Seriously, Don’t Buy a House with Only a Down Payment Saved, Warns One Redditor

published Nov 3, 2021
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Buying a home is expensive. I know this and you know this, but sometimes it’s easy to forget just how expensive. While a down payment is often the biggest concern, closing costs can come as quite a shock. That’s the case for the author of this viral post on the personal finance subreddit, who bought a historic property and learned just how pricey homeownership can be. 

The post starts out predictably enough, with the author sharing that he and his wife offered $305,000 on a Vermont home with an asking price of $299,000. They put down $2,000 for an initial deposit that went toward the closing, then paid additional costs during the inspection, like a $400 lead paint test, a $125 well water test, and a $450 septic inspection. 

“Total cost to this point — $4,175,” he wrote. But of course, the costs didn’t end there. Homeowner’s insurance costs $1,400 a year, though the fact that there was an attached barn with a rusty roof accounted for a few expensive obstacles. The roof had to be painted to the tune of $4,800, not to mention an additional $10,000 estimate to paint the barn’s exterior. Even that doesn’t account for all the extras, like heating oil costs, a U-Haul rental, and buying the tools to care for the property, like a snowblower and lawn mower.

He then went on to list a total of the costs:

Closing Costs: $13,683
Down Payment: $9,150 (yes yes, very low, I know.)
Cash to Close: $22,833
Total Cost : $27,008
Total Cost including currently known required work: $41,808.

The whole point of his post, the author wrote, was to let people know that buying a home goes far beyond the down payment. “Had I tried before we were in a more confident financial position, it definitely would have ended in tears and anxiety,” he shared. 

The author is indeed correct in saying that buying a house goes far beyond the down payment. And when you’re not expecting these costs, they’re pretty alarming. 

“No one expects buying a home to be cheap, but when you’re about to put the bulk of your savings on the line, every little cost can feel like an added insult,” says Kate Ziegler, a Realtor with Arborview Realty in Boston and with Coldwell Banker Lifestyles in New London, New Hampshire. 

That’s why experts recommend asking for a rundown early in the game. “Ask your lender for cost estimates early and often. Many of the added charges that go into closing costs will be related to lending, and will vary by lender, loan product, and location,” Ziegler adds. You can do this as early as during the pre-approval process, but be aware that there may be added variables that will change the estimates.

Your real estate agent can also serve as a valuable source of information when it comes to figuring out those additional costs. Bridget Fortunate, a real estate agent with Elevated Realty in Boston, says she’s had plenty of clients who’ve asked her for a breakdown of closing costs. 

“It’s unfortunate this buyer didn’t have an informative team to fill them in on the costs associated with homebuying. I do my best to give [buyers] all the information they need to understand what they will be paying for,” Fortunate says. “The lenders I consistently work with are also happy to provide spreadsheets and run numbers for any of my clients considering making an offer on a home, so they are not surprised by anything on closing day.”

When it comes to repairs, that’s just how it goes when it comes to being a homeowner. Both Ziegler and Fortunate suggest keeping some of your budget separate for everything from paint and wallpaper to more pressing repairs. Keep in mind that while you are taking on a tremendous amount of responsibility as a homeowner, putting money into a property can be a more worthwhile investment than paying rent, depending on your life circumstances. And being prepared for that can make all the difference.