A home is most likely the biggest purchase you’ll ever make, but in terms of saving for it, “as much as possible” isn’t a good target.
As with any goal, you’ll want to get as specific as you can when figuring out how much money to save for a house, and you won’t want to stop with just the down payment.
“Those new to homeownership are often surprised by the ancillary fees that arise from a home purchase,” says Brent Sutherland, certified financial planner with Ntellivest in Pittsburgh.
How much you need to save will depend largely on how much house you hope to be able to afford. This calculator can help you settle on a target home budget. Other factors, including where you want to live and the type of loan you get, will also play a role in how much money you’ll need to save. Here’s some general guidance to get you started.
The down payment
This will take up the bulk of what you save because it’s still generally recommended that you put down 20% of a home’s purchase price. However, there are alternatives to this 20% standard — the Federal Housing Administration, some commercial lenders and the Department of Agriculture are a few places where you can find a loan for as little as 3% down. If you qualify for a loan from the Department of Veterans Affairs, you may be able to put no money down. But there are tradeoffs to using these loans; you’ll start off with less equity in your home and may be required to pay for mortgage insurance and additional fees. Weigh your options carefully.
A home inspection protects you and your lender, identifying issues you might not have seen while strolling starry-eyed through the open house. Sometimes the cost of your home inspection will be included in the closing costs. Other times, you’ll need to pay out of pocket. Expect to pay up to $500 for the basic inspection, Sutherland said in an email. You can also opt for specialty services like a pest, radon or mold inspection. These might run your tab up by several hundred dollars but could save you headaches in the long run.
Closing costs are expenses that are lumped together and paid to complete the home purchase. They will include loan fees, property taxes, homeowners insurance, title fees and, depending on where you live, attorney’s fees.
These can vary widely based on location and the details of the sale and your loan. Zillow estimates you’ll pay 2% to 5% of a home’s purchase price in closing costs. We recommend you err on the high side or talk with an experienced mortgage broker in your area to get a more precise estimate of closing costs.
Once you close on the house, you’ll need to move your stuff there. Renting a truck and enlisting friends is one of the more budget-friendly routes; expect to pay a daily rate plus mileage. If your move is local, this option will likely run you a few hundred dollars. Packing boxes yourself and hiring movers to transport your property is worth the cost to many people, as you can often be in your new home with all of your things in a matter of hours. The size of your home and the distance moved will play a role in how much you pay for movers. Assuming a $100 hourly rate, Home Advisor estimates a cost of up to $1,000 to move the contents of a three-bedroom house.
Buying your home is only the beginning of this long-term investment. You’ll want to budget for regular monthly homeowner expenses, save for improvements and renovations and maintain an emergency fund for unexpected repairs.
Elizabeth Renter is a staff writer at NerdWallet, a personal finance website. Email: firstname.lastname@example.org. Twitter: @ElizabethRenter.