How Much Do You Need to Save to Buy a House?

Moving is such a fun thought experiment. But when it becomes a reality, it’s important to factor in expenses and savings to be sure things go smoothly.

Entering the property ladder is the dream for many Americans, but the cost of getting started can seem overwhelming. How much does it really cost to enter into homeownership? Is it attainable? I will outline some of the general costs associated with purchasing a home and outline how you can determine how much you need to save. Of course, I recommend discussing your situation with a lender who can give you a much more thorough idea of costs.

Down Payment

The first and most obvious cost associated with buying a house is the down payment. However, homebuyers do not have to save as much as they once did. There are many low or even no down payment loan options available in the mortgage world. A good rule of thumb is to save anywhere between 3.5% to 20% for a down payment before applying for a loan.

Closing Costs

In addition to the down payment, there are closing costs associated with purchasing a home. Closing costs include prepaying taxes, attorney/closing fees, and fees associated with obtaining a loan. Some sellers may be willing to pay a portion of your closing costs, however, in a low inventory market, it is far less likely that they will.  A safe estimate for closing costs is between 2-4% of the sales price of the home.

Out of Pocket Fees

There are some fees that will be paid before closing on a house. Once you are under contract on a home you will be obligated to pay for the appraisal and inspection. Both fees vary by area and professional providing the service, but you can expect both to cost around $700 for a home around 2,500 square feet. Of course, prices may increase with the size of the home.

Moving Costs

You will also want to make sure you leave room in your budget for moving day. Trips to Target, the hardware store, and Uhaul will certainly come up, so be sure to set a bit aside for this as well.