Maybe you’ve been renting for a while now and are thinking about buying a home. You hear advice about “building generational wealth” and not “wasting money on rent,” and it rings true. But the expenses of homeownership shouldn’t be taken lightly. There’s more to consider than how much your mortgage payment might be and how it fits into your budget.

　　Buying and maintaining a home isn’t cheap. There are additional, hidden costs of homeownership that may not have been obvious when you were renting.

　　Closing costs when buying a homeYou’ve made an offer on a home and that’s it, right? Nope. Legally transferring the property into your name takes time and money (and maybe even an attorney to explain what you are buying and ensure all the documents are shipshape). In a typical real estate transaction, some costs are footed by the seller and others by you, the buyer—unless you were savvy enough to negotiate closing costs into your deal.

　　Loan origination fees. Getting a mortgage typically involves a fee to get the loan process moving, unless your lender waives fees for good credit scores or first-time homebuyers.Appraisal fees. The lender will likely require an appraisal to determine what the property you’re considering is worth.Inspection fees. Many homebuying experts say it’s in your best interest to have an inspection to ensure the home is safe and doesn’t have hidden defects.Title fees and insurance. These items ensure the documents transferring the property into your name are properly executed and that the home is free from liens, back taxes, and other legal matters.Other fees. These costs include nominal amounts for things such as courier fees or recording fees.Up-front requirements. Similar to paying a first month’s deposit when you sign a lease, the mortgage lender will likely require all or part of your insurance premium and real estate taxes to be paid ahead of your closing date. These amounts could be substantial.Legal fees. If you do hire an attorney, you’ll need to cover their fees; the amount is typically included in your closing costs.Initial costs of buying a homeIn addition to the purchase price and closing costs, you may incur costs to get your new home to a livable standard (especially if the home was sold “as is”), or you might have improvements you want to make depending on your budget.

　　When you rent, appliances, flooring, and finishes come with the unit, and you may have no or little say in their improvement or replacement. In theory, the landlord charges enough rent to cover upgrading those items over time, but in reality, the turnover of renters can mean the investment sometimes isn’t made. But when you purchase a home, you decide which upgrades to make, how much to spend on them, and when to do them.

　　Some typical costs you may incur when you first buy a home include:

　　Appliances. Your home may come with appliances, but which ones are included may depend on the terms of the sale. Appliances can cost thousands of dollars, so be prepared to budget that amount in your initial expenses if your new home doesn’t include them. Window treatments. Basic blinds or drapes might have been provided at your rental property. But your new home may not have any window treatments, or if it does, they may not be to your liking. Custom window treatments can easily run into thousands of dollars. You can save money by purchasing and installing window treatments yourself.Carpet or other flooring. Depending on the age and condition of the home’s carpet, tile, vinyl, or wood floors, you may need to spend thousands on replacing or refinishing them. But do it before you move in. It’s cheaper and easier.Customized electric outlets, light fixtures, and fans. Your home may not have outlets where you want them, or light fixtures you like, or you might want to install ceiling fans. If you can’t do or aren’t comfortable with electrical work, you’ll need to hire an electrician.Interior or exterior paint. You may wish to paint your home to your particular tastes. If your home is in a neighborhood governed by a homeowners association (HOA), you may have to get approval for exterior color changes.Organizational systems like towel bars, hooks, closet systems, and garage storage. These items may have outlived their usefulness. If you’re handy, you can replace them yourself and save big bucks.Fencing. If you have pets or small children, you may need to budget for fencing around your yard, or if it already exists, it may require repair or replacement.Lawn equipment. If you plan to do your own yard work, you may need to purchase equipment such as a lawn mower, snowblower, rake, and other gardening tools.Grill or other outdoor items. You may wish to invest in outdoor furniture or a grill, and perhaps a patio or deck to set them on.Landscaping and drainage issues. If your new home does not have landscaping, you may want to add bushes, trees, grass (depending on where you live), and so on. Ensuring there are no drainage issues before you make improvements can save you money down the line. Planting a few things yourself from the local garden shop can save money, but hiring a landscape architect or putting in a fully sodded yard can easily cost thousands—even tens of thousands—of dollars.Security systems and smart home features. A security system can help you feel safer in your home, and features like a video doorbell and a smart thermostat add convenience. In addition to budgeting for the cost of those items, there are costs to have them installed, unless you can do it yourself. Some security systems (including video doorbells) require monthly fees. Monthly homeownership costsAfter factoring in your home’s purchase price, closing costs, and any initial improvements you need or want to make, you now know how much moving in will cost.

　　loan calculatorloan calculator GIGAcalculator.comWhen you buy a home, you usually put some of your own money toward the purchase price—a down payment—and then take out a mortgage to finance the remaining balance. Your monthly mortgage payment is made up of the principal (the amount you borrowed) and interest, but other costs are often included:

　　Private mortgage insurance (PMI). If you’re unable to put down at least 20% of the home’s price, your bank or mortgage company will likely require you to purchase insurance to protect the lender should you fail to make your payments and default on your loan.Real estate taxes. Property taxes are typically escrowed—meaning an amount is collected and set aside for payment at a later time—to ensure they are paid. Depending on your home’s location, property taxes can make up a substantial portion of your monthly mortgage payment.Home insurance. This coverage, sometimes called hazard insurance, is required when you have a mortgage, home equity line of credit (HELOC), or other lien on your home. The policy protects the lender and you in case of natural disasters (such as storm damage) or human-caused damage (such as a fire).Once your mortgage is paid off, the amounts set aside (or escrowed) by the mortgage lender for real estate taxes and insurance and paid on your behalf now become your responsibility. Adding these expenses to your household budget can help ensure you set aside money for them and pay them on time. 

　　If you are a renter, these monthly costs are “buried” in your rent. The property owner must pay real estate taxes and building insurance and may also carry a mortgage on the property. A landlord must consider these expenses when determining how much rent to charge to ensure they don’t lose money. They should also expect a return over and above the amount they have invested in the property.

　　Utilities and maintenance costsWhether you buy or not, the cost of utilities such as electricity, natural gas, water, garbage pickup, cable, and Internet are bills you likely can’t avoid. Some of those costs may have been included in your monthly rent, but that simply means your rent was high enough to include expenses the building owner paid for you. But when you own a home, you’re responsible for paying these bills.

　　In addition, there are regular maintenance costs to consider, such as keeping your heating, ventilation, air conditioning (HVAC), and other systems in working order. You may need to hire someone to keep pests at bay or maintain your yard. Then, there are possible renovation or remodeling costs to consider—and don’t forget to budget for unexpected expenses. A water heater, washing machine, or oven could quit with little or no warning.

　　The bottom lineAs you move toward homeownership, remember not to overextend yourself. Your mortgage approval letter will specify the most you can spend to buy your home, but you needn’t spend it all—and it may be smart not to.

　　When you look at what you pay in rent and what your payments for a home might be, be sure to compare apples to apples. Your rent payment includes real estate taxes and money the property owner sets aside for maintenance and renovation, as well as a return on their investment. Your rent might also include utilities or HOA fees.

　　Compare your rent with your projected mortgage payment plus monthly costs for insurance, real estate taxes, fees, and utilities, in addition to maintenance and future expenses. The good news is that the money you pay toward the loan principal builds equity in your property, rather than lining your landlord’s pockets. If the math works and you yearn to earn equity instead of paying rent, becoming a homeowner may be your next destination.