposit. This shows the seller you’re serious about purchasing the home.
The amount varies, but is often 1% to 3% of the purchase price.
The good news is that this money isn’t an additional fee. It is usually credited toward your down payment or closing costs at settlement.
A Home Inspection Is Money Well Spent
Some buyers are tempted to skip inspections to save money or make their offer more competitive, but it is a vital step for buyers to understand what they’re purchasing before closing.
A home inspection can uncover:
- Roof issues
- Plumbing concerns
- Electrical problems
- HVAC deficiencies
- Foundation issues
Spending a few hundred dollars upfront can potentially save thousands later.
Homeownership Comes With Ongoing Expenses
Once you receive the keys, the financial responsibilities don’t stop.
Every homeowner should budget for:
- Routine maintenance
- Appliance replacement
- Landscaping
- HVAC servicing
- Unexpected repairs
A good rule of thumb is to set aside 1% to 3% of your home’s value each year for maintenance and repairs.
Planning ahead helps avoid financial stress when something inevitably needs attention.
Understanding the process is vital
The best homebuying experiences happen when buyers know what to expect.
Whether it’s discussing monthly payments, estimating closing costs, reviewing assistance programs, or preparing for inspections, informed buyers make confident decisions.
FAQ:
- How much money do I actually need to buy my first home?
- The amount varies depending on the home’s purchase price, your loan program, and whether you qualify for down payment assistance. In addition to your down payment, you’ll need to budget for closing costs, which typically range from 2% to 5% of the home’s purchase price. The best way to understand your potential costs is to speak with a lender and review your financing options early in the process.
- What are the most common unexpected costs first-time homebuyers face?
- Many first-time buyers are surprised by expenses such as home inspections, appraisal fees, title insurance, prepaid property taxes, homeowners insurance, and moving costs. After closing, homeowners should also plan for ongoing maintenance and repairs. Understanding these expenses upfront can help you create a realistic budget and avoid financial stress during and after the homebuying process.
- How do I learn more about The Granary or schedule a visit?
- If you would like to schedule a visit, head here. From here you can sign up for more information or reach out to DRB Homes or DR Horton to schedule a tour.
DISCLAIMER:The content shared here is for educational and informational purposes only and should not be construed as tax, legal, financial, investment or other advice.