The Bottom Line Up Front
The purchase price on your contract is not the total cost of buying a home. Between closing costs, prepaid property taxes, homeowners insurance, HOA fees, inspections, and first-year maintenance, you should budget an additional 3% to 6% of the purchase price to cover what most buyers do not see coming. On a $350,000 home, that is $10,500 to $21,000 in costs beyond your down payment and monthly mortgage.
VA loans eliminate some of these costs. There is no PMI, the origination fee is capped at 1%, and sellers can contribute up to 4% of the purchase price toward your VA closing costs. But property taxes, HOA fees, maintenance, and inspections apply to every buyer regardless of loan type. Knowing what to expect keeps you from dipping into reserves you will need after move-in.
Closing Costs Are the First Surprise
Closing costs on a home purchase typically run 2% to 5% of the purchase price. On a $350,000 home, that is $7,000 to $17,500 in fees due at settlement. Most first-time buyers underestimate this number because they focus on the down payment and monthly payment without adding up the line items on the Loan Estimate.
VA borrowers have a built-in advantage here. The VA caps the origination fee at 1% flat, and the VA’s non-allowable fee rules prohibit lenders from charging several junk fees that conventional and FHA borrowers pay. That alone can save $1,000 to $2,000 compared to a conventional loan on the same purchase price.
| Closing Cost Component | Typical Range | VA Loan Note |
|---|---|---|
| Origination fee | 0.5% to 1% of loan amount | Capped at 1% flat on VA loans |
| Appraisal | $400 to $700 | VA appraisal ordered through VA portal; fee varies by region |
| Title insurance | $500 to $1,500 | Same for all loan types |
| Recording and transfer taxes | Varies by county | Same for all loan types |
| Prepaid property taxes | 2 to 6 months escrowed | Same for all loan types |
| Homeowners insurance (prepaid) | 12 months upfront | Same for all loan types |
| VA funding fee | 2.15% first use (0% down) | Exempt for 10%+ disability rating; can be financed into the loan |
You can negotiate seller concessions to offset most of these. VA allows sellers to contribute up to 4% of the purchase price, which is more generous than the 3% cap on conventional loans with less than 10% down. In practice, getting seller concessions depends on market conditions and how your offer compares to competing bids.
On a $350,000 VA purchase with 4% seller concessions, the seller contributes up to $14,000 toward your closing costs and prepaids. If your total closing costs are $11,000, the remaining $3,000 can cover the VA funding fee or prepaid items. Structure this in your purchase offer so the numbers work before you are under contract.
If you are exploring whether a no-closing-cost VA loan makes sense for your situation, understand that the lender is not waiving those costs. They are rolling them into a higher interest rate. That trade-off costs more over 30 years than paying closing costs upfront in most cases.
Property Taxes Vary More Than You Expect
Property taxes are not a hidden cost in the sense that nobody mentions them. They are hidden in the sense that most buyers do not look up the actual rate for the county where they are buying until they see it on the Closing Disclosure. The spread between states is enormous: 0.27% of assessed value in Hawaii versus 2.49% in New Jersey.
On a $350,000 home, that difference is $945 per year in Hawaii versus $8,715 per year in New Jersey. Property taxes go into your monthly escrow, so they directly increase your PITI payment and affect your debt-to-income ratio during underwriting.
| State | Average Effective Tax Rate | Annual Tax on $350,000 Home |
|---|---|---|
| New Jersey | 2.49% | $8,715 |
| Illinois | 2.27% | $7,945 |
| Texas | 1.80% | $6,300 |
| New York | 1.72% | $6,020 |
| Florida | 0.83% | $2,905 |
| California | 0.76% | $2,660 |
| Hawaii | 0.27% | $945 |
Veterans with a service-connected disability rating may qualify for state-level property tax exemptions that reduce or eliminate this cost entirely. The exemption rules vary by state, and some states require 100% disability for a full exemption while others offer partial relief at lower ratings. Check your state’s rules before closing so the exemption is in place for the first tax cycle.
