First-Year Homeowner Expenses You Should Expect

Buying a home is exciting. Then the first few months arrive, and you start realizing there are quite a few expenses that don’t show up in the mortgage payment.

If you’re buying your first home, it helps to know what’s coming. Your first year as a homeowner can include everything from property taxes and insurance to repairs, maintenance, utilities, and the little things you never had to think about when you were renting.

The good news? You don’t need to panic or have a huge pile of cash sitting around. You just need a realistic plan.

Here are the first-year homeowner expenses I’d want you to understand before buying a home.

When buyers look at homes, they often start with one number:

“Can I afford the monthly mortgage payment?”

That’s a good place to start, but it’s not the whole picture.

Your monthly housing cost may include:

• Principal and interest on your mortgage

• Property taxes

• Homeowners insurance

• Mortgage insurance, if required

• HOA or condominium fees, if applicable

• Utilities

• Routine maintenance

Some of these expenses may already be included in your mortgage payment through an escrow account. Others won’t be.

That distinction matters.

A home that looks affordable based on the mortgage payment alone can feel very different once you add everything else.

It’s also worth remembering that where home prices are headed in Ann Arbor can affect how buyers think about affordability and the amount they need to spend upfront, but your personal monthly budget still matters most when choosing a home.

Property taxes are one of the biggest ongoing expenses homeowners need to plan for.

Your property tax bill depends on the home, its taxable value, and the local tax rates that apply to the property.

If you’re buying in Ann Arbor or the surrounding area, don’t assume that the property taxes on one house will be the same as another house with a similar purchase price.

When you’re considering a home, look at the actual property tax information for that property and understand how taxes are handled at closing.

Your lender may collect money for property taxes through your monthly escrow payment. That doesn’t mean taxes are an extra surprise. It simply means you’re paying toward the future bill a little at a time.

One thing I always encourage buyers to do is look beyond the advertised mortgage payment and understand the complete monthly payment.

You’ll also need homeowners insurance.

Your lender will generally require coverage if you have a mortgage, and the cost can vary depending on the property, coverage, deductible, location, and other factors.

Before you get too far into the buying process, get an insurance quote for the specific home you’re considering.

Why?

Because two homes with similar prices can have very different insurance costs.

It’s much better to discover that before you’re committed to the purchase.

Depending on your loan and down payment, you may have mortgage insurance.

This is another expense that can affect your monthly payment.

The amount and requirements depend on the type of mortgage you use and your individual circumstances, so this is something to discuss with your lender early in the process.

When comparing homes, make sure you’re comparing the total estimated monthly payment, not just principal and interest.

This one gets overlooked all the time.

As a homeowner, you’re responsible for the utilities associated with your property.

That might include:

• Electricity

• Natural gas

• Water

• Sewer

• Trash

• Internet

• Other services specific to the property

Your costs can change significantly based on the size and age of the home, insulation, heating and cooling systems, the number of people living there, and how you use the house.

If you’re buying an older home, ask about previous utility costs when possible.

A house with a low purchase price doesn’t necessarily have low operating costs.

This is the expense new homeowners often underestimate.

When you rent, you may be able to call your landlord when something breaks.

When you own the house, you’re the one responsible for dealing with it.

That doesn’t mean everything will break in your first year. It does mean you should have money set aside for normal maintenance and unexpected repairs.

Some examples include:

• Furnace or HVAC maintenance

• Plumbing repairs

• Appliance repairs

• Gutter cleaning

• Lawn care

• Snow removal

• Pest control

• Minor electrical work

• Roof maintenance

• Exterior maintenance

You don’t need to spend money just because you have it.

But you should have a plan for when something eventually needs attention.

There’s another category that doesn’t always get included in a first-year budget.

The “I just want to change this one thing” category.

Maybe the living room needs paint.

Then you realize the light fixtures don’t match.

Then you want curtains.

Then the bedroom needs a ceiling fan.

Then you decide the garage needs storage.

None of these expenses seem huge by themselves.

Together, they can add up quickly.

That’s why I recommend giving yourself some breathing room during the first year instead of spending every available dollar making the house look exactly the way you want it.

You have time.

You don’t have to finish the entire house in the first six months.

Depending on the property and where you live, outdoor maintenance can become a regular expense.

In the Ann Arbor area, homeowners should think about both sides of the year.

During warmer months, that might mean:

• Mowing

• Landscaping

• Mulching

• Tree maintenance

• Yard cleanup

During winter, you may need to budget for:

• Snow removal

• Salting or ice treatment

• Winter equipment

• Furnace or heating-related maintenance

If you’re moving from an apartment or rental, these responsibilities may be new to you.

They’re worth including in your budget from the beginning.

Even after a home inspection, unexpected repairs can happen.

A home inspection gives you valuable information about the property. It doesn’t guarantee that nothing will ever go wrong.

You could have a water heater fail.

An appliance could stop working.

A plumbing issue could appear.

A furnace could need service.

These are the moments when having an emergency fund makes homeownership much less stressful.

You don’t want one surprise repair to turn into a financial crisis.

If you’re purchasing a condominium or a home in a neighborhood with an HOA, make sure you understand the fees before buying.

Ask what the monthly or annual fee covers.

Depending on the community, it might include things such as exterior maintenance, common areas, landscaping, snow removal, or other shared services.

Also ask whether there are rules, restrictions, or potential additional assessments you should know about.

The fee itself isn't necessarily the issue.

The important thing is knowing exactly what you're paying for.

If you’re considering a condo, remember that your overall housing budget may also need to account for association fees in addition to your mortgage, taxes, insurance and utilities.

