The American dream and buying a home are often synonymous in the minds of millennials and generation Z. Buying a home is a huge milestone achievement.

If you haven’t checked this milestone off, do not panic. Approximately only 25% of Gen Z adults owned homes in 2024, a figure that has remained relatively flat since 2022. And only 50% of millennials owned homes in 2024, showing little change from the previous year.

If you are in the fortunate situation to be shopping around or are simply in research mode, this article will explain the hidden cost of home ownership to help you be better prepared when you eventually pull the trigger.

Upfront Costs of Buying a Home

When you first buy a home, there are some big costs you need to pay right away.

• Down payment
  Most people need to put down some money upfront, usually around 3% to 20% of the home’s price.
• Closing costs
  These are the fees for things like the loan, title insurance, and home inspections. They can be 2% to 5% of the home’s price.
• Moving expenses
  Moving can cost a lot, especially if you’re moving far away.
• Immediate repairs and updates
  Many new homeowners need to fix things like paint, flooring, or appliances right after moving in.

Ongoing Costs of Homeownership

Once you own the home, there are other costs to think about every month and every year.

• Mortgage payments
  You’ll make monthly payments to the bank. These payments include the loan (principal) and interest.
• Property taxes
  Homeowners pay taxes on their property each year. The amount depends on where you live.
• Homeowners insurance
  This insurance helps if something happens to your home, like a fire or storm damage.
• Utilities and services
  You’ll pay for things like electricity, water, gas, trash, and internet.
• Maintenance and repairs
  Homes need care. A good rule is to save about 1% of the home’s price each year for repairs.
• HOA fees
  If your home is in a neighborhood with a homeowners association (HOA), you’ll have to pay monthly or yearly fees.
• Private mortgage insurance (PMI)
  If you didn’t put down at least 20% on your home, you may need to pay PMI. This is extra insurance to protect the bank.

Hidden or Unexpected Costs

Some costs can surprise new homeowners.

• Property taxes and insurance can go up over time.
• You might need to take care of the yard, which can cost money.
• Big repairs, like a new roof or water heater, can cost a lot.
• It’s smart to keep some extra money for these surprises.

Comparing Renting vs. Buying

It’s good to think about how buying compares to renting. Renting can be cheaper because you don’t have to pay for repairs or property taxes. It’s also easier to move if you need to. But owning a home can give you more stability and a sense of pride.

Tips for Reducing the True Cost of Homeownership

• Budget carefully
  Plan for all the costs, not just the mortgage.
• Save for repairs
  Set aside money for unexpected fixes.
• Shop around
  Look for the best mortgage rates and insurance deals.
• Improve your home’s energy use
  Small changes can save money over time.
• Look for help
  Some programs help first-time buyers with costs.

Sage Summary

Owning a home is a big goal for many people, but it’s important to know the true costs. By planning for these costs, you can make better choices and enjoy your new home without surprise bills. Take time to make a budget and get ready for the real costs of owning a home.