How Much Money Do You Really Need to Buy Your First Home?

If you are thinking about buying your first home, one of the biggest questions is probably:

"How much money do I actually need?"

And if you have heard that you need 20% down before you can buy a home, I have some good news:

That is not necessarily true.

In fact, many first-time buyers purchase homes with considerably less than 20% down. Depending on your credit, income, location, loan program and other qualifications, there may be several different ways to make homeownership possible.

But your down payment is only one part of the money you should plan for.

Think About Your Home-Buying Funds in Four Buckets

1. Your Down Payment

There is no single down-payment requirement that applies to every buyer.

For example:

FHA financing can be an excellent option for some first-time buyers because it generally allows a relatively low down payment and may offer more flexibility with certain credit profiles than some conventional financing.

Conventional loans may also offer low-down-payment options for qualified buyers , meaning that conventional financing does not automatically mean putting 20% down.

There are also first-time homebuyer and down-payment-assistance programs available in certain circumstances. Depending on the program, assistance may help with a portion of a buyer's down payment or closing costs.

Some programs are based on factors such as:

• Household income
• Purchase price
• Property location
• Credit qualifications
• Whether you have owned a home previously
• The type of property you are purchasing

And there may be additional financing programs available depending on your individual circumstances.

The important thing is this:

Please do not assume you need to save 20% before you even start asking questions.

You may be much closer to homeownership than you think.

2. Closing Costs

In addition to your down payment, there are costs associated with obtaining your mortgage and completing the purchase.

These can include things such as:

• Lender fees
• Appraisal
• Attorney and settlement expenses
• Title-related expenses
• Prepaid property taxes and homeowners insurance
• Other loan and closing charges

The exact amount is different for every transaction.

And here's something else first-time buyers often don't realize:

There may be ways to reduce how much cash you personally need at closing.

Depending on your financing and the terms of the transaction, we may be able to negotiate for a seller to contribute toward certain allowable closing costs.

There may also be lender programs, grants or homebuyer-assistance programs that can help qualified buyers.

This is where having the right team becomes especially important.

Why I Have Built Relationships With Lenders Who Understand First-Time Buyers

First-time homebuyers often need more than someone who can simply quote an interest rate.

They need someone willing to explain the process.

That is why I have intentionally developed relationships with lenders who understand the unique challenges first-time buyers can face.

Maybe your credit isn't exactly where you want it to be.

Maybe you have a good income but haven't accumulated a large amount of savings yet.

Maybe you have student loans or other debt.

Maybe you're trying to determine whether it makes more sense to keep saving or start the buying process now.

Or perhaps you simply have no idea where to begin.

Those aren't reasons to be embarrassed or avoid the conversation.

They are reasons to have the right conversation.

A knowledgeable lender can look at your actual financial picture and help determine what options may be available to you.

And sometimes the answer is:

"You're ready."

Other times it might be:

"You're close. Here's what we need to work on."

And sometimes the smartest plan might be:

"Let's give this six months and put you in a stronger position."

All three of those are good answers because now you have a plan.

3. Due-Diligence and Inspection Expenses

There may also be some out-of-pocket expenses before you ever reach closing day.

Depending on the property, those might include:

• Home inspection
• Radon testing
• Septic inspection
• Well testing
• Survey
• Specialized inspections when needed
• Other due-diligence expenses

You will not necessarily need every one of these.

But when I help someone develop a home-buying budget, I want them to understand the whole picture, not just the down payment.

4. Your "After Closing" Cushion

This may be one of the most important categories.

I do not want to help you buy a house and leave you with $12 in your checking account and a brand-new set of keys.

Homeownership comes with expenses.

You may suddenly discover you need a lawn mower, window coverings, furniture, a refrigerator or a repair you weren't expecting.

And even when nothing goes wrong, having some money left in savings can make the transition into homeownership much more comfortable.

Being able to qualify for a house and being financially comfortable owning that house are not always the same thing.

I want to help you think about both.

So…How Much Should You Save?

There is no single answer.

Someone purchasing a $225,000 home may have a completely different financial plan from someone purchasing a $400,000 home.

Your income, credit, debt, available savings, loan program and the property itself can all affect the answer.

That's why I don't want you trying to figure all of this out by yourself.

And you certainly don't need to wait until you believe everything is perfect before contacting me.

Let's Find Out Where You Actually Stand

You may learn that you're ready to buy sooner than you thought.

You may learn about a financing or first-time buyer program you didn't know existed.

Or we may discover that your smartest move is to spend the next several months improving your credit, reducing debt or increasing your savings.

There is absolutely nothing wrong with that.

My role isn't to push you into buying a home.

My role is to help you understand your options, connect you with trusted professionals, and develop a realistic path toward homeownership when the timing is right for you.

If you're wondering how much money you actually need to buy, reply to this email and simply say:

"I want to figure out my number."

We'll start with a conversation.

No pressure to tour homes.
No pressure to get pre-approved immediately.
No pressure to buy.

Just good information, the right resources and a plan designed around your timeline.

Warmly,

Janée Krauth, REALTOR® | SRES®
Executive Broker
Realty Executives of Hickory
Thoughtful Guidance for Life's Next Chapter

Financing programs, down-payment requirements and eligibility vary. A qualified mortgage professional can review your individual financial circumstances and current program requirements.