Don’t forget about the cost of actually moving into the house.

You might need:

• Movers

• A moving truck

• Packing supplies

• Storage

• Cleaning

• New locks

• Window coverings

• Furniture

• Basic tools

Some of these are one-time expenses.

Others can become part of your ongoing household budget.

And if you’re moving from a rental, there may be overlap between your old housing costs and your new housing costs.

Plan for that possibility ahead of time.

Owning a home often means owning things you never needed before.

A basic homeowner toolbox can go a long way.

You might eventually buy:

• A drill

• Screwdrivers

• A ladder

• A level

• A tape measure

• Basic yard equipment

• A snow shovel

• A shop vacuum

• Other tools specific to your home

You don’t need to buy everything on day one.

Start with what you actually need.

You can build your collection over time.

Before you buy, I’d break your budget into three categories.

Monthly expenses

These are the costs you’ll expect regularly:

• Mortgage

• Property taxes

• Homeowners insurance

• Mortgage insurance, if applicable

• HOA or condo fees, if applicable

• Utilities

Planned annual expenses

These are costs you know are coming, even if they aren't monthly:

• Lawn care

• Snow removal

• Maintenance

• Seasonal services

• Home-related subscriptions or services

Emergency expenses

This is your cushion.

It’s money you don't plan to spend.

It’s there because homes have a funny way of needing something at the least convenient time.

The exact amount you should keep available depends on your income, other savings, the age and condition of the home, and your overall financial situation.

If you’re buying a home because of a particular school district or local area you want to be near, remember to include those location priorities in your overall budget as well. Sometimes buyers focus so heavily on the purchase price that they forget how other housing costs affect what they can comfortably afford.

A newer home can reduce some immediate repair concerns, but it doesn't mean there are no first-year expenses.

You may still have:

• Property taxes

• Insurance

• Utilities

• HOA fees

• Landscaping

• Window coverings

• Appliances or furnishings

• Maintenance

• Unexpected issues

You may also have costs associated with finishing spaces or adding items that weren't included with the purchase.

The key is to look at the actual home and what comes with it rather than assuming “new” means “no extra expenses.”

Older homes can have plenty of character.

They can also come with more maintenance.

That doesn’t automatically make an older home a bad choice. It simply means you should understand the condition of the major systems before you buy.

Pay close attention to things such as:

• Roof

• Furnace and HVAC

• Plumbing

• Electrical system

• Windows

• Water heater

• Foundation

• Drainage

• Appliances

This is where a thorough inspection can be especially helpful.

You’re not trying to find a house that will never need anything.

You’re trying to understand what you’re buying so you can plan for it.

One of the biggest mistakes first-time homeowners make is thinking they need to have everything figured out immediately.

You don't.

Your first year is partly about learning your house.

You’ll figure out which rooms you actually use.

You’ll learn how much your utilities cost.

You’ll discover which projects matter to you and which ones really don't.

You’ll probably make a few purchases you later wonder about, too. That’s normal.

Give yourself some room to live in the house before making every possible change.

Forgetting about the expenses outside the mortgage

The mortgage is easy to remember because it's the number everyone talks about.

Taxes, insurance, utilities, maintenance, and repairs need attention too.

Spending all your cash at closing

Getting the keys is exciting.

But don't let the excitement leave you with nothing in reserve.

Having money available after closing can make the first year much easier.

Doing too many projects at once

You don't need to remodel the kitchen, furnish every room, landscape the yard, and repaint the entire house immediately.

Pick the things that matter most.

Not asking questions before buying

If you're unsure about taxes, insurance, utilities, HOA fees, maintenance, or the condition of a major system, ask.

These are exactly the kinds of questions you should be asking before you buy.

And if schools are one of your priorities, make sure you understand the school district associated with the property before making your decision. Location can affect both your lifestyle and your overall housing budget.

How much should I budget for first-year homeowner expenses?

There isn't one number that works for every homeowner. Your costs depend on the home, location, mortgage, taxes, insurance, utilities, maintenance needs, and how much work you want to do after moving in.

The safest approach is to build a budget based on the specific property you're considering rather than using a generic percentage.

What expenses should I expect besides my mortgage?

Common expenses include property taxes, homeowners insurance, mortgage insurance when applicable, utilities, HOA or condo fees, maintenance, repairs, lawn care, snow removal, and moving or furnishing costs.

Should I have an emergency fund after buying a house?

Yes. Homeowners should plan for unexpected expenses. The right amount depends on your financial situation and the condition of the home, but you don't want to spend every dollar you have on the purchase itself.

Are repairs common during the first year of homeownership?

They can be. Even a well-maintained home can need repairs or maintenance. A home inspection can help you understand the property's condition before you buy, but it can't predict every future repair.

What should I ask about before buying a home?

Ask about property taxes, insurance, utilities, HOA or condo fees, major systems, recent repairs, maintenance, and anything the inspection identifies.

The more you understand before buying, the easier it is to plan for the first year.

Your first year as a homeowner doesn't have to be financially stressful.

The biggest thing is knowing what you're getting into.

Look beyond the mortgage payment. Understand the property's taxes and insurance. Ask about utilities and HOA costs. Pay attention to the condition of the major systems. And, most of all, keep some money available for the unexpected.

If you're buying a home in Ann Arbor, Michigan, having these conversations early can help you build a more realistic picture of what homeownership will cost for the specific property you're considering.

Nancy Arnold, Realtor®, is a local real estate professional with The Charles Reinhart Company. She helps home buyers understand the buying process and make informed decisions about purchasing a home in the Ann Arbor area.