Avoid Sticker Shock: 4 Hidden Costs of Home Buying

Despite mortgage rates hitting a one-year high and ever-increasing home prices, The New York Times says consumer confidence is also on the rise, putting the country in a "buying mood."

However, many who jump into a new purchase decision see an initial price tag but are unprepared for the hidden costs of homeownership that accompany it. These can include anything from utilities or insurance fees to property taxes, repairs, and maintenance expenses.

Luckily, there's ways to save money.

The Hidden Costs

There are some costs of homeownership that can be expected on a fairly regular basis, but some can't be predicted. Here's the five crucial money-saving tips for buying a home.

1.) Cut down utility bills. Homeowners can save hundreds on utility bills, for example, simply by washing clothes in cold water. According to Planet Green, more than 90 percent of the washing machine's energy is used to heat the water. Whereas laundry done using hot water costs 60 cents per load, laundry done using cold water costs just 4 cents per load.

Installing low-flow shower heads and faucets can have a similar effect. The Department of Energy attributes water savings of 25 to 60 percent to these low-flow fixtures, but the utility savings don't stop with water. Among their "Energy Saver" list is also replacing air conditioner filters regularly, using compact fluorescent lamps in place of the usual incandescent bulbs, and investing in energy-efficient appliances.

2.) Insurance fees and property taxes can also be minimized, though not near as drastically. Perhaps the most beneficial advice is to shop around for rates, just as a prospective buyer does for a home. The Insurance Information Institute recommends contacting the particular state's insurance department or the National Association of Insurance Commissioners, as both will often have information regarding typical rates of major insurers.

3.) Taxes on your home can be troubling, but buyers can seek out houses in towns known for low tax rates. Forbes.com provides a list ranking counties with the highest-to-lowest property taxes nationwide, using data compiled from the U.S. Census American Community Survey. It shows the median property taxes, home value, and homeowner income, as well as taxes as a percentage of home value and taxes as a percentage of homeowner income. Passaic County in New Jersey, for instance, ranks at the top with the highest rates nationwide, with property taxes accounting for more than 8.5 percent of the homeowners' income alone while Calcasieu Parish in Louisiana takes the bottom spot with the lowest property taxes.

4.) Expect the unexpected. Putting money aside for unexpected repairs is crucial. While the cause of these expenses is typically more urgent, which makes it near impossible to minimize the cost, even the most abrupt expenses can be accounted for in a structured budget. Sure, there's no way to forecast each one down to the decimal point, but data from HSH Associates suggests expenses for emergency repairs and maintenance over the course of a year usually amount to at least 1 percent of the total value of the home.

Older or poorly-maintained homes may cost even more. Setting aside at least that 1 percent each year, which could easily be broken up into monthly allotments, might save homeowners a lot of grief when unexpected events arise.

How VA Home Loans Are Different

Luckily, the VA home loan program goes to great lengths to ensure prospective buyers will ultimately have enough money for both the expected and unexpected costs of owning a home. Residual income, or total monthly income minus total monthly expenses, is a standard set in place by the VA that mandates how much money a borrower should have left over at the end of each month, and varies based on region and family size.

These residual income standards act as an extra layer of protection for VA borrowers and lenders, and can prevent prospective buyers from making purchase decisions without thinking about the hidden costs of homeownership.

Mike Frueh, national director of the VA home loan program, the residual income standards allow VA loans to have the lowest foreclosure rates in the past five years. According to Frueh, the ability to purchase with no money down also aims to leave a little extra in the bank for such expenses.

"That's money that they have to cover the broken furnace or the car that breaks or the children that get sick or any other contingency life throws at them," Freuh said.