Feb 13, 2026
First-Time Buyer's Guide to Mortgage Costs You Didn't Expect
he monthly payment is just the start. Here are the real costs first-time buyers consistently underestimate when purchasing a $1M+ home — from closing costs to maintenance to the expenses that creep up after move-in.
The monthly mortgage payment gets all the attention. It's the number you obsess over, the number your lender qualifies you on, and the number most budget conversations center around. But experienced homeowners — and many buyers who learned the hard way — will tell you the mortgage payment is only the beginning.
There's a layer of costs that consistently catches first-time buyers off guard: some due at closing, some monthly, some that only materialize months or years into ownership. Knowing them in advance doesn't eliminate them, but it does prevent the kind of financial whiplash that turns an exciting purchase into a source of ongoing stress.
This guide is built around a $1 million home — a realistic price point in many major U.S. markets — using current 2026 figures throughout.
Before You Get the Keys: Closing Costs
Most buyers know closing costs exist. Few understand how much they add up to on a jumbo purchase.
For a $1 million home with 20% down, you're financing $800,000. At closing, expect to pay roughly 2–5% of the loan amount in fees — on top of your down payment. That's a range of $16,000 to $40,000 in additional out-of-pocket costs at the table.
What's in that number?
Closing Cost | Typical Range ($800K jumbo loan) |
|---|---|
Loan origination fee (0.5–1% of loan) | $4,000–$8,000 |
Appraisal (higher for jumbo/luxury) | $750–$1,500 |
Title insurance + title search | $3,000–$6,000 |
Escrow / settlement fee | $2,000–$4,000 |
Recording fees + transfer taxes | $1,000–$10,000+ (highly location-dependent) |
Attorney fees (required in some states) | $800–$1,500 |
Total (est.) | $16,000–$40,000 |
Transfer taxes alone can be significant in high-cost states. In New York City, transfer taxes on a $1M purchase can exceed $10,000 before other fees. In California or New Jersey, the number is lower but still meaningful.
The prepaid items: On top of the fees above, you'll also prepay certain costs at closing — typically your first year of homeowners insurance, 2–6 months of property tax escrow, and prepaid interest from closing date to your first payment. On a $1M home, this adds another $5,000–$12,000 to your closing table requirement.
Total cash at closing on a $1M home with 20% down: Down payment ($200,000) + closing costs + prepaids = roughly $220,000–$252,000.
The Monthly Costs That Aren't in Your Mortgage Payment
Your lender qualifies you on PITI — principal, interest, taxes, and insurance. But the real monthly cost of a $1M home includes more:
Property Taxes: The Variable You Can't Ignore
Property taxes are included in your escrow payment, but many buyers underestimate how much they vary by location — and how much they can increase over time.
At 1.2% annually, property taxes on a $1M home run $12,000/year — $1,000/month. In high-tax states, this climbs considerably:
New Jersey (avg. 2.2%+): $22,000+/year, or $1,833+/month
Illinois (avg. 2.0%+): $20,000+/year
Texas (avg. 1.6%): $16,000+/year
California (Prop 13, ~1.1%): $11,000+/year at purchase price
And here's the part buyers miss: taxes aren't fixed. Property assessments rise with home values, and local governments add surcharges. Your escrow payment will likely increase over time even if your mortgage rate is locked.
Homeowners Insurance: A Cost That's Rising Fast
Homeowners insurance premiums rose an average of 21% nationally between 2021 and 2024, according to a Consumer Federation of America study — and are expected to increase another 8% in 2026, per industry data. For a $1M home, annual premiums can range from $3,600 to $7,200+ ($300–$600/month), with significantly higher costs in wildfire, hurricane, or coastal flood zones.
Unlike your mortgage rate, insurance premiums can be repriced at each renewal. In high-risk markets, some insurers are exiting entirely, leaving buyers with fewer options at higher prices. Budgeting for insurance is essential — and so is factoring in potential future increases.
HOA Fees: More Common Than You Think
According to a January 2026 Realtor.com report, nearly 44% of homes are now subject to HOA fees, up from 34% in 2019. For condos, urban townhomes, and planned communities at the $1M+ price point, HOA fees can range from $500 to $2,000+/month — and are not included in any mortgage calculation or lender qualification.
