6 things that surprised me as a first-time homebuyer

It's not just the price of the house you need to consider...

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Once upon a time, I bought a home.

The experience was eye-opening. Before I went through the process of getting a mortgage, I thought things were simple. Find a home. Get a mortgage. Close the deal. I learned there's a bit more to it than that. Here are some of the things I wish I'd been ready for as a first-time homebuyer:

1. Your Credit Report Matters—a Lot

Perhaps the biggest factor determining if you can buy a home is your credit. Your credit determines whether or not you are approved for a mortgage and what your interest rate will be. An error on your report can cost you big time. When I was buying a house, the credit report double-reported some of my credit cards. It looked like I had more debt than I did.

I got it straightened out, but things would have been easier if I'd checked my credit report first and fixed the errors before applying for a mortgage.

2. The Closing Costs Just Keep Coming

There's the home price, and then there are all the costs that come with getting a home loan. When you get a mortgage, some of the costs you pay include a home inspection, title insurance, credit check, and other loan fees. In some cases, the seller pays some of the costs. However, you need to be prepared. Save up a fund you can use to pay some of these costs. Otherwise, they will be rolled into your loan and cost you more over time.

3. Property Taxes Cost More than You Think

I was vaguely aware that I would need to pay property taxes. As a first-time homebuyer I was surprised that they cost more than I thought. I had my property taxes included as part of my monthly payment. That meant that as property taxes rose or fell with my home's value, my mortgage payment changed. You might want to start a savings account just for property taxes if you don't want to deal with a changing payment.

4. Maintenance Costs More than You Might Expect

Once you buy, you are responsible for upkeep and repairs. You might be surprised at the cost. The rule of thumb is that you can expect to pay between 1% and 2% of the home's purchase price each year for maintenance and repairs. So, if you bought a home for $200,000, you need to prepare to pay between $2,000 and $4,000 a year.

5. HOA Fees

Depending on your neighborhood, you might owe dues to a Homeowners Association (HOA). Pay attention, since these fees can run as much as a few hundred dollars a month. I ended up in a neighborhood where fees were $25 a month. Before you settle on a home, double-check the HOA fees to see if you can afford them on a monthly basis.

6. Don't Forget the Things You Buy

When I moved into my new home, I realized I had no window coverings. Anyone could look in! I had to buy window treatments for the whole house. I also had to buy a refrigerator. As you get ready to buy a home, don't forget all the things you take for granted. From a washer and dryer to sometimes even the stove, you might need to pay to furnish your home.

Bottom Line

Buying a home comes with hidden costs. Don't just budget for the down payment and monthly payment. Make sure you think about the extras too.

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The statements and opinions expressed in this article are those of the author. Neither Fidelity Investments nor your employer can guarantee the accuracy or completeness of any statements or data.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

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