How Much Money Do You Need to Buy a Home?

When you’re saving to buy a home, it’s easy to focus on one number: the down payment.

But the down payment isn’t the only expense to prepare for. Understanding the other costs that may come with buying a home can help you create a more realistic budget and avoid surprises along the way.

How Much Do You Need for a Down Payment?

You may have heard that you need 20% down to purchase a home, but that’s not always the case.

Down payment requirements vary based on your mortgage program and financial situation. The Consumer Financial Protection Bureau explains that many buyers have options below 20%, although a smaller down payment can affect your mortgage costs.

A qualified lender can help you understand which options may be available to you.

Don’t Forget About Closing Costs

You’ll also need to budget for closing costs.

According to the Consumer Financial Protection Bureau, closing costs typically range from about 2% to 5% of the home’s purchase price, not including your down payment.

Your actual costs will vary based on your loan, lender, property, location, and transaction.

What Other Expenses Should You Plan For?

Depending on your purchase, you may also need money for things such as:

Earnest money
Home inspection
Appraisal
Homeowners insurance
Moving expenses
Immediate repairs or maintenance
New furniture or appliances

Some expenses may ultimately be included in or credited toward your final cash-to-close amount, depending on the transaction.

Keep Some Money in Reserve

Just because you can put more money toward buying a home doesn’t necessarily mean you should empty your savings account.

The CFPB recommends considering an emergency cushion along with money for moving, renovations, furnishings, and other financial goals when deciding how much cash to use upfront.

Homeownership comes with unexpected expenses, and having money left over after closing can provide valuable breathing room.

Wondering what buying a home could look like for your budget? Go With Mason and let’s start the conversation.