August 14, 2020


First-time home buyers know to prepare for a down payment, but that’s not the only cost to consider when buying your first home. Home-buying costs can add up quickly — and often startlingly — so it’s important to know about and prepare for them before you sign on the dotted line.

The following seven costs often surprise first-time home buyers — but only if you aren’t ready for them.


Earnest money acts as a deposit on your home purchase application. It tells the seller you’re a committed, trustworthy buyer. If the contract goes through, the money will be applied toward the down payment and closing costs. And if the contract doesn’t go through, there are many contingencies in place to ensure you’ll get the money back. Simply deciding you’re no longer interested in the house most likely does not constitute a legitimate reason to back out of your contract, therefore, carefully review any contracts before putting down earnest money.

Tip: You should keep one to two percent of the total purchase price on hand as earnest money. It’ll help move your application along faster, an important factor as the housing market gets more competitive for buyers.


You can’t avoid appraisals and inspections, nor should you want to. Appraisals ensure an accurate asking price, offering some protection to you and your lending institution. Buyers are typically responsible for the appraisal — often as much as several hundred dollars — though you may be able to negotiate these costs with the seller.

Home inspections are separate from the appraisal process and offer additional security for home buyers. They can prevent unexpected surprises like a termite infestation or leaky pipes. As these issues can affect your purchasing decision, as well as give you bargaining power, you’ll want to know about them before closing. In some instances, you can ask the seller to address the concerns before you close or negotiate for a better asking price. The buyer generally pays for the home inspection as part of the closing costs.

Tip: If you can, be present for the home inspection so you understand any issues as fully as possible before trying to negotiate the terms of your contract.

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