Buying a home involves more than saving for a down payment.
There may be several other expenses along the way—and some of them can come up before you ever reach the closing table.
That can catch first-time buyers by surprise.
You may need money for inspections, an appraisal, deposits connected with your offer, closing costs, homeowners insurance, and other expenses associated with purchasing and moving into a home.
Exactly what you'll pay—and when you'll pay it—depends on your purchase, financing, and the decisions you make during the transaction.
The important thing is to know these expenses may be coming so you can prepare for them ahead of time.
Let's walk through some of the most common out-of-pocket costs you may encounter when buying a home.
Start With the Down Payment—But Don't Stop There
Your down payment is the portion of the home's purchase price that you pay rather than finance through your mortgage.
The amount you'll need can vary significantly depending on the type of loan you're using, your qualifications, and other factors. That's why it's better to discuss your specific down payment requirements with your lender rather than assume you need a certain percentage.
But there's another reason I don't want you to put every dollar you've saved into your down payment.
Buying the house itself may require money at several different points in the process.
Some expenses may be paid when you make an offer. Others may occur while the home is under contract. And additional costs may be due when you close.
Understanding that timeline can help you think beyond one big question—“How much do I need for my down payment?”—and start asking:
“How much money should I have available throughout the entire homebuying process?”
That's the more useful question.
Due Diligence Fee and Earnest Money in North Carolina
If you're buying a home in North Carolina, two terms you're likely to hear when preparing an offer are due diligence fee and earnest money deposit.
They are not the same thing, and it's important to understand the difference before you make an offer.
Due Diligence Fee
A due diligence fee is a negotiated amount, if any, paid by the buyer to the seller in connection with the buyer's right to conduct due diligence during the agreed-upon due diligence period.
During this period, buyers may investigate things that are important to their decision to move forward with the purchase. That can include inspections, financing, appraisal, title matters, property condition, and other concerns.
If a due diligence fee is included in the contract, it becomes the seller's property on the effective date and is generally non-refundable, although the contract provides limited circumstances in which it may be refundable. If the transaction successfully closes, the fee is credited to the buyer at closing.
This is money a buyer should be prepared to potentially lose if they decide to terminate the contract during the due diligence period.
The amount isn't automatically a particular percentage or dollar figure. It is negotiable and can vary from one transaction to another.
The North Carolina Real Estate Commission provides additional information about due diligence fees and how they work in North Carolina.
Earnest Money Deposit
Earnest money is another negotiated amount that may be included with an offer.
Unlike the due diligence fee, earnest money is generally held in escrow rather than being paid directly to the seller.
Under the commonly used North Carolina Offer to Purchase and Contract, a buyer who properly terminates during the due diligence period generally receives the earnest money deposit back.
However, once the due diligence period has expired, the buyer's earnest money may be at risk if the buyer later fails to complete the transaction as required by the contract.
Why This Matters Before You Make an Offer
Due diligence and earnest money can represent a significant amount of a buyer's available cash, and these funds may be needed very early in the transaction—not months later at closing.
That's why your real estate agent should discuss these terms with you before an offer is submitted.
Before deciding how much you're comfortable offering, make sure you understand:
• How much due diligence money you're offering
• How much earnest money you're offering
• When each payment is due
• Where each payment goes
• Under what circumstances you could lose the money
• How the amounts will be treated if you successfully close
Never assume that money paid with or shortly after an accepted offer is automatically refundable.
Ask questions before you sign the contract so you understand the financial risk you're agreeing to take.
Home Inspections and Other Property Inspections
Once you're under contract, one of the expenses you may choose to pay for is a professional home inspection.
A home inspection gives you an opportunity to learn more about the condition of the property before you complete the purchase. The inspector may evaluate many of the home's major systems and components and identify items that may need attention.
Depending on the property and what is discovered, you may also decide to have additional inspections or evaluations performed.
Those might include things such as:
• Pest or wood-destroying insect inspections
• HVAC evaluations
• Plumbing or electrical evaluations
• Roof evaluations
• Well or septic inspections
• Radon testing
• Structural evaluations
• Other specialized inspections based on the property or concerns that arise
Not every home will need every type of inspection.
Your choices will depend on the property, your concerns, your contract, and the recommendations of the professionals involved.
These Costs May Come Before Closing
Inspection expenses are often paid while you're under contract—not at the closing table.
And if you decide to order additional inspections or evaluations, those expenses can add up.
That's one reason it's important not to think of all of your available cash as simply “down payment money.”
You may need access to funds throughout the transaction to investigate the property and make informed decisions about whether you're comfortable moving forward.
