What to Save for When Buying a Home: A Breakdown Every Buyer Should Know

What to Save for When Buying a Home: A Breakdown Every Buyer Should Know

Buying a home is one of the most exciting—and significant—financial decisions you’ll ever make. But with so much focus on finding the perfect house, many buyers underestimate what it really takes to financially prepare. To help you plan confidently, here's a simple breakdown of the three major expenses you need to be ready for when buying a home.

1. Down Payment

The down payment is often the biggest upfront cost in the homebuying process. Traditionally, buyers put down 20% of the home's purchase price, but that’s not always required. Depending on your loan type, you may be able to put down as little as 3% to 5%, or even 0% with VA or USDA loans.

Quick Tip: The more you put down, the lower your monthly mortgage payment—and you may be able to avoid paying private mortgage insurance (PMI).

Why It Matters: Your down payment not only affects your mortgage terms, but also demonstrates your financial readiness to lenders. Saving early and consistently can give you more flexibility when choosing your home and loan type.

2. Closing Costs

Closing costs are the fees associated with finalizing your mortgage and transferring ownership of the property. These typically range from 2% to 5% of the home’s purchase price and may include:

• Loan origination fees

• Title insurance

• Appraisal fees

• Inspection fees

• Attorney fees (in some states)

• Escrow deposits for taxes and insurance

Quick Tip: Some closing costs may be negotiable or covered by the seller depending on market conditions and your agent’s negotiation skills.

Did You Know? First-time homebuyer programs, grants, or lender credits may help reduce your closing costs. It’s worth asking your lender or real estate agent about available assistance options.

3. Earnest Money Deposit

When you make an offer on a home, it’s common to include an earnest money deposit—essentially a good-faith payment to show the seller you're serious. This amount is usually 1% to 3% of the purchase price and is credited back to you at closing.

Quick Tip: If your offer is accepted and you back out for a reason not covered by your contingencies, you could lose this deposit—so make sure you’re confident in your offer.

Why It’s Important: The earnest money helps reassure sellers that you're a committed buyer, which can be especially important in a competitive market where sellers are weighing multiple offers.

Additional Costs to Consider

While the three main savings categories are essential, it’s also smart to budget for:

• Moving expenses

• Utility setup fees

• Immediate home repairs or upgrades

• New furniture or appliances

Even if these costs aren’t due at closing, they can add up quickly once you move in.

Final Thoughts

Being prepared for these three key expenses—and a few additional ones—can make your home buying journey much smoother. With the right strategy and a clear understanding of the costs, you can make confident decisions that put you on the path to homeownership success.

The earlier you start planning and saving, the better prepared you'll be when the right home comes along. Whether you're just beginning your search or ready to tour homes, working with an experienced real estate professional can make all the difference.

If you're thinking about buying a home and want personalized guidance or just have questions, I'm here to help.

👉 Send me a message to get started today!