For many people in the United States, home ownership is still a part of the American Dream. Typically, house hunters will save money for years and then shop carefully to find a home that fits within their budget. However, the price of the home is not the only homeownership expense. There are many other costs that must be planned for, and they usually come as a surprise to those who are accustomed to renting or living with their parents. Below are six factors that potential buyers should also consider to determine the true cost of home ownership.

1. Closing Costs

Purchasing a home involves more than just the list cost of the house itself. Some of the many fees in the home-buying process include charges for performing a credit check, having the home’s value appraised, and inspecting for termites. Other types of closing fees include a loan origination fee to process the loan documents, title insurance in case there’s a problem with the title, an underwriting fee for approving the loan, and, of course, the lawyer’s fees to make sure the transaction is legal. These fees can amount to anywhere between 2% to up to 7% of the home’s purchase price.

Sometimes, potential homebuyers can get the seller to agree to pay closing costs. They may also be able to get a no-cost closing, but the amount will be added to the total cost of the loan, and the interest rate may be higher.

2. PMI/Property Taxes

All homeowners should have insurance, and usually, insurance is not optional for new homebuyers. In this instance, lenders require private mortgage insurance (PMI) to protect themselves in case the homeowner defaults on the mortgage. Unless buyers have a 20% down payment, or even if they do, but they’re considered a high risk, they can expect to pay PMI each month as a part of their mortgage payment. On conventional loans, PMI may be canceled when the home’s equity reaches 22%; but on FHA loans, PMI is paid for the duration of the loan period.

Property taxes are also included in the monthly mortgage amount. The tax amount is a percentage of the home’s value.

3. Utilities

Utilities, such as gas, water, and heat, are another cost of home ownership. Amy Tierce, regional vice president at Wintrust Mortgage in Needham, Massachusetts, advises Investopedia readers to ask the seller to provide copies of utility bills so they can determine how much it will cost to heat and cool the property. “These figures can be a big surprise if you’re not considering them,” says Tierce. This is especially true if the new home is larger than your previous residence.

Also, if it is an older home, there may be cracks around the windows and doors that could allow air to escape. According to the Department of Energy, up to 25% of the heating bill can be a result of old or improperly sealed windows. Tierce also recommends asking the home inspector about the insulation of the property, since this will also affect heating and cooling costs.

4. Home Maintenance

Home maintenance costs should be factored into the total cost of home ownership. “Gutters need cleaning, ice dams can happen, roofs need to be maintained, appliances require repair, and heating systems need routine maintenance,” says Tierce.

In addition, homeowners should be prepared to purchase such seasonal equipment as lawn mowers and snow blowers, or they should be prepared to pay for lawn maintenance, snow removal, and other recurring services. In addition, homeowners should budget for pest control costs, such as monthly or quarterly visits from an exterminator.

Tierce warns that maintenance is an important part of home ownership. “Just a few years of deferred maintenance can create huge costs for the current or future homeowner.”

If the property is located in an urban area, Tierce says homeowners may have to pay for a residential parking permit, or rent a parking space. And depending on the home’s location, there may be fees for trash removal and Homeowners Association (HOA) fees.

5. Furniture/Appliances

Homeowners who lived in an apartment or with their parents will probably need to buy furniture and appliances. While furnishing some rooms, like the guest bedroom, can be deferred, homeowners will soon tire of sitting on the floor, sleeping on air mattresses, and eating on dinner trays. Some homes may come equipped with appliances, but if appliances are not included, then homeowners will need to purchase a refrigerator, oven, microwave, washing machine, and dryer. 

6. Home Emergencies

Ceilings leak, pipes burst, and washing machines overflow. In addition, refrigerators stop cooling, and drains get clogged. These are just some of the unexpected situations that require urgent attention. Homeowners need a sufficient amount in savings to cover unforeseen circumstances, some of which can cause thousands of dollars in property damage if left untreated.

The Bottom Line

Purchasing a home is an exciting time, but potential buyers should be aware that they’ll need to pay much more than just the asking price for the house. Understanding the true cost of home ownership allows buyers to more accurately determine if they are financially prepared to undertake what will likely be their most expensive purchase.