Don't Buy a Home Unless You Can Easily Cover These 2 Expenses

Don't end up caught off guard by two up-front fees home buyers must pay.

When you buy a house, you're committing to many ongoing costs including your mortgage, property taxes, maintenance, and repair expenses. Most people are aware they'll face these expenses when they go into the purchase process.

But, aside from the continuing costs of homeownership, there are two very large expenses that have to be paid up front when you first purchase your home. They can add up to tens of thousands of dollars, and if you aren't prepared for them, you could find yourself facing a financial shock in the weeks before you commit to homeownership.

Let’s take a closer look at those two important expenses.

1. Closing costs

The first big up-front expense you'll need to pay is closing costs. These are required by your mortgage lender, as well as by the government. They include fees for things like the home appraisal, a mortgage origination fee, title insurance, transfer taxes, and prorated property taxes. And they can add up to about 2% to 5% of the home's value.

Some lenders do allow you to borrow for closing costs, but you'll need to make sure this doesn't have an adverse affect on your ability to get a mortgage, since lenders are willing to only lend you an amount of money equal to a certain percent of your home's value. Other lenders will offer "no closing cost" loans without adding the costs to your loan balance, but that usually means they make up the money by charging you a higher interest rate.

You generally don't want to end up with either of these options -- even though they allow you to avoid the upfront closing expenses -- since they can make your loan more expensive in the long-run. You should be prepared to pay out-of-pocket for the closing expenses on the day that you sign your loan paperwork and ownership of your new home is transferred to you.

2. Moving costs

Moving costs are another big expense you need to be prepared for -- especially if you're making a long distance move or have a lot of stuff.

Even if you opt for a low budget move and plan to transport your own possessions, you'll still need to factor in the cost of truck rental and insurance as well as gas -- which can be quite expensive by itself right now due to high prices at the pump. And if you're paying professional movers, you can expect to pay thousands of dollars for assistance packing and transporting your possessions.

Moving costs will, obviously, have to be paid upon moving into the new house. It can be hard to come up with the extra money for them at the same time as you're making a home down payment and dealing with closing fees. But you don't want to end up not being able to afford to move your possessions out of your old place and into your new one.

Before you commit to buying a home, make sure you research what your move will cost you and look carefully at the lender's estimate for total closing costs. If these two expenses are not yet in your budget, think about putting off your home purchase until you can save up a little longer in order to cover them.