A Home Inspection Is Not the Same as an Appraisal
Buyers sometimes assume that if the lender orders an appraisal, they don't need a home inspection.
They serve different purposes.
A home inspection is primarily intended to help you learn about the property's condition.
An appraisal is a valuation of the property. When you're financing a home, your lender may require an appraisal or another form of valuation as part of the mortgage process.
An appraisal should not be treated as a substitute for a home inspection.
The Consumer Financial Protection Bureau makes the same distinction: it explains that an inspection helps the buyer assess the home's physical condition, while a lender generally requires some form of appraisal when financing the purchase.
What About the Appraisal?
If you're financing your home purchase, your lender may require an appraisal or another form of property valuation as part of the loan process.
The purpose is different from a home inspection.
An appraiser develops an opinion of the property's value using information about the home, the market, and comparable properties. The lender uses the valuation as part of determining whether the property provides adequate collateral for the mortgage.
Who Orders and Pays for the Appraisal?
When you're obtaining a mortgage, the appraisal or other required valuation is generally coordinated through the lender or its appraisal process.
However, the buyer may still be responsible for the cost.
Depending on the lender and loan, you may be asked to pay the appraisal fee before the appraisal is completed, or the cost may be handled differently as part of your loan and closing expenses.
Your lender can tell you exactly how much the appraisal will cost and when payment will be required for your particular transaction.
That's another reason buyers should keep some money available during the mortgage process instead of assuming every expense will wait until closing.
What If the Home Appraises for Less Than the Purchase Price?
This is an important possibility to understand before making an offer.
If the appraisal comes in below the agreed-upon purchase price, it can create a financing issue because the lender's loan decision is based in part on the property's appraised value.
What happens next depends on several factors, including your contract, your financing, and what the buyer and seller agree to do.
Possible next steps might include further discussions between the parties, the buyer bringing additional funds if appropriate and permitted, or other options depending on the circumstances.
A low appraisal does not automatically mean the seller has to reduce the price.
If this happens during your purchase, your real estate agent and lender can help you understand the options available in your particular situation.
Closing Costs: More Than One Expense
In addition to your down payment and expenses that may come up while you're under contract, you'll also need to prepare for closing costs.
“Closing costs” isn't one single charge. It's a general term for a variety of expenses associated with your mortgage and the purchase of the home.
The exact costs will depend on your loan, your property, your lender, and your transaction.
Depending on your situation, your closing costs may include items such as:
• Lender or loan-related fees
• Appraisal or other valuation charges, if not already paid
• Attorney and title-related expenses
• Recording fees
• Property taxes or tax-related adjustments
• Homeowners insurance-related amounts
• Prepaid interest
• Initial deposits into an escrow account, when applicable
• Other costs associated with your particular loan or transaction
You should not assume that someone else's closing costs will look exactly like yours.
Your lender will provide disclosures showing the estimated costs associated with your mortgage, and those documents can help you understand how much money you may need for closing.
Closing Costs and Prepaid Expenses Aren't Exactly the Same Thing
You'll sometimes hear buyers use “closing costs” to describe everything they need to bring to closing, but some of that money may actually be for prepaid expenses or initial escrow deposits rather than fees.
For example, depending on your loan and closing date, you may need to pay certain amounts associated with homeowners insurance, property taxes, or interest.
Some borrowers may also have an escrow account established to collect money toward future property tax and homeowners insurance bills.
This is one reason the total amount needed at closing can be different from simply adding your down payment to a list of lender fees.
Your Loan Estimate Can Help You Prepare
After you apply for a mortgage, your lender will provide a Loan Estimate showing important information about the loan, including estimated interest rate, monthly payment, and closing costs.
Later in the process, you'll receive a Closing Disclosure with details about the final loan terms and closing costs.
Don't simply file those documents away.
Review them. Ask questions.
If there's a charge you don't understand or something looks different from what you expected, ask your lender to explain it.
Knowing what you're expected to pay before you arrive at closing is much better than being surprised at the end of the transaction.
Homeowners Insurance: Don't Wait Until the Last Minute
If you're financing your home purchase, your lender will generally require you to have homeowners insurance in place before the loan can close.
Homeowners insurance can help protect you financially if the home or your belongings are damaged or lost because of certain covered events. Your policy may also provide liability protection, depending on the coverage you select.
The cost of insurance can vary considerably from one property and homeowner to another.
Factors such as the home's location, characteristics, coverage selected, deductible, insurance company, and other considerations may affect the premium.
That's why it's a good idea to begin getting insurance quotes while you're under contract rather than waiting until the last few days before closing.
