Buying a house requires far more savings than just the down payment. Here's everything you should have saved before buying.
1. Down payment: - Conventional loans: as little as 3% for first-time buyers, though 20% avoids private mortgage insurance (PMI). - FHA loans: 3.5% down. - On a $350,000 home, that's $10,500 (3%) to $70,000 (20%).
2. Closing costs (often overlooked): - Typically 2–5% of the loan amount — on a $300,000 loan, that's $6,000–$15,000. - Covers appraisal, title insurance, loan origination, attorney fees, and more.
3. Emergency fund (don't drain it for the house): - You should still have 3–6 months of living expenses saved AFTER buying. - Buying a home with zero cushion is risky — repairs and life happen.
4. Move-in and immediate costs: - Moving expenses, immediate repairs, basic furniture, and setting up utilities. - Budget a few thousand dollars.
5. Home maintenance reserve: - Homes cost money to maintain — a common guideline is 1% of the home's value per year. - Having some set aside for the inevitable repairs (water heater, appliance, roof) prevents going into debt.
Realistic example for a $350,000 home: - Down payment (10%): $35,000 - Closing costs (3%): ~$10,000 - Emergency fund preserved: $15,000+ (not spent on the house) - Move-in/repairs cushion: $5,000 - You'd want roughly $50,000–$65,000 saved, while keeping your emergency fund intact.
The key principle: Don't spend every dollar you have on the down payment. Lenders may approve you, but becoming 'house poor' — owning a home with no savings left — is one of the most common and stressful financial mistakes. Buy a home that leaves you with a cushion.