High property taxes push your PITI higher, which increases your DTI ratio. If you are shopping in a high-tax state like New Jersey or Illinois, the property tax line alone can add $500 to $700 per month to your qualifying payment. Run the DTI math before you fall in love with a house in a high-tax county.
Home Inspection and Appraisal Fees
A home inspection and appraisal are two separate costs, and both happen before closing. The inspection is optional but strongly recommended. The appraisal is required by the lender.
A standard home inspection runs $300 to $500, depending on the size and age of the property. The inspector checks plumbing, electrical, HVAC, roofing, foundation, and structural integrity. If the inspection turns up significant problems, you can negotiate repairs or a price reduction with the seller before closing.
The VA appraisal is a requirement, not an option. It serves two purposes: confirming the property meets VA minimum property requirements and verifying the home is worth at least what you are paying for it. VA appraisal fees vary by region but typically run $400 to $700. If the appraisal comes in low, you have options including the Tidewater process and Reconsideration of Value.
- Home inspection: $300 to $500 (optional but recommended)
- VA appraisal: $400 to $700 (required, ordered through VA portal)
- Specialized inspections (radon, termite, well, septic): $100 to $300 each as needed
- Inspection findings can be used to negotiate repairs or a price reduction
Do not confuse the appraisal with the inspection. The appraisal determines market value and checks basic livability standards. The inspection is a detailed condition report. You need both, and skipping the inspection to save $400 is one of the most expensive mistakes a buyer can make.
HOA Fees Add a Permanent Monthly Cost
Homeowners association fees range from $200 to $600 per month depending on the community, and luxury or resort-style HOAs can run higher. These fees cover maintenance of common areas, landscaping, community amenities, and sometimes exterior building maintenance in condo or townhome communities.
The monthly HOA fee is added to your PITI when calculating your debt-to-income ratio for qualification. A $400 per month HOA fee has the same effect on your DTI as $400 in additional debt payments. In high-HOA communities, this can reduce the purchase price you qualify for by $50,000 to $70,000.
- HOA fees: $200 to $600+ per month, paid in addition to your mortgage
- Special assessments: one-time charges for major repairs (new roof, repaving, pool renovation) that can range from $1,000 to $10,000+
- HOA reserves: review the reserve study before buying to check whether the community is underfunded for future repairs
- Fee increases: most HOAs raise fees annually, typically 3% to 5% per year
Before buying in an HOA community, request the financial statements, reserve study, and meeting minutes. If the reserve fund is below 50% funded, the risk of a special assessment is high. A $5,000 special assessment 6 months after closing wipes out whatever you saved on closing costs.
Understanding how HOA fees work before you start house hunting prevents sticker shock on properties that look affordable on paper but cost significantly more when the monthly dues are added in.
Maintenance and Repairs Start Day One
The industry guideline is to budget 1% to 3% of the home’s value annually for maintenance and repairs. On a $350,000 home, that is $3,500 to $10,500 per year. Year one often runs on the higher end because move-in repairs surface issues the inspection did not flag or the seller did not fix.
| System | Average Lifespan | Replacement Cost |
|---|---|---|
| HVAC system | 15 to 20 years | $5,000 to $12,000 |
| Roof (asphalt shingle) | 20 to 25 years | $8,000 to $15,000 |
| Water heater | 10 to 15 years | $1,000 to $3,000 |
| Appliances (full set) | 10 to 15 years | $3,000 to $8,000 |
| Plumbing repair | Varies | $500 to $5,000 per incident |
Set up a dedicated savings account at closing and contribute to it monthly. Treating maintenance as a line item in your budget, not an emergency expense, keeps a broken water heater from becoming a financial crisis. If you are buying an older home, weight your budget toward the higher end of the 1% to 3% range.
