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How much does a home actually cost?

One of the biggest things that first-time homebuyers often overlook in their home search are all of the various expenses besides the purchase price of a home — often in the tens of thousands of dollars.

what should a house cost

Spoiler alert: We can’t tell you exactly how much a home actually costs. There are simply too many variables that depend on your personal situation, location, and fluctuations in the housing market and interest rates. However, knowing what types of expenses to expect is crucial for avoiding shock later on.

Types of Expenses to Expect

Home price

The bulk of your money will go toward the purchase price of the house. In February 2023 for example, the median home price in the U.S. was $363,000 ( However due to lots of factors like home size and location, the price of a home can be hundreds of thousands of dollars higher or lower, so let’s not fixate on that number. Determining how much home you can afford is something you should research on your own. You can use Nestiny’s True Affordability Tool to find out your suggested home price ranges.

Down payment

A down payment is the amount of money that the lender requires you to put into the purchase of your new home up front. The amount of the down payment is determined by the type of loan but typically it ranges from 3.5% to upwards of 20% of the purchase price of the home. The down payment is paid on closing day and generally, the more money you can put down, the better. If you can afford to put more money up front, you can get a lower interest rate and lower monthly payments which can save you money in the long run. With more money up front, your bank may be willing to lend you more money than otherwise too.

Private mortgage insurance

If you can’t afford to make a large down payment of around 20%, your lender may require you to buy private mortgage insurance (PMI) until your equity in the home increases (that is to say, until you’ve paid off a good portion of your loan). PMI benefits the lender by insuring them in case you default — that is to say, if you can’t pay your mortgage. Paying for PMI every month can add $15,000–$50,000 to the total cost of your home, or about .3%-1.5% of the original loan amount each year, so it can definitely pay off to be aware of the ways you can avoid PMI.

Property taxes

The amount of property tax you’ll have to pay each year can vary radically depending on your location. According to data from, your effective tax rate could range from 0.55% to 2.38% of your property’s value. Not only can states collect property taxes, but so can counties, cities, and other districts, and you can be taxed by more than one of these. There are exemptions and tax credits available for special cases like veterans, seniors, farmers, and non-profit organizations, but don’t let property taxes shock you at the end of the year! Ask your Real Estate Agent how much you may be expected to pay in your area.

Homeowners Insurance

When you close on a home, your lender will probably require that you purchase a Homeowners Insurance policy. It protects your lender’s investment in case your home is damaged or destroyed, and it protects you in this case too. According to the Federal Reserve, Homeowners Insurance may cost around $300 to $1,000 a year, but this can vary depending on the amount of the deductible, the value of the home, and if the policy covers certain location-specific hazards (such as hurricanes, tornadoes, or wildfires).

how much should you pay for a house


While all of the things above may be included in your monthly payment, maintenance is not, so you should be prepared to save and plan for it separately. A good rule of thumb is to put aside 1% of the home’s value each year for regular maintenance costs like new paint, air filters, weatherproofing, and other regular home repairs.

However if your home is older, you may want to save even more. On a $200,000 home, this means you should save $2,000 a year. But that doesn’t mean you have to spend it every year. Instead, think of it as an average, because who knows when you may have to replace a broken refrigerator or shell out thousands of dollars for a costly roof repair.

Upfront expenses

Inspections and appraisals are an important part of the homebuying process. If they aren’t rolled into the closing costs, these two things can cost $350-$500 each depending on your location. Read more about upfront expenses on Nestiny.


This may seem like an obvious expense, but if you’re a first-time homebuyer, you may be in for some budgetary shock when you go from paying utilities for an apartment to covering utility costs for an entire home. Some utilities that are commonly included in rent (garbage collection or sewer service, for instance) will become your responsibility too.

Other optional costs

If you’re buying a home in a neighborhood that has a homeowner’s association, expect to pay monthly or annual HOA fees. You might want to figure in expenses for moving, landscaping, security systems, and cleaning services too depending on your personal needs.

Want more advice about all things home — including homebuying or selling advice? Nestiny is a great place for homebuyer education and to help you gauge how ready you are to buy a home. Journey Homeward allows you to enter all your wants and needs while the True Affordability Tool will break down your budget, showing what you can comfortably afford. You will also receive a Ready Report that will give you a vital head start in the home buying journey, saving you valuable time and money.

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