When buying a home, most people know about the down payment and monthly mortgage bills that come along with it. Unfortunately, it may surprise potential home buyers of the hidden costs that come along with buying a house. Often, the amount that is paid is greater than the cost of the actual house. Learn what to expect when buying a home so that there are no surprise costs during closing.

Down Payment

Most lenders require a down payment of at least 20 percent on a home. For a $400,000 home, the down payment required would be $80,000. Some lenders will accept a smaller amount as a down payment, and there are some programs that help first-time home buyers pay their down payment.

Mortgage Insurance

Lenders who allow qualified home buyers to acquire a loan without 20 percent down will charge mortgage insurance. This amount is typically paid in its entirety at closing or billed in monthly installments. It helps mitigate the risk of lending money with a smaller down payment.

Loan Origination Fee

This is a fee the lender charges in order to process a loan application and the costs to underwrite and fund the loan. Loan origination fees typically range between 0.5 and one percent of the borrowed amount for the home.


Before the loan papers are signed, lenders require that an appraisal be done by a third-party appraiser. The appraisal lets the lender know that the home is actually worth the amount that is being loaned. Costs of appraisals vary from state to state but typically range between $100 and $400.


Laws vary by state and some inspections aren’t required; however, inspections can give buyers peace of mind and help them know up-front what to expect in their new home. Inspections will let buyers know if the home has termites, lead paint, pests, asbestos and radon as well as any heating, plumbing or structural issues. Home buyers have the option of not purchasing the home or negotiating for a lower amount or repairs should the inspection reveal repairs that need to be made. Most inspections cost $500.

Transfer Taxes

These fees may be paid by the home buyer or split between seller and buyer. Transfer taxes vary from one to three percent of the cost of the home. These taxes pay for the property to be transferred from one individual to another and typically stream to help pay for nearby roads, community centers, and schools.