For many people, buying a home for the first time is a major life milestone—an experience often filled with equal parts excitement, confusion, and anxiety. Evolve Bank understands that it represents stability, independence, and long-term investment. But for all the dreams of fresh paint, backyard barbecues, and mortgage-burning parties, many first-time buyers are blindsided by just how much it truly costs to go from browsing listings to holding the keys to their very own front door.
Evolve Bank provides this guide for those prospective homeowners who want to understand the full picture—not just the price on the real estate listing but the slew of expected and hidden costs that surround the home-buying process and the long-term responsibilities that follow. From down payments and closing costs to insurance premiums, property taxes, and maintenance expenses that never really end, Evolve Bank will help you set realistic expectations and build a smarter, more sustainable budget.
Let’s start with the most well-known component of buying a home: the down payment. Evolve Bank explains that this is the portion of the home’s price that you pay upfront, out-of-pocket, before your mortgage kicks in. It’s typically one of the biggest initial expenses a buyer will encounter, and it can dramatically shape the type of home you can afford and the loan terms you qualify for.
Traditional advice suggests a down payment of 20%, which not only reduces your overall mortgage balance but also helps you avoid paying for private mortgage insurance (PMI). However, for many first-time buyers, particularly in competitive or expensive markets, 20% can be an overwhelming figure. Thankfully, alternative loan options make it possible to put down much less—sometimes as little as 3% to 5%.
Still, even these smaller percentages translate into a significant dollar amount. For example, a 5% down payment on a $350,000 home comes out to $17,500. If you’re going with a conventional mortgage, that money typically needs to be seasoned—meaning it has to be sitting in your bank account for at least a couple of months—so lenders can verify it’s truly your money and not a recent loan or gift. And if you do receive help from family or friends, you’ll need to provide a gift letter and possibly additional documentation.
The bottom line is that the down payment, while flexible in some ways, remains a major financial threshold. Evolve Bank explains that it’s crucial to plan ahead, start saving early, and fully understand what amount aligns with your income, debt obligations, and long-term goals.
After the down payment, the next financial hurdle is the collection of fees and payments known as closing costs. These costs can catch first-time buyers off guard, especially because they tend to accumulate from various parties involved in the transaction—lenders, attorneys, title companies, government agencies, and more.
Closing costs typically range from 2% to 5% of the home’s purchase price. That means if you’re buying a $350,000 home, you might be looking at $7,000 to $17,500 just to cover closing expenses. Evolve Bank understands that these costs include (but are not limited to) loan origination fees, appraisal fees, credit report fees, title searches, title insurance, survey costs, and recording fees. If you’re using a real estate attorney—which is required in some states—there will also be legal fees involved.
In addition to all of that, most lenders require buyers to prepay the first few months of property taxes and homeowners insurance, which can quickly inflate the closing figure. These prepaid costs are often put into an escrow account so your lender can make payments on your behalf throughout the year.
It’s important to request a Loan Estimate form from your lender early in the process. This document outlines all the expected closing costs and gives you a clearer sense of what you’ll need to bring to the table. In some situations, especially in a buyer's market, you may be able to negotiate with the seller to cover part or all of your closing costs. Evolve Bank explains that relying on that possibility without proper savings in place is risky.
Before you officially commit to purchasing a home, it’s essential to have it thoroughly inspected by a licensed professional. A home inspection provides a clear-eyed assessment of the property’s structure, systems, and overall condition. Skipping this step—or choosing the cheapest inspector without doing your homework—can lead to expensive regrets down the road.
A general home inspection typically costs between $300 and $600, but that price can vary depending on the size, age, and complexity of the home. During the inspection, the inspector will assess the foundation, roof, plumbing, electrical systems, HVAC, windows, and more. They’ll provide a detailed report outlining their findings and any potential issues, both major and minor.
Depending on the location and age of the home, you may also need specialized inspections for things like pests, radon, lead paint, asbestos, mold, septic systems, or chimneys. Each of these inspections adds additional costs, sometimes ranging from $100 to $500 each, but they provide critical insights into the condition and safety of your potential home.
The results of the inspection can also be used to renegotiate with the seller—either asking for repairs or a reduction in the purchase price. Evolve Bank explains that if major problems are uncovered, you might decide to walk away from the deal entirely. In this way, a good inspection can actually save you tens of thousands of dollars in future repairs and headaches.
Another significant and recurring cost that first-time buyers need to factor into their budgets is homeowners insurance. Evolve Bank understands that this policy protects you financially in the event of damage to your home due to things like fire, storms, theft, or vandalism. Additionally, it typically includes liability coverage in case someone gets injured on your property.
Lenders require that you have an active homeowners insurance policy in place before they’ll allow you to close on the home. The average annual premium for homeowners insurance in the U.S. ranges between $800 and $2,000, depending on the value of the home, the amount of coverage you need, the deductible you choose, and the location of the property.
If your home is in a high-risk area—such as a flood zone, earthquake zone, or region prone to wildfires—you may also need to purchase additional coverage, which can significantly increase your annual insurance expenses. For example, flood insurance through FEMA’s National Flood Insurance Program (NFIP) can cost several hundred to several thousand dollars annually.