Ask the seller for the age and service history of the HVAC, water heater, and roof during the inspection period. If any major system is past 75% of its expected lifespan, price the replacement into your first-year budget. Knowing the timeline prevents surprise expenses.
How VA Buyers Can Reduce Total Costs
VA loans provide structural cost advantages that reduce several of the hidden costs on this list. No PMI saves $100 to $300 per month compared to conventional financing with less than 20% down. The 1% origination cap and non-allowable fee rules cut closing costs. And seller concessions up to 4% can cover most or all of the remaining out-of-pocket at settlement.
Veterans with a service-connected disability rating of 10% or higher are exempt from the VA funding fee, which saves $7,525 on a $350,000 purchase at the 2.15% first-use rate. That single exemption is one of the most valuable cost reductions in any mortgage program.
- No PMI on VA loans regardless of down payment
- Origination fee capped at 1% flat (lender cannot itemize into higher total)
- Seller concessions up to 4% of purchase price
- Funding fee exemption for 10%+ service-connected disability
- Non-allowable fee protections block several common junk fees
Reducing your cash to close is a matter of structuring the deal correctly from the purchase offer forward. Negotiate seller concessions, verify your funding fee exemption status before application, and review every line of the Loan Estimate within 3 business days of receiving it.
The Bottom Line
Hidden costs on a home purchase add 3% to 6% of the purchase price beyond your mortgage payment. For a $350,000 home, budget $10,500 to $21,000 for closing costs, prepaid taxes and insurance, inspection fees, and first-year maintenance. VA borrowers have built-in protections that reduce closing costs and eliminate PMI, but property taxes, HOA fees, and maintenance apply to every homeowner.
The buyers who avoid surprises are the ones who run the total-cost math before writing an offer, not after seeing the Closing Disclosure. Factor in the county tax rate, any HOA dues, and a realistic maintenance budget alongside your monthly PITI, and you will know exactly what the house costs before you commit.
Frequently Asked Questions
What are closing costs on a home purchase?
Closing costs are fees paid at settlement to finalize the purchase. They include the origination fee, appraisal, title insurance, recording fees, prepaid taxes, and prepaid insurance. Total closing costs typically run 2% to 5% of the purchase price.
Do VA loans have closing costs?
Yes, but VA loans have lower closing costs than most alternatives. The origination fee is capped at 1%, several junk fees are prohibited, and sellers can contribute up to 4% of the purchase price toward your costs.
How much should I budget for home maintenance each year?
Budget 1% to 3% of the home’s value annually. On a $350,000 home, that is $3,500 to $10,500 per year. Older homes and homes with aging HVAC, roofing, or plumbing should be budgeted at the higher end of the range.
Can I negotiate closing costs with the seller?
Yes. Seller concessions are common, and VA allows up to 4% of the purchase price. Include the concession amount in your purchase offer. How much the seller agrees to depends on market conditions and how competitive your offer is.
Do property taxes affect my VA loan qualification?
Yes. Property taxes are escrowed into your monthly PITI payment, which directly affects your DTI ratio. High-tax counties can add $500 or more per month to your qualifying payment, reducing the purchase price you can qualify for.
What is a special assessment in an HOA?
A special assessment is a one-time charge an HOA imposes on homeowners to cover unexpected major repairs or improvements, such as a new roof, repaving, or pool renovation. These can range from $1,000 to $10,000 or more depending on the project.
Is a home inspection required on a VA loan?
A home inspection is not required by the VA or by most lenders, but it is strongly recommended. The VA appraisal checks minimum property requirements and market value, but it does not provide a detailed condition report. The inspection covers plumbing, electrical, HVAC, roofing, and structural issues the appraisal does not examine.
Levi Rodgers is the Founder of VA Loan Network, a leading resource for Veteran homebuyer education. A Retired Green Beret and Broker-Owner of LRG Realty in San Antonio, Levi leverages his military discipline and real-world real estate expertise to provide Veterans with expert loan advice, guidance, and trusted financial leadership.