More important: HOA special assessments. If the association needs to fund a major repair — a new roof, elevator replacement, foundation work — they can levy assessments that add thousands in unexpected one-time costs. In newer Realtor.com reporting, buyers are increasingly surprised by capital contribution requirements at closing, often several months of HOA dues paid upfront.
After Move-In: The Costs That Creep Up
Maintenance: Budget More Than You Think
Experts commonly cite 1% of home value annually as a maintenance budget baseline. On a $1M home, that's $10,000/year — $833/month. In practice, for older homes or those with more systems to maintain, 1.5–2% is more realistic, bringing the number to $15,000–$20,000/year.
What does that cover? HVAC servicing, roof repair, plumbing issues, appliance replacement, exterior painting, landscaping, pest control — and the inevitable surprise. There is always a surprise.
A Zillow/Thumbtack analysis published in late 2025 found that the average annual cost of homeownership beyond the mortgage — including taxes, insurance, and maintenance — runs approximately $21,400 nationwide. In expensive markets like Boston or the Bay Area, it can be two to three times higher.
Utilities: The Invisible Upgrade in Costs
Moving from an apartment or smaller home into a $1M property almost always means a larger footprint — and larger utility bills. Heating and cooling a 2,500–4,000 square foot home adds $300–$800+/month over typical rental costs, depending on climate, home efficiency, and local energy rates.
The "Year One" Effect
First-year costs in a new home consistently run above the long-run average. Buyers typically discover issues that weren't in the inspection, personalize spaces that need work, or simply underestimate the setup costs of moving into a larger home. Budgeting $10,000–$20,000 for year-one surprises on a $1M purchase is not conservative — it's prudent.
The Real All-In Monthly Number
Let's pull everything together for a $1M home, 20% down, 30-year fixed at 6.0%, mid-tax-rate state:
Cost | Monthly Estimate |
|---|---|
Principal & Interest | $4,796 |
Property Taxes (1.2%) | $1,000 |
Homeowners Insurance | $350 |
Maintenance reserve (1% rule) | $833 |
Utilities (uplift over renting) | $400 |
Total All-In (no HOA) | ~$7,379 |
Add an HOA at $600/month and you're at nearly $8,000/month — significantly more than the $4,796 P&I figure that leads most mortgage conversations.
How to Be Financially Ready for All of This
Build a full-picture budget, not just a payment budget. Before you decide on a price range, calculate your estimated all-in monthly cost — not just P&I.
Keep your emergency fund intact after closing. Many buyers drain savings for the down payment and closing costs, then have nothing left for repairs. Lenders actually look for this: jumbo loan approval often requires 12–24 months of mortgage payments in reserves.
Get an insurance quote before you fall in love with a property. In high-risk areas, insurance can be a deal-breaker or a major budget item that changes the math entirely. Knowing the number early prevents late-stage surprises.
Treat maintenance as a non-optional monthly cost. The 1% rule isn't a suggestion — it's the baseline for keeping a home in good condition. If you can't afford the mortgage plus a real maintenance reserve, the home is beyond your budget.
The Bottom Line
The mortgage payment is real — but it's one piece of a larger picture. On a $1M home, the gap between the P&I payment ($4,796/month at 6.0%) and the true all-in monthly cost ($7,000–$8,000+) is substantial — and entirely predictable if you do the work in advance.
The buyers who feel financially comfortable after closing are the ones who ran the full number, not just the mortgage number.
Use our Affordability Calculator to build a complete picture of your monthly housing costs — including taxes, insurance, and maintenance — before you set your search range.
Sources
Freddie Mac Primary Mortgage Market Survey, Feb. 26, 2026 — freddiemac.com/pmms
FHFA 2026 Conforming Loan Limit: $832,750 — fhfa.gov
Consumer Federation of America: Homeowners insurance premiums up 21% (2021–2024) — consumerfed.org
VIU by HUB: Home Insurance Rate Report 2026 — viubyhub.com
Realtor.com: 44% of homes subject to HOA fees (January 2026 report), via Boston Globe — boston.com
Zillow/Thumbtack: Average annual hidden homeownership costs ~$21,400 nationally (2025) — meganmicco.com
ClosingCorp 2025 data: Jumbo closing costs 2–5% of loan — via amerisave.com
All payment figures calculated using standard amortization formula