Insurance Can Affect More Than Your Closing Costs
If your homeowners insurance premium is included in an escrow account, a portion of the cost may become part of your ongoing monthly housing payment.
That means insurance isn't only something to consider when figuring out how much cash you'll need at closing.
It can also affect what the home costs you month after month.
Before choosing a policy, make sure you understand the coverage you're purchasing, the deductible, the premium, and how the insurance will be paid.
Your insurance professional and lender can help explain how the policy and payment will work for your particular purchase.
Ask About Flood Insurance Too
A standard homeowners insurance policy generally does not cover flood damage.
Depending on the property's location and your financing, flood insurance may be required. Even when it isn't required by a lender, a buyer may still want to investigate the property's flood risk and discuss available coverage with an insurance professional.
Don't assume that “not required” means “no flood risk.”
Understanding the property's location and available insurance coverage before closing can help you make a more informed decision about the ongoing cost and risk of owning the home.
Don't Forget About the Costs After You Get the Keys
Closing day is exciting—but getting the keys doesn't mean the expenses suddenly stop.
There may be additional costs associated with moving into and settling into your new home, and these are easy to overlook when most of your attention has been focused on the down payment and closing costs.
Depending on your situation, you may need money for things such as:
• Moving expenses
• Utility deposits or connection fees
• Changing locks or rekeying the home
• Immediate repairs or maintenance
• Appliances or household items the home doesn't include
• Window coverings, furniture, or other items you need after moving in
• Lawn equipment or other maintenance supplies
• Unexpected expenses that come with becoming a homeowner
You certainly don't have to furnish an entire house the week you move in. 😊
Some purchases can wait.
But having money available after closing can give you more flexibility when something genuinely does need attention.
Try Not to Make Closing Day Your Financial Finish Line
It's easy to focus on one number:
“How much money do I need to close?”
But I want you to think one step beyond that.
A better question may be:
“How much money will I have left after I close?”
Owning a home means taking responsibility for repairs, maintenance, and unexpected expenses that were previously a landlord's responsibility if you were renting.
Having some financial breathing room after closing can make that transition much easier.
This is also why the highest home price you're approved to purchase isn't necessarily the amount you'll feel comfortable spending.
If you haven't already read it, my guide How Much House Can I Comfortably Afford? explains why your comfortable housing budget should consider more than simply the amount a lender may approve.
So, How Much Money Should You Have Available?
There's no single dollar amount that's right for every homebuyer.
The amount you'll need depends on several things, including the price of the home, your financing, the terms of your offer, the inspections you choose, your closing costs, insurance, and your personal moving expenses.
Instead of focusing on one universal number, think about your homebuying money in separate buckets:
• Down payment – the portion of the purchase price you're paying rather than financing
• Offer-related funds – such as due diligence and earnest money when applicable
• Under-contract expenses – such as inspections, specialized evaluations, and appraisal costs when applicable
• Closing funds – including your remaining down payment, closing costs, prepaid expenses, and other amounts due at closing
• After-closing money – funds available for moving, immediate household needs, maintenance, and unexpected expenses
Thinking about the money this way can make the process much easier to understand.
Ask for Estimates Early
You don't have to wait until a few days before closing to start asking what things may cost.
Before you begin making offers, talk with your lender about your estimated down payment, closing costs, and other mortgage-related expenses.
When you're preparing an offer, talk with your real estate agent about due diligence money, earnest money, inspections, and other expenses that may arise during the transaction.
And when you're under contract, continue reviewing the information you receive from your lender, attorney, insurance professional, inspectors, and other professionals involved in your purchase.
The goal isn't to predict every dollar perfectly.
The goal is to understand where your money may be needed so you're less likely to be caught off guard.
One Last Thing: Keep Some Breathing Room
Buying a home is a major financial commitment, and getting to closing is only the beginning of homeownership.
If possible, think beyond simply having enough money to complete the purchase.
Consider what you'll need to feel comfortable after the keys are in your hand, too.
Preparing for the entire journey—from making an offer through settling into your home—can help you approach the process with greater confidence and fewer financial surprises.
Ready to Start Planning Your Home Purchase?
If you're thinking about buying a home in Greenville or anywhere in Pitt County, you don't have to figure out every step by yourself.
I can help you understand the homebuying process, what to expect as you move from searching to making an offer, and the questions you may want to ask the other professionals involved in your purchase.
Even if you're several months away from buying, it's never too early to start learning and preparing.
Denise Davis, REALTOR®
Fresh Start Realty
Serving Greenville & Pitt County, North Carolina
📞 Phone: 252-902-9006
✉️ Email: denisedavis@pittcountyliving.com