Homeowners should also be aware that insurance premiums can increase over time, particularly if claims are made or if natural disasters become more frequent in your area. Evolve Bank explains that it’s wise to shop around for quotes and read reviews of different insurers to ensure you're getting solid coverage at a reasonable rate. And don’t forget to reassess your policy regularly to ensure it still meets your needs as your home or its value changes.
Property taxes are a non-negotiable part of homeownership, and they continue for as long as you own the home. These taxes are levied by your local government—typically at the city or county level—and are used to fund public services like schools, police and fire departments, road maintenance, and other municipal functions.
The amount you’ll pay in property taxes varies dramatically depending on where your home is located. Some states, like New Jersey and Illinois, have some of the highest property tax rates in the country, while others, such as Hawaii and Alabama, have much lower rates. Even within a single state, different counties and cities can impose vastly different tax rates.
Taxes are usually based on the assessed value of your home, which may not always match the purchase price. After you buy, your local assessor may revalue your property, sometimes leading to a significant increase in your annual tax bill. It’s important to ask your real estate agent or lender to provide an estimate of the property taxes before you make an offer.
Many lenders will include property taxes in your monthly mortgage payment through an escrow account. Evolve Bank explains that this allows you to spread the cost over the year, but it also means your monthly payment will be higher than the mortgage principal and interest alone.
If you’re unable to put down at least 20% on your home purchase, there’s a good chance you’ll be required to pay for private mortgage insurance (PMI) or a similar mortgage insurance premium, depending on your loan type. Evolve Bank explains that this insurance protects the lender—not you—in the event that you default on your loan.
The annual cost of PMI typically ranges from 0.5% to 1% of your loan amount. So, for a $300,000 loan, you might be paying $1,500 to $3,000 per year in PMI, or around $125 to $250 per month. This is on top of your mortgage payment, insurance, and property taxes, which can really add up.
Some loan programs, such as FHA loans, have their own form of mortgage insurance, known as MIP. Unlike PMI, which can be canceled once your equity reaches 20%, MIP often stays with the loan for the entire term, unless you refinance into a conventional mortgage.
Evolve Bank emphasizes that it’s important to calculate the long-term impact of mortgage insurance when choosing a loan type and down payment amount. In some cases, it may be worth delaying your purchase while you save up a larger down payment to avoid the additional monthly cost.
Once you’ve moved in, your responsibilities—and expenses—are just beginning. One of the most underestimated aspects of homeownership is the ongoing cost of maintenance and repairs. Homes require regular upkeep to remain safe, efficient, and comfortable.
There’s a common rule of thumb that suggests setting aside 1% to 4% of your home’s value each year for maintenance. On a $350,000 home, that’s $3,500 to $14,000 annually. Evolve Bank explains that this might seem excessive, but consider all the components that require attention: your HVAC system, roof, plumbing, water heater, windows, exterior siding, and more.
Some maintenance tasks are seasonal—like cleaning gutters, winterizing your home, or servicing your furnace—while others may be less predictable, like replacing a broken appliance or fixing a leaky pipe. Major systems like roofs or HVAC units can cost thousands of dollars to replace and often come with little warning.
In addition to budgeting money, home maintenance also demands time, effort, and a basic knowledge of home systems. Some homeowners enjoy these tasks as part of the experience; others may prefer to outsource to professionals, which increases costs.
When you move from renting to owning, you’re likely to experience a jump in your monthly utility bills. Evolve Bank understands that’s because homeowners typically pay for all utilities directly—electricity, natural gas, water, sewer, trash collection, and often internet and cable.
Depending on the size and age of the home and where it's located, utility costs can vary widely. For a modest single-family home, monthly utility costs might fall between $200 and $500, but that number could climb higher in regions with extreme weather or older homes with inefficient systems.
Some first-time buyers forget to budget for these recurring expenses, especially if they’re moving from an apartment where some utilities were included. It’s a good idea to ask the seller or your real estate agent for historical utility data so you’re not caught off guard in your first month.
Even if your new home is in pristine condition, you'll almost certainly need to spend money on furniture, appliances, and basic supplies. Many homes don’t come with refrigerators, washers, dryers, or microwaves—so be sure to ask what’s included before closing.
You may also find that your existing furniture doesn't fit or match your new space. Bedrooms, living rooms, and dining areas in homes are typically larger than those in apartments, and filling them can get expensive fast. Window coverings, light fixtures, and even essentials like shower curtains and rugs can add up quickly.
Evolve Bank explains that it’s not uncommon for new homeowners to spend anywhere from $3,000 to $10,000 in the first year just getting settled and making their home feel like their own.
Buying a home for the first time is a major financial commitment that goes well beyond the sticker price. Understanding the true cost of ownership—from down payments and closing costs to taxes, insurance, and ongoing maintenance—is essential for setting realistic expectations and avoiding financial strain.
Evolve Bank emphasizes that by breaking down these expenses and preparing for both the known and the unknown, you can enter the housing market with confidence and clarity. Homeownership can be incredibly rewarding—but only if it’s built on a solid foundation of knowledge, preparation, and thoughtful budgeting.
